US Dollar Price Forecast: Weakens Before NFP Test – GBP/USD and EUR/USD

Market Overview

During Asian trading, the US dollar opened the week weaker, extending recent losses as markets leaned toward expectations of interest rate cuts by the Federal Reserve next year. While hawkish comments from some Fed officials offered brief support last week, sentiment remained cautious ahead of key US labor data and lingering global risk concerns.

Fed Signals Keep Markets Guarded

The Federal Reserve last week delivered its third 25-basis-point rate cut of the year, bringing the target range to 3.50%–3.75%. Fed Chair Jerome Powell said the move leaves policymakers in a position to assess incoming data before deciding on further action.

According to the CME FedWatch tool, markets now assign a 76% probability that rates will remain unchanged at the January 2026 meeting, up from 70% before the December decision.

Some officials urged caution. Chicago Fed President Austan Goolsbee suggested waiting for more data before easing further, while Cleveland Fed President Beth Hammack stressed keeping policy restrictive enough to control inflation. Investors are now watching remarks from Fed Governor Stephen Miran and New York Fed President John Williams for clearer guidance.

US Jobs Data in Focus

Attention turns to US labor market data due Tuesday, including Nonfarm Payrolls, Average Hourly Earnings, and the Unemployment Rate. Strong employment figures could reduce near-term rate cut expectations and support the dollar, while weaker data would likely reinforce bets on easier policy.

Global Risks and Safe-Haven Demand

Beyond US data, broader global risk events have kept markets cautious. Periods of heightened uncertainty often encourage defensive positioning, which can support demand for traditional safe-haven assets, including the US dollar, despite its recent softness.

US Dollar Index (DXY) – Technical Analysis

The US Dollar Index (DXY) is trading near 98.35 on the 4-hour chart, extending losses within a clearly defined descending channel. Recent candlesticks show small bodies near the channel base, signaling fading downside momentum rather than a confirmed reversal. Price remains below the 50-EMA at 99.20 and the 100-EMA near 99.30, keeping short-term control with sellers.

The broader trend turned lower after rejection from the 100.80–101.00 zone in late November, with a sequence of lower highs guided by a descending trendline. Immediate support is seen at 98.10, followed by 97.80, a prior swing low. A break lower could open room toward 97.45.

On the upside, resistance stands at 98.95 and 99.30. RSI near 40 points to weak momentum without oversold conditions, favoring consolidation or a modest corrective bounce rather than a trend reversal.

GBP/USD Technical Analysis

GBP/USD is trading near $1.3360 on the 4-hour chart after easing from recent highs while staying within a clear ascending channel. Recent candlesticks show smaller bodies and overlapping ranges, pointing to consolidation rather than a trend reversal. Price is holding just above the channel midline, indicating buyers remain active on pullbacks.

The broader trend stays constructive, supported by a rising trendline from late November. The pair continues to trade above the 50-EMA near $1.3310 and the 100-EMA around $1.3240, reinforcing bullish structure. A Fibonacci retracement places the 38.2% level near $1.3330, aligning with current price action.

On the upside, resistance stands at $1.3425, then $1.3470. A break higher could target $1.3510. Below $1.3330, support is seen at $1.3285 and $1.3235. RSI near 55 suggests cooling momentum without a bearish shift.

EUR/USD Technical Forecast

EUR/USD is trading near $1.1735 on the 4-hour chart after breaking out of a multi-week ascending structure and entering a short consolidation phase. Recent candlesticks show smaller bodies and limited follow-through, pointing to hesitation after the sharp advance rather than renewed selling. Price is holding above the former breakout area near $1.1720, now acting as immediate support.

The broader trend remains constructive, supported by a rising trendline from late November. The pair is trading above the 50-EMA at $1.1685 and the 100-EMA near $1.1620, confirming bullish structure. A Fibonacci extension projects resistance in the $1.1760–$1.1800 zone.

A break below $1.1720 could open a pullback toward $1.1685 and $1.1650. RSI sits near 65, reflecting strong momentum without overbought conditions, favoring consolidation before another directional move.