Key Events
• The dilemma between inflation risks and soft labor market risks fuels caution across major charts ahead of the FOMC meeting
• The 25 bps rate cut seems fully priced in, keeping the DXY above 98.80 and GBPUSD below 1.34
• With the Fed and BoE facing similar challenges between inflation and employment uncertainty, key levels are set to define the primary trends heading into 2026
As the final FOMC meeting of the year approaches, extended consolidations across major currency pairs are being monitored closely for signs of directional breakouts that may shape the December outlook — and, if aligned with high-time-frame levels, the 2026 trajectory.
DXY Outlook: Daily Time Frame – Log Scale
Source: Trading view
A long term double bottom and short term double top pattern can be identified on the DXY, both awaiting further confirmation before extending their respective targets. These patterns sit just below a previous support zone (January 2023 to September 2024) that has now turned into key resistance near the 100.30 mark.
The first is a double-bottom formation near the 96 level between July and September 2025. Confirmation above 100.30, the neckline, is needed to extend gains toward 101.70, 103.40, and 104.20, the pattern’s target potential. A move of this magnitude would erase gains across major currency pairs, including EUR/USD and GBP/USD, with key downside levels around 1.12 and 1.27 respectively.
The second is a short-term double-top pattern formed in November, also respecting the broader 100.30 resistance zone. A clear close below 98.80 is required to confirm a DXY pullback consistent with rate-cut expectations, targeting 98.00 and 97.50 supports and pattern target potential. Such a move could help lift major currency pairs back toward their 2025 record highs.
However, with overall price action remaining above the 17-year trendline established since 2008, the long-term bias remains bullish unless a clean break below the 95 low occurs.
DXY Outlook: Monthly Time Frame – Log Scale
Source: Trading view
As the saying goes, the trend is your friend. Unless the index decisively drops back below the 96-mark, the long-term bias remains bullish, supported by an up trending parallel channel that has held since the 2008 lows.
Year-end liquidity may be challenging ahead of the upcoming FOMC meeting, increasing the relevance of long-term timeframes, key price levels, and structural outlooks across the charts to confirm the next directional moves heading into 2026.
GBPUSD Outlook: Daily Time Frame – Log Scale
Source: Trading view
From a 3-day perspective, GBPUSD remains pressured below a descending resistance line connecting consecutive lower highs since July 2023 — which also aligns with the yearly high near 1.38. This barrier triggered a three-legged correction toward the 1.30 psychological support, which then fueled a positive rebound toward 1.34, establishing key support and resistance levels that determine the sustainability of a trend that resembles an extended consolidation phase since July 2023.
Upside scenario:
A clear hold above 1.34 could expose gains toward 1.36 and 1.38 (the yearly high). A breakout above these zones could open the path toward the 1.40 psychological level and 1.42, aligning with the 2021 peaks.
Downside scenario:
A break below 1.30, along with the support line connecting lower lows between May and November, could trigger a deeper retracement toward the upper bound of the larger long-term downtrending consolidation from the 2007 highs — as illustrated on the monthly timeframe.
GBPUSD Outlook: Monthly Time Frame – Log Scale
Source: Trading view
On the monthly chart, an extreme downturn scenario aligns with a resistance-turned-support zone that has held for over 17 years, with key downside levels near 1.27 and 1.25. These zones may offer dip-buying opportunities unless the broader narrative shifts back into deeper consolidation.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
