US Dollar Price Forecast: Pressured Ahead of Post-Holiday Data – GBP/USD and EUR/USD

Market Overview

The US Dollar Index (DXY), which tracks the dollar against six major currencies, held near 97.95 on Thursday after recovering earlier intraday losses. Markets are closed for the Christmas holiday, leaving Wednesday’s close as the latest reference point and keeping trading volumes subdued.

Rate Cut Expectations Limit Upside

The dollar remains under mild pressure as investors continue to price in the possibility of two Federal Reserve rate cuts in 2026. US Treasury yields rebounded on Wednesday, with the 2-year yield near 3.53% and the 10-year yield around 4.16%, but gains may prove fragile if rate-cut expectations persist. Even with firmer yields, the outlook for monetary easing continues to cap sustained dollar strength.

Strong US Data Offsets Dovish Bets

Recent economic data has provided some support. Preliminary figures showed US GDP expanded at an annualized 4.3% in Q3, well above expectations and the prior quarter’s pace.

The core PCE Price Index rose 2.9% quarter over quarter, in line with forecasts, suggesting inflation remains contained. These data points highlight economic resilience, potentially limiting how quickly policy easing unfolds.

Japan Data in Focus After Holidays

Attention now turns to upcoming Japanese releases. Tokyo core CPI is expected at 2.5%, down from 2.8%, while the unemployment rate is forecast to hold at 2.6%. Industrial production is seen falling 1.9%, and retail sales growth slowing to 0.9%. Weaker readings could influence global risk sentiment and shape dollar positioning when markets reopen.

US Dollar Index (DXY) – Technical Analysis

The US Dollar Index (DXY) is holding near 97.95, reflecting Wednesday’s closing price ahead of the Dec 25 Christmas holiday, with markets closed and the setup relevant for the next session. Price remains confined within a clearly defined descending channel that has guided the broader downtrend since mid-November. Recent candles show limited follow-through after a bounce from the 97.70–97.75 area, suggesting weak demand on dips.

The index continues to trade below both the 50-EMA and 200-EMA, reinforcing the bearish structure. Former support near 98.10 has turned into resistance, aligning with the channel midline.

RSI has recovered modestly toward 45, but remains below neutral, indicating a corrective pause rather than a momentum shift. Overall structure favours downside continuation on rallies, with scope for a sell near 98.10, stop above 98.60, and downside target toward 97.30 when markets reopen.

GBP/USD Technical Analysis

GBP/USD on the 2-hour chart is holding near $1.3501, reflecting Wednesday’s closing levels ahead of the Dec 25 Christmas holiday, with markets closed and the setup relevant for when trading resumes. Price remains well supported within a clearly defined ascending channel that has guided the uptrend since late November.

The latest pullback from the $1.3535–$1.3540 area has been shallow, with candles showing limited downside follow-through, pointing to consolidation rather than distribution. The pair continues to trade above the 50-EMA, while the 200-EMA trends higher below $1.3330, reinforcing the broader bullish structure.

Former resistance around $1.3470–$1.3480 has turned into near-term support. RSI has eased from near 70 toward 55, signalling cooling momentum without a bearish shift, keeping the bias constructive with scope for a buy near $1.3475, stop below $1.3425, and upside target toward $1.3580 when markets reopen.

EUR/USD Technical Forecast

EUR/USD on the 2-hour chart is holding near $1.1779, reflecting Wednesday’s closing levels ahead of the Dec 25 Christmas holiday, with markets closed and the setup relevant for the next session. Price remains supported within a clearly defined ascending channel that has guided the uptrend since late November.

The recent pullback from the $1.1805 area has been orderly, with candles showing smaller bodies and limited downside follow-through, suggesting consolidation rather than distribution. The pair continues to trade above the 50-EMA, while the 200-EMA slopes higher below $1.1705, reinforcing the broader bullish structure.

Former resistance around $1.1745–$1.1750 now acts as near-term support. RSI has eased from near 70 toward 55, indicating cooling momentum without a bearish shift, keeping the bias constructive with scope for a buy near $1.1750, stop below $1.1715, and upside target toward $1.1850 when markets reopens.