Summary at a Glance
- Main Trend: Dollar softens into mid-December as markets brace for another Fed rate cut.
- Fed Outlook: 85% probability of a 25 bps cut on 10 December; rate to fall to 3.50–3.75%.
- Top FX Pairs to Watch: EUR/USD, GBP/USD, USD/JPY, USD/INR, and DXY.
- Key Risks: Fed split, patchy U.S. data, BoJ policy pivot, BoE meeting on 18 December.
USD Weekly Forecast: Pressure Mounts as Dovish Fed Moves Closer
The dollar continues to slip as traders price in a widely expected interest rate cut at the upcoming 10 December FOMC meeting. Fed Funds futures show an 85% chance of a 25 bp cut, which would bring the target range to 3.50–3.75%. The U.S. government shutdown’s data gap, cooling job market, and falling bond yields all weigh on the greenback’s near-term prospects.
While Chair Powell has cautioned against overconfidence in further easing, dovish FOMC members have dominated recent commentary. With inflation around 3% and signs of labour market slack emerging, another cut now seems more likely than not.
Core Drivers of USD Weakness
- Data Gaps: October data was lost due to the 43-day shutdown. Q4 GDP estimates are now being revised lower by several banks.
- Cooling Labour Market: November’s ADP report showed private-sector job losses; unemployment has crept up to 4.4%.
- Falling Yields: 10-year Treasury yields have fallen below 4.0%, undermining USD’s yield premium.
- Fed vs. Rest: ECB and BoE are holding, while the BoJ is signalling a shift — eroding the USD’s former policy edge.
FX Pair Forecasts (8–14 December)
EUR/USD: Bullish Breakout on Fed Divergence
- Forecast: 1.1650 – 1.2000
- Bias: Bullish
- Support/Resistance: 1.1600 / 1.1800
- Outlook: A dovish Fed and a stable ECB favour euro strength. Momentum could push EUR/USD toward 1.20 if 1.18 breaks.
GBP/USD: Strong Start, BoE Risks Ahead
- Forecast: 1.3050 – 1.3400
- Bias: Cautiously Bullish
- Support/Resistance: 1.3000 / 1.3350
- Outlook: Post-budget gains remain intact, but BoE’s 18 December meeting poses downside risk if a rate cut is flagged.
USD/JPY: BoJ Tightening Speculation Builds
- Forecast: ¥153.00 – ¥158.50
- Bias: Bearish USD / Bullish JPY
- Support/Resistance: ¥152.00 / ¥160.00
- Outlook: Traders are wary of BoJ rate hikes and FX intervention. Upside capped near ¥160; downside favoured if BoJ shifts.
USD/INR: RBI Cut Softens Rupee, Intervention Limits Losses
- Forecast: ₹88.50 – ₹90.30
- Bias: Bearish INR
- Support/Resistance: ₹88.00 / ₹90.00
- Outlook: After the RBI’s 25 bp cut on 5 December, INR remains under pressure. However, active RBI dollar sales near ₹90 are limiting a deeper fall.
DXY: Dollar Index Teeters Below Key Support
- Current: ~98.9
- Forecast Range: 98.00 – 100.00
- Bias: Bearish
- Outlook: DXY is testing its lowest levels in months. A weekly close below 98 could confirm a deeper trend lower.
Key Events This Week (8–14 December)
| Date | Event | Importance |
|---|---|---|
| 10 Dec | US Fed Interest Rate Decision | High |
| 11 Dec | Eurozone Industrial Production | Medium |
| 13 Dec | US PPI Inflation (Nov) | Medium |
| 13 Dec | China CPI & PPI (Nov) | Medium |
| 14 Dec | UK GDP (Oct) | High |
Quick Technical Bias Summary
| Pair | Bias | Support | Resistance | Key Driver |
|---|---|---|---|---|
| EUR/USD | Bullish | 1.1600 | 1.1800 | Fed cut vs. ECB hold |
| GBP/USD | Cautiously Bullish | 1.3000 | 1.3350 | Budget tailwind, BoE risk |
| USD/JPY | Bearish USD | ¥152.00 | ¥160.00 | BoJ tightening, intervention risk |
| USD/INR | Bearish INR | ₹88.00 | ₹90.00 | RBI easing vs. trade pressures |
| DXY | Bearish | 98.00 | 100.00 | Fed rate cut and weak data |
FAQs – Your Dollar Questions Answered
Will the Fed cut rates this week?
Most likely yes. Market pricing shows ~85% odds of a 25 bp cut on 10 December.
Can EUR/USD reach 1.20 soon?
Yes, if it clears 1.18 after the Fed meeting, especially if the ECB remains on hold.
Is GBP/USD still heading higher?
Potentially, though upside is limited ahead of the BoE decision. Risk of a rate cut caps gains.
Could Japan intervene in USD/JPY?
Yes, if the pair breaks above ¥160. That’s viewed as a red line by Tokyo officials.
Final Thoughts
The Fed’s upcoming decision is the week’s focal point. Unless Chair Powell strongly pushes back against easing expectations, the dollar is likely to remain under pressure. Key pairs like EUR/USD and GBP/USD look poised for further gains, while USD/JPY is nearing levels that could trigger intervention or BoJ tightening.
Positioning will remain cautious ahead of 10 December — expect consolidation early in the week, followed by potential volatility into Friday.
For those planning large international transfers, now is a pivotal moment to monitor dollar rates.
