US Dollar Forecast: DXY Extends Losses After Fed Cut and Weak Jobless Claims

Dollar Slides as Fed Cut and Soft Data Trigger Broad Repricing

The U.S. Dollar Index (DXY) extended its slide on Thursday, trading sharply lower for a second session after breaking beneath the 50-day moving average at 99.222. The drop pushed the index deeper into the September–November range of 96.218 to 100.395, with price now probing the key retracement band that previously supported medium-term buying interest. The move reflects pressure from softer Treasury yields and renewed repricing of Fed policy expectations after this week’s rate cut.

Dollar selling accelerated as yields declined across the curve and traders reassessed U.S. growth prospects following a jump in weekly jobless claims. With the current daily low at 98.212, market tone for the remainder of the session hinges on reaction to the 50% retracement at 98.307.

At 15:57 GMT, DXY is trading 98.181, down 0.453 or -0.46%.

Fed Cut, Labor Weakness, and Yield Compression Drive Dollar Pressure

The dollar came under pressure after the Fed lowered its overnight rate to 3.5%–3.75%, a decision that featured three dissenting “no-cut” votes. That split encouraged traders to interpret the move as less supportive for future easing. Chair Powell emphasized that the Fed is prepared to wait for further evidence before adjusting policy again, and the projection of only one cut in 2026 reinforces a slower pace. For DXY, reduced yield support combined with uncertainty around the Fed’s path cuts into the index’s carry advantage.

Labor market concerns added to selling pressure. Jobless claims surged to 236,000, well above expectations, prompting traders to reassess the near-term economic backdrop. Weakening labor signals tend to weigh on the dollar by increasing the likelihood of further easing if conditions deteriorate.

FX Flows Favor EUR and GBP as Dollar Softness Dominates

Sterling held its recent gains versus the dollar as the softer U.S. backdrop overshadowed a quiet U.K. calendar. The pound traded near $1.2288, supported by the broader decline in the greenback. Expectations for a Bank of England rate cut next week have not prevented GBP from benefiting from dollar outflows.

Meanwhile, euro strength continued as markets considered the possibility of an ECB hike late next year, lifting EUR/GBP to 87.51 pence. Stronger cross-currency flows into the euro and stable GBP positioning both limited dollar demand.

Declining Treasury Yields Strip Support from the Dollar

Treasury yields slid on Thursday, with the 10-year at 4.118%, the 2-year at 3.515%, and the 30-year at 4.761%. Lower yields reduce relative returns on U.S. assets, pressuring the dollar as global investors rotate toward alternative markets. The combination of softer data and a cautious Fed message encouraged broader risk uptake, further weighing on defensive dollar flows.

Key Technical Battleground: 98.307–97.814 Zone Draws Buyer Interest

The index is testing the retracement zone between 98.307 (50%) and 97.814 (61.8%), an area some traders view as value. With the daily low at 98.212, near-term tone depends on whether buyers defend 98.307. A sustained hold could slow downside momentum, while failure to reclaim that level would keep pressure in place.

Short-Term Outlook: Dollar Bias Remains Bearish Unless 98.307 Holds

Based on declining yields, softer U.S. data, and the failure to hold above the 50-day moving average, the short-term outlook for the DXY leans bearish, unless buyers regain control at 98.307.

More Information in our Economic Calendar.