USD Strengthens on Strong Q2 GDP Data, PCE Inflation Data Awaited

The US dollar index has surged 0.5% to 101.85, propelled by stronger-than-expected Q2 GDP data showing 3.0% annualized growth versus 2.8% forecast. EUR/USD retreated 0.4% to 1.1120, while USD/JPY advanced 0.6% to 144.50 as the greenback gained across the board. The robust economic performance reinforces expectations for a more gradual Fed easing cycle, supporting dollar bulls. However, traders remain cautious ahead of Friday's core PCE inflation data, the Fed's preferred inflation gauge, which could temper the rally if it shows continued disinflation. Technical analysis reveals the dollar index approaching resistance at 102.00, a break above which could trigger further gains toward 102.50. Support for EUR/USD sits at 1.1100, while USD/JPY faces resistance at 145.00. The dollar's near-term trajectory will largely depend on whether upcoming inflation data confirms the Fed's cautious stance on rate cuts.