US Dollar Price Forecast: Drops Amid 85% Fed Cut Probability – GBP/USD and EUR/USD

Market Overview

The US dollar remained soft against major peers during European trading, holding near a five-week low. Even with solid labor data released Thursday, the greenback failed to gain traction as investors continued to price in a more accommodative Federal Reserve.

Labor Strength Offers Limited Support

Initial jobless claims fell to their lowest level in more than three years, underscoring resilience in the US labor market. The reaction in currency markets, however, was muted.

Traders focused less on weekly improvements and more on the Fed’s policy direction. Some analysts also noted that the Thanksgiving period may have distorted the data.

Fed Cut Expectations Keep Pressure on the Dollar

Markets now assign roughly an 85–86% probability of a quarter-point rate cut at the December 9–10 FOMC meeting, with expectations for several additional cuts next year. Anticipation of easier policy continues to weigh on the dollar, reducing its appeal even as economic indicators remain firm.

Data Gaps Add to Market Uncertainty

The extended government shutdown has delayed several key economic releases, including monthly payroll figures. With incomplete data, investors have been forced to navigate the outlook with limited visibility, increasing uncertainty around near-term dollar direction.

While the dollar still offers defensive appeal during periods of risk aversion, Fed communication in December and upcoming employment updates will likely determine its next move.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) trades near $98.92, moving inside a well-defined descending channel that has guided price lower since late November. Recent candles show rejection at the mid-channel trendline near $99.06, signaling persistent selling pressure. The index remains below both the 50-EMA and 200-EMA, reinforcing a bearish structure.

Immediate support sits at $98.76, followed by $98.56 and $98.38 if downside momentum continues.

A break below these levels would extend the channel toward the lower boundary. On the upside, resistance stands at $99.22, and a close above that level would be required to challenge the broader downtrend.

GBP/USD Technical Analysis

GBP/USD trades near $1.3353, holding inside a rising channel that has guided the pair higher since mid-November. Recent candles show buyers defending the mid-channel support at $1.3326, keeping the short-term structure intact. Immediate resistance sits at $1.3375, where multiple rejection wicks indicate supply.

Below current levels, support stands at $1.3287, followed by $1.3248 and $1.3190 if sellers extend pressure. Price remains above the 50-EMA, while the 200-EMA below confirms broader bullish momentum.

RSI is recovering toward 55 after easing from overbought, suggesting stabilizing momentum. A breakout above $1.3375 could open $1.3424, while losing the channel floor risks a deeper pullback toward $1.3287.

EUR/USD Technical Forecast

EUR/USD trades near $1.1659, holding inside a rising channel that has guided price higher since late November. Recent candles show buyers defending the mid-channel trendline around $1.1653, keeping the short-term bias constructive. Immediate resistance stands at $1.1688, where multiple rejection wicks show supply.

On the downside, support sits at $1.1623, followed by stronger levels at $1.1591 and $1.1566 if sellers pressure the trend. The pair remains above the 50-EMA and 200-EMA, reinforcing broader bullish structure.

RSI is recovering from mid-range toward 55, indicating improving momentum but not stretched conditions. A close above $1.1688 could open $1.1716, while losing the channel floor risks a deeper pullback toward $1.1591.