US Dollar Forecast: DXY Slides Below 99.463 Pivot as Traders React to Fed Uncertainty

Dollar Sinks as Shutdown Ends and Fed Uncertainty Mounts

The U.S. Dollar Index (DXY) extended losses at mid-session Thursday, under pressure from renewed risk appetite and fading expectations of a near-term Federal Reserve rate cut.

DXY broke below a key short-term pivot at 99.463, now new resistance, opening the door to further downside toward the 50-day moving average at 98.494. The session low was marked at 98.991.

At 17:43 GMT, DXY is trading 99.043, down 0.428 or -0.43%.

Shutdown Resolution Sparks Risk-On Tone

Sentiment turned risk-on after President Trump signed legislation ending the 43-day government shutdown, the longest in U.S. history. Markets responded positively, with the U.S. dollar coming under pressure as federal agencies prepared to reopen and delayed economic data loomed. Sarah Ying of CIBC Capital Markets noted that the dollar was “slightly offered” on the headline, while prior support from diminished Fed cut expectations has started to reverse.

The shutdown’s impact lingers, however. Critical reports such as the CPI, PPI, and Non-Farm Payrolls may not be released, raising concerns over impaired Fed decision-making. White House press secretary Karoline Leavitt warned that “October CPI and jobs reports [are] likely never being released,” potentially leaving policymakers “flying blind.”

Fed Outlook in Focus as Divisions Deepen

Interest rate expectations remain fluid. Fed funds futures now reflect a 52% probability of a December rate cut. San Francisco Fed President Mary Daly said the Fed’s goals are “balanced,” but acknowledged a slight tilt toward labor-market risk. The cautious tone echoes recent comments from Fed Chair Powell, who pushed back on the certainty of a December cut.

Treasury yields rose modestly across the curve as markets digested the shutdown’s end. The 10-year yield climbed to 4.098%, while the 2-year yield increased to 3.583%. Although the move suggests some relief, the dollar failed to benefit, highlighting the prevailing uncertainty around Fed policy direction.

Yen Intervention Risks Remain in Play

The dollar also weakened against the yen, sliding 0.23% to 154.43 after Japanese officials issued fresh warnings about “one-sided and rapid” FX moves. With USD/JPY approaching the 155 level, traders remain on alert for possible BOJ intervention or even a rate hike, though odds of a December increase sit at just 22%.

Elsewhere, the euro climbed to $1.1624, its highest level since October 30, while the pound edged up to $1.3172 despite weak UK GDP figures.

Short-Term Outlook: Bearish Bias in Dollar Index

With DXY breaching 99.463 support and Fed rate cut bets regaining traction, the near-term bias remains bearish. Risk-on sentiment tied to the government reopening, softening Treasury yield support, and thin forward guidance from the Fed reinforce selling pressure. A test of the 50-day moving average at 98.494 is likely if sentiment holds, especially without fresh economic data to counter the current drift.

More Information in our Economic Calendar.