Insights 
VT 
Key Points
- USDX hovers at 98.951, set for its second consecutive weekly loss.
- Markets now price in an 87% chance of a 25 bps Fed rate cut next week.
The US dollar index (USDX) traded at 98.951 on Friday, holding below the 99 mark as sentiment around Federal Reserve policy continued to shift dovishly.
The greenback is on track for its second consecutive weekly decline, retreating from mid-November highs near 100.60.
Markets have now fully priced in a 25 basis point cut at the Fed’s upcoming December meeting, with an 87% probability according to Fed funds futures.
Traders are also positioning for two to three more cuts across 2026, spurred by weakening inflation and a softer labour outlook.
Hassett Speculation Builds
Adding to the pressure on the dollar, markets are increasingly factoring in a possible leadership transition at the Fed. Economic adviser Kevin Hassett is reportedly the frontrunner to replace Jerome Powell when his term ends in May.
Hassett is known for advocating more proactive rate cuts to support economic expansion, particularly in election years.
If appointed, traders believe Hassett’s dovish leanings could further accelerate policy easing — a prospect that has already started weighing on long-dollar positions.
Jobs Data Mixed Ahead of PCE Inflation Print
Thursday’s economic data painted a conflicting picture. Initial jobless claims unexpectedly dropped to a three-year low, but the decline is widely attributed to seasonal noise around the Thanksgiving period.
In contrast, the Challenger job cuts report showed that layoffs climbed to 71,321 in November, the highest reading for that month since 2022 — a reminder that labour market fragility still lingers.
Markets are now looking to the delayed September PCE index, the Fed’s preferred inflation gauge, due later today. Alongside it, consumer spending and income data could shed light on household demand and future policy paths.
Technical Analysis
The US Dollar Index has edged lower to 98.951, continuing its mild retreat after failing to break above the 100.80 resistance in mid-November.
Price action is now back below the 5- and 10-day moving averages and testing the 30-day MA from above, hinting at a potential breakdown of short-term support. The broader uptrend from the September low at 95.819 remains intact for now, but momentum is weakening.
The MACD has dipped below the signal line and is heading toward the zero level, confirming a bearish shift in momentum. The histogram also shows increasing red bars, suggesting downside pressure is building.
If price breaks cleanly below the 98.80 region, the next support area lies around 98.20, followed by 97.50. On the upside, a recovery above 99.50–99.80 would be needed to restore bullish confidence and open the door for another push toward 101.
For now, the bias leans cautiously bearish, with traders watching for a confirmed close below the 30-day moving average as a trigger for further downside.
Cautious Forecast
Unless the upcoming PCE reading surprises to the upside, the dollar may remain heavy into the weekend. A sustained close below 99.00 could deepen downside pressure toward the 98.30–97.80 range.
However, any signs of inflation stickiness or reduced rate cut pricing could prompt a short-covering rally back to 99.70.
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