US Dollar Forecast: DXY Weakens as Bearish Momentum Builds Ahead of Fed Decision

DXY Slides Below Key Levels — Is the 50-Day MA the Last Line of Defense?

The U.S. Dollar Index (DXY) is under pressure in Tuesday’s mid-session trade, slipping to 98.746 as the four-day pullback from the October 22 high of 99.139 continues. Price has broken through a minor pivot at 98.797 and a 61.8% retracement level at 98.650, with today’s low tapping 98.565. Traders are watching the 50-day moving average at 98.135, which could either act as a floor for dip buyers or trigger a deeper slide toward 97.462 if it gives way.

Technically, the trend is intact while DXY holds above that 50-day line. But unless bulls can punch through 99.139 and reclaim 99.563, the market stays stuck in a weak uptrend. That won’t change without a fresh dose of Fed hawkishness — and right now, that’s not on the table.

At 15:19 GMT, DXY is trading 98.680, down 0.121 or -12%.

Fed Cut Priced In, Eyes on Powell’s Guidance

Yields edged lower across the curve ahead of the Fed’s decision, with the 10-year hovering just under 4% at 3.976%. The bond market has fully priced in a 25-basis-point cut, dropping the fed funds range to 3.75%–4.00%. Traders are also assigning nearly 80% odds to another cut in December, but that call isn’t locked in.

With economic data scarce due to the government shutdown, the market is leaning on assumptions and Powell’s tone will carry extra weight. If he hints that more cuts are likely, DXY could stay under pressure. If he pushes back, the dollar might bounce — but with inflation subdued and hiring slowing, there’s little reason for Powell to turn hawkish here.

Yen Firms as Bessent Pushes BOJ for Rate Normalization

The dollar also slipped against the yen after U.S. Treasury Secretary Scott Bessent called on the Bank of Japan to adopt “sound monetary policy.” Traders took it as a nudge toward rate hikes, sending USD/JPY down to 151.225. Markets are now watching whether the BOJ offers any timeline for policy tightening at its upcoming meeting.

Trump-Xi Meeting Keeps Trade Hopes Alive

Meanwhile, hopes for a U.S.-China trade breakthrough are helping keep risk appetite afloat — and the dollar soft. President Trump’s meeting with President Xi on Thursday is now a wildcard. Any progress on trade could lift equities and weigh on the greenback further, even if a full resolution remains elusive.

Outlook: Bearish Tilt Until Powell or Data Says Otherwise

Unless Powell signals a pause or inflation data forces a rethink, the bias remains for further dollar weakness. The technical picture favors a test of the 50-day MA at 98.135. Break below that, and sellers could press toward 97.462. The market doesn’t want to chase strength without a reason — and right now, it’s not getting one.

More Information in our Economic Calendar.