US Dollar Price Forecast: Dollar Weakens on Trump Support for Cuts GBP/USD and EUR/USD

Market Overview

During the European session, the US Dollar edged lower toward 98.20, extending its recent decline as traders positioned for a more accommodative Federal Reserve. The Greenback remains under pressure as markets increasingly expect a faster pace of rate reductions than the Fed signaled at its latest meeting.

Rate-Cut Expectations Diverge From Fed Guidance

The CME FedWatch Tool shows a 58% probability of at least two rate cuts by October 2026. This contrasts with the Fed’s projections, which point to the policy rate falling to 3.4% by end-2026, implying only one cut next year.

Comments from President Donald Trump, who expressed support for further easing following Wednesday’s 25-basis-point cut, reinforced expectations of additional reductions and added pressure on the dollar.

Focus Shifts to US Data for Policy Signals

Attention now turns to upcoming US indicators, including November Nonfarm Payrolls, Retail Sales, and preliminary December PMI figures. These releases will help clarify whether the labor market and consumer demand are cooling enough to justify further easing.

Employment data will be particularly influential: stronger readings may temper rate-cut expectations, while softer numbers could extend the dollar’s decline.

Outlook: Dollar Vulnerable Ahead of Key Releases

Although the US economy remains resilient, rate-cut speculation continues to weigh on the DXY. Unless incoming data surprises to the upside, the dollar may struggle to recover from recent lows as other major currencies benefit from shifting policy expectations.

US Dollar Index (DXY) – Technical Analysis

The U.S. Dollar Index is trading near $98.34, moving firmly inside a descending channel that has guided price lower since early December. Candles continue to respect the upper boundary as dynamic resistance, while the 20-EMA and 50-EMA slope downward above price, confirming sustained bearish structure.

The latest bounce from $98.12 signals short-term profit-taking, but momentum remains weak, with RSI hovering near 30, showing oversold conditions but no reversal signal yet.

If pressure resumes, the next support sits at $97.80, followed by $97.47 at the channel base. A recovery above $98.76 is needed to challenge $99.24, though buyers face strong trendline resistance overhead.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3387, holding within a rising channel that has guided price action since mid-November. The pair recently pulled back from $1.3425, with candlesticks showing slowing momentum near the upper boundary of the channel. Price remains above the 20-EMA and 50-EMA, keeping short-term structure bullish.

Immediate support sits at $1.3360, aligned with the channel’s midline. A deeper dip may test $1.3287, where the 50-EMA and prior horizontal support converge.
RSI has eased from overbought territory, suggesting room for consolidation before another directional move.

A close above $1.3425 would expose $1.3470 and potentially $1.3513. Failure to hold $1.3360 risks a slide toward the channel base near $1.3233.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1740, consolidating just below the $1.1762 Fibonacci 0.0 retracement after a strong breakout from the rising trendline. The pair is holding above the 20-EMA and 50-EMA, keeping short-term momentum constructive.

Price is currently retesting the 23.6% Fib at $1.1727, with deeper support at the 38.2% level at $1.1706 and the 50% retracement at $1.1689. These zones align with the ascending trendline, creating a confluence support area.

RSI remains elevated but not overbought, suggesting pullbacks could be corrective rather than trend-changing.

A close above $1.1762 would expose $1.1797 and $1.1832. If sellers step in, a drop toward $1.1706 or $1.1672 remains likely.