Insights 
VT 
Key Points:
- Dollar Index slides to 98.18 following dovish tone at FOMC meeting
- Markets now expect two rate cuts in 2026 versus Fed’s single-cut projection
- MACD momentum weakens as 98.00 support faces renewed pressure
The US dollar extended its decline on Thursday after the Federal Open Market Committee (FOMC) delivered a policy outlook that leaned more dovish than markets anticipated.
While the Fed lowered rates by 25 basis points as expected, it was the accompanying commentary and Chair Jerome Powell’s post-meeting tone that triggered a wave of dollar selling and fresh bets on risk assets.
Traders had largely priced in the rate cut, but expectations of a more hawkish stance were dashed as the Fed signalled a more accommodative approach going into 2026.
This pivot allowed traders to reprice the path of monetary policy, with Fed funds futures now implying two additional rate cuts in 2026, compared to the Fed’s median projection of just one.
The impact was immediate across currency markets. The US Dollar Index (USDX) slumped to an intraday low of 98.18, its weakest level since late October. The euro pushed past $1.17, the yen rebounded to 155.64, and sterling climbed to a 1.5-month peak at $1.3391.
Adding to the downward pressure was the Fed’s announcement of a $40 billion programme to purchase Treasury bills starting December 12, aimed at improving market liquidity.
The size and timing of this operation caught traders off guard, further reinforcing the view that the Fed is easing policy more aggressively than expected.
Technical Analysis
The US Dollar Index (USDX) has slipped to 98.18, continuing its gradual retreat from the late November high near 100.85. While the dollar remains within a broader uptrend from the September low at 95.82, recent price action suggests weakening momentum.
Price is now testing support at the 98.00–98.20 area, a critical zone that previously acted as resistance in October and support in early November.
A clean break below this could open the door for a drop toward 97.50, or even a retest of 96.80–95.80 if bearish pressure intensifies.
The MACD has crossed below the signal line and is falling toward the zero line, indicating bearish momentum is building. Meanwhile, the short-term moving averages (5, 10, 30) have aligned bearishly and are sloping downward.
Cautious Forecast
With the Fed’s dovish pivot now confirmed and liquidity measures kicking off next week, the dollar may struggle to regain strength in the near term.
A sustained move below the 98.00 level would reinforce bearish sentiment and deepen downside momentum heading into the final stretch of the year.
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