Key Events
- Rate cut expectations jumped from 50% to 80%, lifting risk assets back to key resistance levels.
- The U.S. Dollar Index continues to hold above the 100 mark, despite limited economic data.
- EURUSD remains fragile above the critical 1.1480 support as markets head into year-end momentum.
CME Fed Watch Tool: December Rate Expectations
Rate cut bets climbed sharply—from 50% to 80% within a week—following dovish remarks from Fed Governor Christopher Waller, New York Fed President John Williams, and San Francisco Fed President Mary Daly. Their comments helped reverse recent losses across U.S. indices, cryptocurrencies, and precious metals.
However, with the dollar still hovering near the 100 level, lagging U.S. economic reports, and risk assets trading below their bullish bias zones, a cautious outlook remains warranted despite the surge in rate cut bets.
From a technical perspective, the DXY’s 17-year uptrend and structural support remain the dominant force across major currency pairs, as seen on the monthly timeframe. This structure continues to shape the broader bullish-to-neutral bias unless key support levels are breached.
DXY Outlook: Monthly Time Frame – Log Scale
Source: Tradingview
As long as the 17-year structure holds, my analysis leans bullish to neutral on the DXY.
Currently, the index faces a key resistance near 100.30, a former support zone from July 2023 to April 2025. A decisive hold above this resistance—or a further move beyond 100.80—would likely confirm a stronger bullish rebound from the 2025 lows, potentially driving currencies and commodities into deeper corrections. On the downside, a close below this channel would confirm a bearish continuation bias, opening the path toward the 95.00 mark.
Translating the following onto the EURUSD chart
EURUSD Outlook: Weekly Time Frame – Log Scale
Source: Tradingview
The EURUSD is stabilizing above the 1.1470–1.1380 support zone but remains under bearish pressure as the DXY holds above 100. Should this support break, a deeper drop aligned with the RSI’s potential return to yearly oversold levels could follow (a confirmed hold below the weekly RSI’s 50 neutral zone should take place), targeting the 1.12–1.11 area. This could present a potential dip-buying opportunity before the pair resumes its upward trajectory toward 1.20.
From the upside perspective, a sustained break above 1.1680, 1.1780, and 1.1900 would be required to confirm an extended recovery above the 1.20 peaks last seen in 2022.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
