Insights 
VT 
Key Points
- USDX dips to 98.13, its lowest since late October
- Fed cuts rates and opens door for further easing
- Political pressure from Trump raises concerns over Fed independence
The US Dollar Index (USDX) continued its downward slide on Friday, slipping to a fresh near two-month low of 98.134, as markets digest the Federal Reserve’s latest policy pivot and growing political influence over central bank decisions.
As expected, the Fed delivered a 25 basis-point rate cut during its December FOMC meeting.
However, Chair Powell’s tone surprised traders by leaning more dovish than anticipated, suggesting further easing could be warranted in 2026 if inflation continues to trend lower and the labour market softens.
Adding to the pressure, President Trump stated in an interview with the Wall Street Journal that he was considering Kevin Warsh and Kevin Hassett as potential candidates for Fed Chair.
Trump added that he believed rates should be cut to 1% or lower, and implied the Fed should consult him on policy—comments that raised fresh questions about the independence of the central bank.
These factors combined to fuel USD selling, with the USDX now on track for its third straight weekly loss, weighed by rising expectations of two more rate cuts in the year ahead.
Technical Analysis
The Dollar Index is currently hovering around 97.98, flat on the day after falling sharply from its recent peak above 100.
Price action has broken below the key 30-day moving average and is now flirting with support around 97.90, last seen in mid-October.
Momentum has shifted bearish, with the 5- and 10-day MAs rolling over and pointing downward.
The MACD has crossed below the signal line and is diving deeper into negative territory, suggesting growing bearish momentum.
A sustained drop below 97.90 could trigger a further decline toward the 95.80 level, the multi-month low from August.
On the upside, a recovery above 98.50–99.00 would be needed to stabilise the short-term outlook.
Bottom Line
The dollar remains vulnerable in the near term as markets lean further into the Fed’s dovish shift and weigh potential political interference.
Traders should watch for a weekly close below the 98.00 threshold, which could trigger accelerated downside momentum into Q1 2026.
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