The decline of the dollar index (USDX), which began yesterday during the Asian trading session, accelerated significantly after the Federal Reserve announced a 0.25% rate cut. Although this decision was anticipated by the market, accompanying statements and comments from Fed Chair Jerome Powell indicated that the central bank is ready for further rate cuts in the upcoming year.

During the press conference following the policy meeting, Jerome Powell underscored the Fed's willingness to "wait and see how the economy evolves," but raising interest rates in the future is not part of the baseline scenario.

The next FOMC meeting is scheduled for January 27–28. The rate-setting committee is expected to take a pause (currently, markets assess this probability at 80%, according to the CME FedWatch tool), and, if inflation develops favorably, return to gradual monetary easing.

It is also important to consider that Jerome Powell will conclude his term as Fed Chair in March next year. Donald Trump announced last month his intention to propose a successor. Although a candidate has not yet been officially named, among the leading contenders, experts mention the president's economic advisor Kevin Hassett, known for his dovish stance on monetary policy.

Despite the high probability of a pause, the upcoming Fed meeting in January will be a critical step in assessing the current state of the economy and deciding the central bank's future actions.

Technical picture

Thus, the outcomes of the meeting that concluded on Wednesday and the expectations of changes in Fed leadership create a negative backdrop for the dollar and its USDX index, which continues to move in the zone of short-term, medium-term, and long-term bear markets—below key resistance levels of 99.10 (EMA200 on the 1-hour chart), 99.85 (EMA200 on the daily chart), and 101.40 (EMA200 on the weekly chart).

In the first half of the European session, the dollar index USDX traded near the 98.57 mark, slightly below the previous day's closing price.

Technical indicators (in our case, RSI, OsMA, Stochastic) on the daily and weekly charts also remain in short position territory.

What to expect today?

Today, market participants are awaiting important releases (at 13:30 and 15:00 GMT), including reports on trade balance, initial jobless claims, and wholesale inventories. Experts anticipate an increase in claims for benefits to about 220,000 (up from 191,000 the previous week), indicating an unstable situation in the labor market.

Conclusion

The US dollar remains in a vulnerable position. The outcomes of the December Fed meeting have become a determining factor for the American currency in the coming weeks or even months. For short-term investors, it is advisable to focus on the publication of important US macroeconomic data, particularly relating to labor market dynamics and inflation.

It is crucial for investors to consider all potential risks, paying attention to key economic indicators and the rhetoric from subsequent Fed statements, in order to make informed investment decisions.