The US Dollar has seen a small increase recently, but overall, it is still losing ground as the DXY index remains around 99. Market activity suggests a pause in movement ahead of the Federal Reserve’s expected rate cut. Recent reports show the US labor market is slowing down. In November, the private sector lost 32,000 non-farm jobs, while hiring fell by 9,000. This pattern supports the expectation of a 25 basis points rate cut, despite some uncertainty about future policies.

December Trends And Economic Indicators

We are waiting for delayed data from September on Personal Income, Spending, and PCE, which is likely to show slight increases in both spending and income. Core PCE is expected to drop to 2.8%. The University of Michigan’s Sentiment data is also expected to improve a bit, though it is still close to all-time lows. Negative technical factors are putting pressure on the Dollar Index, which has seen a decline for the second straight week. December usually brings unfavorable trends for the dollar. The FXStreet Insights Team shares insights from noted experts, along with our own analyst perspectives, to give a complete picture of market trends. Currently, the US Dollar is still weak, with the DXY index around 99 ahead of next week’s important Federal Reserve meeting. The market fully anticipates a 25 basis point rate cut, so traders should focus on the long-term policy outlook for 2026 rather than just the decision itself. The real market shifts will come from any hints about future easing. This expectation is supported by clear signs of a slowing US economy, similar to conditions seen before the easing cycle in 2019. Recent private payroll data from November 2025 showed a net job loss, while the latest Core PCE inflation reading is likely to fall to 2.8%, giving the Fed a strong reason to act. In this environment, buying put options on the dollar or call options on currencies like the Euro or Yen could be a good strategy.

Strategies For Traders

The technical outlook remains bearish for the dollar, as two consecutive weekly declines strengthen the downward trend, with our focus shifting toward the mid-97 range. Historically, December has been a weak month for the dollar, which adds to bearish positions. Traders may want to consider establishing short positions in US Dollar index futures to take advantage of this expected decline as we near year-end. Uncertainty about the Fed’s plans for 2026 is increasing implied volatility in the currency markets. With consumer sentiment near record lows, any surprises in the Fed’s statements could lead to significant price changes. This situation suggests that traders might benefit from using volatility strategies, which can profit from large market moves in either direction, especially around the FOMC announcement. Create your live VT Markets account and start trading now.

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