EURUSD & DXY Q2 Forecast: US Dollar Weak Trend Continues

With Q1 behind us, let’s look ahead and see what the price patterns suggest regarding key forex trends in Q2 2025. We use Elliott Wave Theory as a basis for these forecasts. We’ll analyse the current patterns, see where the current price is within those patterns, and discuss anticipated trends for the Q2 2025.

DXY

As of December 2024, the market was anticipating 50 basis point rate cuts from the Fed in 2025. Now, with the first quarter under our belt and no rate cuts (yet), the anticipation of rate cuts is beginning to grow. speed up. There is now an expectation of 75 basis point rate cuts in 2025 with the first cut anticipated for June 18.

Much of the rate cutting is a result of softening inflation. If this trend continues, then the trend for US dollar weakness likely continues for a large portion of Q2.

Our Q1 forecast for DXY was spot on. At the time, the dollar was in a strong trend and we anticipated upside targets between 110-111 with a larger bearish reversal at hand.

We now know that DXY topped on January 13, 2025 at 110.18. Since then, DXY has pushed down to 104 at the time of this writing.
 

This downtrend does not appear over when assessing through the lens of Elliott wave. It appears DXY is in wave iv of (iii). This implies an unfolding bearish impulse that still has a couple of more waves lower to go.

I suspect DXY finalizes wave (iii) near 101.50 in the early parts of Q2. Then, wave (iv) likely proves to be a temporary rally that carries back near 104. Once wave (iv) is in place, then (v) would be a bearish wave to new lows below 100.

It is possible, the wave (v) trend lower could appear towards the end of Q2. The main price action to follow in Q2 is another trend lower to finalize (iii) to near 101.50, then a wave (iv) relief rally to 104.

Bottom line, we are anticipating wave (iii) to trend down to around 101.50, then a temporary rally in wave (iv) to 104. This likely takes up most of Q2. If wave (v) does begin, it would trend lower from around 104 to new lows below 100.

EURUSD

As anticipated in our Q1 report, EURUSD did put in a major low at 1.0177 on January 13, just below our targeted range. EURUSD does appear to be in a cyclical uptrend that likely carries to 1.18 and potentially higher levels in the coming quarters.

The current Elliott wave pattern depicts EURUSD at wave (iv) of ((iii)). Once this wave ends, then wave (v) of ((iii)) rallies to the upside and likely carries to 1.12.

There are several wave relationships popping up near 1.12. Therefore, I suspect EURUSD punches a wave ((iii)) high around 1.12 and begins a wave ((iv)) correction to carry it down to near 1.08.

If all of this happens prior to the end of Q2, then the remainder of Q2 would imply a wave ((v)) beginning to levels above 1.12.

Bottom line, EURUSD appears poised to rally in wave (v) of ((iii)) to 1.12 in the beginning part of Q2. Then, the latter part of Q2 may be spent in a wave ((iv)) decline down to 1.08.

View our other Q2 forecasts at:
Q2 Equities

Q2 Commodities
Q2 Forex