Bearish Dollar outlook in play: How low can USD go? What to anticipate with the major pairs?

Previously, I have forecasted in: USD Gains Traction: Breakout or Reversal? Key Technical Scenarios to Watch This Week potential bullish and bearish case amidst the Israel-Iran conflict happening the past days.

Bullish and bearish scenario, respectively

As noted in the previous forecast, the dollar remains in a key holding level, and as long as it stays above the equilibrium level, this continues to signal underlying strength. A daily close above this range with bullish follow-through would confirm momentum building for a breakout toward the next resistance zone. However, if the dollar fails to hold above equilibrium and slips below with no signs of buyer support, that would invalidate the bullish bias and open the door for a continuation to the downside, in line with the lower boundary projections from last week.

Bearish scenario on-point

The bearish scenario is now unfolding, with price showing no signs of slowing down - at least for now. This suggests that, despite Trump publicly praising Israel and Iran for their ceasefire efforts, the market remains cautious and continues to pressure the dollar lower.

Iran has made it clear that any truce is still under negotiation and conditional on Israel halting its aggression in line with international law. Earlier reports of Iran retaliating by launching missiles at a U.S. base in Qatar also added fuel to the downside move in the dollar, reinforcing the market’s focus on risk sentiment over political rhetoric.

Bullish scenario

As long as we stay above the 2025 All-Time Low, there’s still room for the dollar to wiggle around and pick up steam for potential recovery.

Another bullish scenario for this is the incoming Core PCE news this comes out higher than the forecast, signaling a potential kick on inflation.

• Higher high and low at the current price action.

• Does not break below 2025 ATL.

• Inflationary print on Core PCE news.

Bearish scenario

If price fails to reclaim the previous range by rebound back to it around 98.50–98.80, this breakdown is likely to extend toward 97.60, 2025 ATL.

• Ceasefire in Israel-Iran gains traction.

• Core PCE shows a disinflationary surprise.

• Risk assets rebound and the Fed shifts dovish.

What this means for the majors

1. EUR/USD: Watch for a sustained breakout above recent swing highs. As the dollar loses strength, EUR/USD could target 1.16 level and beyond if inflation in Europe stabilizes.

2. GBP/USD: Cable is poised to retest 1.36 and may push toward 1.363.

3. AUD/USD and NZD/USD: Risk-sensitive pairs may outperform. Look for bullish continuation with caution as previous price action is choppy.

4. USD/JPY: If U.S. yields fall further, dollar continue to weaken and safe-haven flows unwind, USD/JPY could begin a deeper retracement, offering short opportunities with bearish target to 145.00 level.

5. USD/CHF: With uncertainty looming around and USD gets weighed down, a downside move is on the table with bearish targets at 0.810-0.806 level.

6. USD/CAD: With potential ceasefires on Israel-Iran, the threat of Iran on Strait of Hormuz is dissipating: supply lines still intact - for now. Potential retracement to 1.37 level.