US Dollar Forecast: Dollar Firms as Fed Cuts Fade, GBP/USD and EUR/USD Outlook

Market Overview

During early European trading, the US Dollar Index (DXY) continued to firm, touching $99.40 as investors adjusted expectations for Federal Reserve policy.

The shift reflects reduced confidence in near-term rate cuts, lending support to the dollar.

At the same time, Treasury yields slipped, with the 2-year at 3.60% and the 10-year at 4.14%, signaling a more cautious bond market.

Fed Signals Reinforce Reduced Easing Expectations

The CME FedWatch Tool now shows a 46% probability of a 25-basis-point cut in December, down from 67% a week earlier. This adjustment follows a series of measured comments from Federal Reserve officials.

Kansas City Fed President Jeffrey Schmid said policy should continue to “lean against demand growth,” describing current rates as “modestly restrictive.” St. Louis Fed President Alberto Musalem added that rates are now closer to neutral, cautioning that there is limited room to ease without creating broader risks.

These remarks have tempered expectations for rapid policy shifts and kept investors hesitant to price in earlier cuts.

Market Awaits Delayed US Economic Releases

Attention is now turning to upcoming US data releases delayed by the recent government shutdown. The September Nonfarm Payrolls report is due on November 20, but gaps remain for several October indicators.

National Economic Council Director Kevin Hassett cautioned that some October data may not be recoverable, leaving markets waiting for clearer signals on the Fed’s next steps.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading near $99.32, holding inside a broad descending channel that has shaped the trend since early November. Price is struggling below the $99.47 resistance, which aligns with the upper boundary of the channel and the 20-SMA, keeping short-term momentum restrained.

The 200-SMA sits lower near $99.20, offering a secondary layer of support. The RSI has eased from higher levels, showing loss of momentum after failing to break above $99.47. Immediate support lies near $98.99, and a break below that area may open a move toward $98.65.

If buyers reclaim $99.47, DXY could attempt a move toward $100.02, but until then, the bias stays mildly bearish within the channel.

GBP/USD Technical Analysis

GBP/USD is holding near $1.3175, supported by a rising trendline that has guided the rebound since early November. Price is testing the $1.3142 support zone, which aligns with the trendline and recent reaction levels. The 20-SMA is flattening, while the 200-SMA above price keeps the broader structure restrained.

The pair recently struggled to break $1.3211, with sellers defending that level as short-term resistance. The RSI is recovering from lower levels, suggesting early signs of stabilization but no confirmed momentum shift.

If buyers protect $1.3142, GBP/USD may attempt another move toward $1.3211 and potentially $1.3247. A break below the trendline would weaken the outlook and expose $1.3084.

EUR/USD Technical Forecast

EUR/USD is stabilizing near $1.1610, holding above the rising trendline that has guided price higher since early November. The pair is currently testing support around $1.1595, which aligns with the 20-SMA, keeping the short-term structure intact. The 200-SMA remains below price, reinforcing a broader upward bias.

The recent pullback from $1.1670 shows sellers reacting at the upper boundary of the channel, but momentum has not shifted significantly. The RSI is recovering from lower levels, hinting at potential stabilization.

If buyers hold $1.1595, EUR/USD could attempt another move toward $1.1670. A break below the trendline would weaken the outlook and expose $1.1560 as the next downside level.