The US Dollar Index (DXY) is struggling to get back to the 99.00 mark after falling by 1.5% in the last two weeks. It has leveled off around this important point after bouncing back from a low of 98.80. Market participants are being cautious with the Federal Reserve’s policy meeting coming up. Soon, we will see the US Personal Consumption Expenditures data, which is anticipated to show ongoing price pressures. Even with these numbers, the chance of more interest rate cuts remains since the job market is still facing challenges. Investors are interested in what the future holds, looking beyond the immediate data.

Technical Analysis Of US Dollar Index

On a technical note, the US Dollar Index is below the neckline of a Double Top Pattern at 99.00. This suggests there might be a deeper correction following its previous rise. If it can’t move past 99.00, it could drop further to support levels at 98.80 and 98.60. On the other hand, if it breaks above 99.00, it could aim for targets like the December 2 high at 99.55 and possibly reach 100.00. This week, the US Dollar had mixed results against major currencies, with a notable 1.30% drop against the Swiss Franc. The accompanying table shows specific percentage changes in the USD against various currencies, highlighting market strengths and weaknesses. We are keeping a close eye on the US Dollar Index as it fights to stay above the crucial 99.00 level. After a significant decline of 1.5% in two weeks, the dollar’s position is uncertain. The next few trading sessions are vital to determining its direction as the year ends. If the DXY cannot reclaim 99.00, it will confirm a bearish double top pattern, often indicating a major trend reversal. For derivative traders, this means they may want to prepare for a deeper correction in the coming weeks. This pattern suggests a potential drop to around 97.60, a level not seen since early October 2025.

Economic Outlook And Trading Strategies

This technical weakness is supported by a slowing economy. The November 2025 jobs report showed only 95,000 new jobs added and unemployment rising to 4.2%. These results raise expectations that the Federal Reserve will need to cut interest rates next week to help the job market. Currently, markets are pricing in over an 80% chance of a rate cut at the next meeting. If the DXY falls below the recent low of 98.80, buying put options or establishing bear put spreads could be effective strategies to profit from a move toward 98.00. Selling out-of-the-money call options or using call credit spreads might also work well to benefit from declining prices. This method enables traders to manage their risk while betting on a weaker dollar. Conversely, if the DXY decisively breaks and holds above 99.00, it would invalidate the bearish pattern. This kind of move, possibly triggered by a surprisingly hawkish Federal Reserve statement, would open up paths toward 99.55 and even 100.00. In this scenario, traders should be ready to close short positions and consider call options to take advantage of upward momentum. Reflecting on recent performance, the dollar showed some strength against the Swiss Franc but weak against the Australian Dollar. This discrepancy indicates that a potential dollar decline might not be the same across all currency pairs. Traders should focus their short-dollar strategies against currencies with stronger fundamentals. Create your live VT Markets account and start trading now.

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