Insights 
VT 
Key Points
- The USDX dipped 0.1% to 99.202, on track for a near 9% annual decline, as traders priced in an extended U.S. easing cycle.
- Bitcoin reclaimed $93,633.70, lifting broader risk appetite and weighing further on the greenback.
The U.S. dollar remained subdued on Wednesday, with the USDX easing to 99.202, down 0.1% on the day and set for its worst year since 2020. The index has now fallen nearly 9% year-to-date, a slide driven by rising expectations that U.S. rate cuts will deepen through 2026.
Liquidity stayed stable, yet the broader tone suggests traders are preparing for a weaker dollar cycle. Futures markets continue to price in an aggressive easing path, with 90 basis points of cuts now assumed before the end of 2026.
The muted dollar backdrop has allowed risk assets to recover. Bitcoin climbed 2% on the day to $93,633.70, building on a 6% surge in the previous session.
After a painful November when the cryptocurrency sank by more than $18,000, this rebound has helped pull markets back into a more constructive stance.
Euro Outperforms as ECB Seen Keeping Rates Steady
The euro strengthened as the U.S. dollar drifted, rising to $1.1640 after clearing its 50-day moving average. Eurozone inflation came in slightly above expectations, firming support for the single currency.
The euro has already gained more than 12% this year, making it one of its strongest annual performances since 2017. Traders see the ECB remaining on hold for the next several months, with markets pricing only a one-in-four chance of any easing next year.
The shift in U.S.–euro rate expectations continues to work against the greenback, particularly as tariff uncertainty earlier in the year had already weakened dollar demand.
Dollar Pressured by Fed Chair Speculation
Sentiment toward the dollar weakened further after speculation intensified that pro-rate cut White House economic adviser Kevin Hassett may become the next Fed chair. President Trump confirmed he would announce his nominee in early 2026.
Markets remain highly sensitive to the prospect of a Fed leadership change. A more dovish chair could accelerate the easing cycle and reinforce the downward trajectory for the dollar into next year.
Deutsche Bank’s Tim Baker warned that the dollar could fall roughly 2% in December alone, consistent with a decade-long trend of softer year-end USD performance.
Technical Analysis
The US Dollar Index has slipped back below the 99.50 level, erasing some of November’s gains and putting pressure on short-term bullish momentum. After peaking just under 100.80 late last month, the index has faltered at resistance and now trades around 99.09.
Price has fallen beneath the 5- and 10-day moving averages, and is testing the 30-day average, signalling potential further softness if buyers don’t return soon.
The MACD has crossed bearishly below the signal line, and the histogram is trending lower, supporting a short-term downside bias. Key support lies near 98.80–99.00; a break below this range could open the way toward 98.00 or even 97.50.
Conversely, if USDX reclaims 100 with conviction, it would invalidate the bearish signal and reassert the uptrend.
For now, the bias has turned cautious, with momentum softening and technicals pointing to further consolidation or a near-term pullback unless macro catalysts revive dollar demand.
Cautious Forecast
The USDX may continue to weaken if markets lean further into U.S. rate-cut expectations. A break below 99.00 could attract more sellers, while only a firmer U.S. data surprise or hawkish Fed communication is likely to lift the dollar back toward the 100.00–100.50 band in the short term.
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