US Dollar Price Forecast: Dollar Slips as Fed Adopts Wait-and-See Tone – GBP/USD and EUR/USD

Market Overview

During the European session, the US Dollar Index (DXY) edged lower toward 98.55, extending its decline following the Federal Reserve’s December meeting. The central bank delivered a third consecutive 25-basis-point rate cut since September, bringing the policy range to 3.50%–3.75%.

Fed Cuts Rates and Adopts a Wait-and-See Approach

Fed Chair Jerome Powell noted the central bank is “well positioned to wait and see how the economy develops,” indicating little urgency to adjust policy further. Updated projections show only one rate cut expected next year, unchanged from September forecasts.

This restrained outlook caught some investors off guard, leading to a softer US Dollar as markets scaled back expectations for near-term policy easing.

Market Pricing Adjusts to Fed Tone

Following the announcement, markets priced a 78% probability that the Fed will hold rates steady at the next meeting, up from 70% before the decision, according to CME FedWatch. The shift reflects a broader recalibration toward a more cautious policy stance, pressuring the DXY in early trade.

Key US Data Ahead

Traders now turn to weekly Initial Jobless Claims, expected to rise to 220,000 from 191,000. A stronger-than-forecast reading could help stabilize the Dollar by tempering concerns about economic cooling. For now, the USD may remain under pressure unless incoming data challenges the market’s increasingly patient view of the Fed’s policy path.

US Dollar Index (DXY) – Technical Analysis

The US Dollar Index is trading near $98.68, holding inside a well-defined descending channel that has guided the downtrend since late November. Recent candles show repeated rejection near the channel’s midline and the $99.05–$99.31 resistance band, where both the 20-EMA and 50-EMA are sloping downward, keeping momentum bearish. Price is now reacting around $98.52, a short-term support tested multiple times this week.

A break below $98.52 would expose the next support at $98.28, followed by $98.03, the lower boundary of the channel. If buyers attempt a recovery, they must close above $98.82 and the descending trendline to shift momentum. RSI remains below 40, signaling weak demand and favoring continued downside pressure.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3370, holding firmly inside the ascending channel that has shaped the uptrend since late November. Price recently tested resistance at $1.3391, where upper wicks show sellers defending the zone. The pair is stabilizing above $1.3344, a short-term support aligned with the channel’s midline.

Both the 20-EMA and 200-EMA slope upward, confirming underlying bullish structure. A break above $1.3391 would open a move toward $1.3433, followed by the channel top near $1.3472. If GBP/USD slips below $1.3344, next supports appear at $1.3287 and $1.3233.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1693, holding inside a rising channel that has guided the trend since mid-November. Price recently stalled at $1.1707, where long upper wicks show hesitation. Support sits at $1.1682, aligned with the channel’s midline, while the 20-EMA and 200-EMA continue to slope upward.

A close above $1.1707 would expose $1.1732 and the channel top near $1.1763. If sellers push the pair below $1.1682, downside targets appear at $1.1658 and $1.1622.