US Dollar Forecast: Pulls Back as Traders Brace for PPI and Fed Commentary – GBP/USD and EUR/USD

Market Overview

During the late Asian session, the US Dollar Index (DXY) halted its five-day advance, easing near 100.15 as expectations for a Federal Reserve rate cut in December gained traction. The pullback comes ahead of Tuesday’s US Producer Price Index (PPI), which is expected to guide short-term moves in the currency market.

Rate Cut Odds Increase as Fed Signals Shift

Dollar momentum softened as markets priced in a higher probability of December easing. According to the CME FedWatch Tool, the likelihood of a 25-basis-point cut has risen to 69%, up from 44% a week earlier.

Comments from key Fed officials contributed to this shift. New York Fed President John Williams said policymakers could still adjust rates in the “near term,” while Fed Governor Stephen Miran noted recent payroll data supports December easing, adding he would favor a 25-bp cut if he held a vote.

Boston Fed President Susan Collins remains undecided, maintaining some uncertainty.

Consumer Sentiment Improves Despite Inflation Concerns

The University of Michigan’s November Consumer Sentiment Index edged up to 51, above the preliminary 50.3, though below October’s 53.6 reading. Inflation expectations eased slightly: the one-year outlook dipped to 4.5% from 4.7%, and the five-year measure declined to 3.4% from 3.6%.

The data suggests households are marginally more confident, though still cautious about inflation.

Market Outlook: Dollar Faces Near-Term Pressure

Despite last week’s rally, the dollar faces headwinds as traders weigh rising rate-cut expectations against mixed Fed commentary. With PPI data and additional Fed remarks ahead, investors are adopting a more cautious stance.

Near-term performance will likely hinge on incoming inflation and labor data, alongside clearer signals from policymakers. A confirmed shift toward easing would keep the dollar under pressure into year-end.

US Dollar Index (DXY) – Technical Analysis

DXY is trading near 100.14, easing slightly after failing to gain traction above the 100.34 resistance area. The index continues to follow a steady ascending trendline that has guided price action since mid-October, with higher lows forming a clear upward structure. Price remains above the 20-EMA and 200-EMA, keeping the broader bias constructive, though momentum has softened.

The RSI has rolled off recent highs and now sits below 60, indicating cooling momentum rather than a shift in trend. If DXY stabilizes above 99.70, buyers may attempt another move toward the upper resistance zone.

A break below 99.13 would weaken the trend and expose the lower supports near 98.54.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3105, attempting to recover after slipping to a weekly low. The pair is holding above $1.3087, where horizontal support and the rising trendline intersect, creating a short-term floor. Price remains capped below $1.3124, with the 20-EMA acting as immediate resistance, while the 200-EMA overhead keeps the broader bias tilted bearish.

The RSI has bounced from oversold territory and now sits near 45, showing early signs of stabilization but not enough momentum for a clear upside shift.
If GBP/USD stays below $1.3124, sellers may remain in control.

A break below $1.3087 exposes $1.3039, while a close above $1.3124 could open a move toward $1.3171.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1523, stabilizing after a sharp drop from last week’s highs. The pair recently broke below its ascending channel, shifting momentum back in favor of sellers. Price remains under both the 20-EMA and 200-EMA, reinforcing a bearish short-term bias.

Support around $1.1500 has held for now, with several long wicks suggesting buyers are defending the area. The RSI is recovering from oversold territory but remains below 40, signaling weak momentum despite the bounce.

If EUR/USD stays below $1.1553, the broader risk remains tilted lower. A break beneath $1.1490 opens the door toward $1.1467. A close above $1.1553 would be the first sign of recovery.