USD Strength Driving EUR and GBP Lower – Macro & Technical Outlook (July 2, 2025)
The U.S. Dollar remains broadly supported, underpinned by resilient macroeconomic fundamentals and growing policy divergence between the Federal Reserve and its global counterparts. This ongoing dollar strength is exerting sustained downward pressure on key FX pairs such as EUR/USD and GBP/USD, both of which are exhibiting well-defined bearish structures on higher timeframes.
Macro Drivers of U.S. Dollar Strength
1. Robust U.S. Economic Performance
Recent economic data—particularly in labor markets and the services sector—continue to exceed expectations, reinforcing the resilience of the U.S. economy. This solid macro backdrop reduces the urgency for the Federal Reserve to shift toward a rate-cutting cycle.
2. Yield Differential & Monetary Policy Divergence
While the European Central Bank (ECB) and the Bank of England (BoE) adopt more dovish tones amid deteriorating growth prospects, the Fed maintains a cautious approach. This divergence is widening yield spreads in favor of the dollar, supporting increased capital inflows into U.S. assets.
3. Safe-Haven Flows
Heightened geopolitical risks and fiscal uncertainty—particularly ongoing tensions within the U.S. Congress—have fueled safe-haven demand for the dollar, reinforcing its role as the world’s reserve currency.
4. Inflationary Pressures from Tariffs
Recently imposed tariffs have added upward pressure on inflation, further diminishing the likelihood of imminent policy easing. This supports the dollar through elevated rate expectations.
Technical Outlook – EUR/USD and GBP/USD
EUR/USD – Daily Timeframe
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Structure: The pair continues to print lower highs and lower lows, with a confirmed break of structure (BOS) below 1.0700.
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Liquidity: Failed liquidity grabs above minor highs suggest smart money distribution and a lack of bullish follow-through.
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Outlook: Momentum remains bearish, with price gravitating toward the 1.0580–1.0600 liquidity pool, in confluence with prior swing lows.
GBP/USD – Daily Timeframe
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Structure: A decisive break below key support at 1.2620 has flipped order flow bearish.
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Inducement: A recent sweep of equal highs likely served as inducement before sharp rejection, indicating institutional positioning.
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Outlook: Continued bearish momentum targets the 1.2450 level, with further downside potential toward the 1.2380 liquidity shelf.
Conclusion & Trade Consideration
The U.S. dollar’s strength is supported by both macroeconomic and technical factors. EUR/USD and GBP/USD remain firmly bearish on the daily timeframe, presenting high-probability opportunities for trend-continuation short setups.
Traders should manage risk tightly above recent sweep highs, while monitoring key structural levels and liquidity zones for validation.
