US Dollar Price Forecast: Dollar Slips Ahead of Fed Decision and Powell – GBP/USD and EUR/USD

Market Overview

During early European trading on Monday, the US Dollar Index (DXY) edged lower toward 98.90, pressured by rising expectations of a Federal Reserve rate cut at this week’s policy meeting. The move reflects softer Chair Jerome Powell and growing confidence that the Fed may shift toward easing.

Rate Cut Expectations Weigh on the DXY

Markets now anticipate a quarter-point rate cut on Wednesday, supported by moderating inflation trends and weaker growth indicators. Fed funds futures show a near 90% probability of a December rate cut, up sharply from 71% last week, according to the CME FedWatch Tool.

These expectations have kept the DXY under sustained pressure, although traders remain alert for any pushback from Chair Jerome Powell. A firmer stance during the press conference could temporarily stabilize the dollar, but sentiment currently favors easing.

Mixed US Data Helps Contain Downside

While the dollar is softening, recent economic data has helped limit losses. The University of Michigan Consumer Sentiment Index improved to 53.3 in December from 51.0 previously, beating forecasts of 52.0. The stronger reading underscores steady consumer confidence and provides some support for the greenback.

Still, the market’s focus remains firmly on the Fed decision. Traders are weighing signs of resilience in the US economy against the increasing likelihood of policy easing. Powell’s communication will be critical; any indication of caution or a slower path to rate cuts could lift the DXY in the short term.

US Dollar Index (DXY) – Technical Analysis

The US Dollar Index is trading near $98.87, holding inside a declining channel that has guided price lower since late November. Recent 2H candles show repeated rejection at the mid-channel zone around $99.07, signaling persistent selling pressure. Price remains below the 20-EMA and 50-EMA, keeping the short-term bias tilted downward.

Immediate support sits at $98.76, followed by $98.56, where prior bounces formed. A break beneath this area could open a move toward the channel base near $98.31. On the upside, DXY would need a close above $99.29 to challenge $99.56 and shift momentum.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3330, holding within a rising channel that has guided the pair higher since the November low. Recent 2H candles show steady support around $1.3311, where the 20-EMA continues to act as a short-term floor. The 50-EMA sits lower at $1.3267, reinforcing broader bullish structure as long as price stays above it.

Immediate resistance stands at $1.3384, where several upper wicks formed last week. A breakout above this zone could open the way toward $1.3424, followed by the channel top near $1.3472. On the downside, a break below $1.3311 may pull price toward $1.3267 and $1.3223, aligning with mid-channel support.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1662, holding firmly inside a rising channel that has guided the pair higher since the November low. Recent 2H candles show a strong rebound from $1.1640, aligning with the channel’s mid-line and the 20-EMA, which continues to slope upward. The 50-EMA remains supportive below price, keeping the broader structure bullish.

Immediate resistance sits at $1.1688, where several wicks formed earlier. A breakout above this zone would open the path toward $1.1716, followed by the channel top near $1.1741. On the downside, support stands at $1.1623, then $1.1591, where the 200-EMA also aligns.