USD Index on a Softer Note Ahead of the Federal Reserve Meeting
In a week packed with macroeconomic releases—one that will see four major central banks, including the Federal Reserve, announce potential changes to their monetary policy—the USD Index (USDX) begins trading at 98.63. This places the index closer to its H2 2025 highs (100.35 recorded on 20 November) than to its semiannual lows (95.85 reached on 17 September). This soft tone persists despite Fed Funds futures implying an 87.2% probability of a rate cut this Wednesday.
For those less familiar with this instrument, the USD Index measures the value of the US dollar against a basket of six major currencies, each assigned a different weight: the EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%). This composition makes it a useful tool for investors seeking exposure to the US dollar without having to factor in the idiosyncratic behavior of individual FX pairs. The index was introduced in 1973 and later adjusted in 1999 to incorporate the euro, replacing legacy currencies such as the German mark and French franc. It is listed on ICE (Intercontinental Exchange) in futures format, and the USDIDX price displayed on our platform is derived directly from the ICE contract.
To avoid confusion, it is worth noting that a Nominal Broad US Dollar Index also exists, used by the Federal Reserve for research purposes; this index includes trade-weighted adjustments but is not tradable nor exchange-listed.
Economists broadly expect a 25bp rate cut this Wednesday, bringing the target range to 3.50%–3.75%. This expectation is echoed in the December 30-day Fed Funds Future, currently priced at 96.265. Our internal calculations suggest a slightly lower probability than the previously mentioned 87%—likely due to methodological differences—but the market is certainly pricing in a full cut by the next meeting in February 2026. On a separate note, Treasury Secretary Bessent stated yesterday that the US is on track to close the year with GDP growth of 3%, which would mark a notable acceleration from the latest +2.1% reading.
Technical Analysis
Taking a longer-term view, the USD has clearly weakened since early 2025, following a descending trend from its 110.02 peak on 13 January. The break below the key 100.30 level was particularly significant, as this threshold had acted as strong support since mid-2022 and had been tested multiple times. The decline halted on 1 July, and the downtrend was technically broken on 14 July around the 97.50 mark. Since then, the index has been trading sideways with support retested in the 96 area in September and resistance encountered near the psychological 100 level in recent sessions.
The most recent leg higher, which began in early autumn, now appears to be losing momentum—or at least consolidating. The current price sits at its lowest since early November, a softness also reflected by the RSI at 41.83 and a MACD line that has just slipped into negative territory on MT5. Furthermore, the short-term uptrend was decisively broken on Wednesday, 26 November, and the index now trades close to the lower Bollinger Band. While this may partially stem from the recent test of the 100 level, it nonetheless warrants caution.
On the downside, initial levels to monitor include 98.35 and subsequently 98.15, with 97.66 marking a key support. To the upside, resistance stands at 99.20, 99.50, 100, and finally 100.30.
