US Dollar Price Forecast: Core PCE Miss and Bond Yields Stabilize, GBP/USD and EUR/USD Outlook

US Dollar Strengthens Amid Bond Yields and Data

The US Dollar Index (DXY) held firm near $107.74 as US 10-year bond yields consolidated around 4.52%, reflecting cautious market sentiment. Core PCE Price Index increased by 0.1%, slightly below expectations, suggesting softening inflation pressures.

Personal income grew 0.3%, while spending rose 0.4%, signaling moderate consumer activity. Revised UoM Consumer Sentiment remained steady at 74.0, reflecting stability in consumer outlook. The Fed’s Daly reiterated a cautious tone, highlighting the importance of inflation trends.

With bond yields stabilizing, the dollar remains supported ahead of next week’s CB Consumer Confidence report, projected at 112.9, signaling resilience in the US economy.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading near $107.74, maintaining an upward channel that continues to support its bullish momentum. Immediate support rests at the pivot point of $107.59, with further downside cushioned by the key level at $107.20. On the upside, immediate resistance is seen at $108.10, with the next hurdle at $108.55.

The 50 EMA, currently at $107.36, aligns with the channel’s lower boundary, providing dynamic support, while the 200 EMA at $106.29 highlights a broader bullish trend.

The DXY remains buoyant, benefiting from strong demand for the dollar amid global economic uncertainties. Holding above $107.59 is crucial for sustaining this uptrend, with a breakout above $108.10 signaling further strength.

US 10-year Bond Yields

The US 10-year bond yield is consolidating near 4.52%, after retreating from its recent peak of 4.59%. The Fibonacci 0.382 level at 4.51% acts as immediate support, with 4.54% resistance above. The yields’ recent decline reflects cautious sentiment ahead of potential dovish Federal Reserve signals, indicating market expectations for slower rate hikes.

Global investor sentiment closely tracks US bond yield movements, as they serve as a barometer for economic stability and risk appetite. A decline in yields typically softens the US Dollar Index (DXY), as lower returns on Treasuries reduce dollar demand.

Should yields break below 4.48%, it could pressure the dollar and lift risk-sensitive assets. Conversely, a rebound above 4.54% would bolster the dollar, reinforcing its strength across forex markets.

Sterling Wavers Amid Mixed Retail and Borrowing Data

The British Pound (GBP) struggled for direction after Retail Sales rose 0.2%, falling short of expectations. Public Sector Net Borrowing widened to £11.2B, reflecting fiscal challenges, while CBI Realized Sales dropped to -15, signaling weak consumer activity.

Upcoming data on the Current Account (projected at -£22.9B) and Final GDP (0.1%) on December 23 will provide further clarity on the UK economy’s health. The BOE Quarterly Bulletin will also be closely monitored for policy insights.

GBP/USD Technical Analysis

The GBP/USD is trading near $1.2575 on the daily chart, struggling under a persistent downward trendline. This trendline has reinforced bearish momentum, with immediate resistance at $1.2725 and stronger resistance at $1.2872. On the downside, support is holding at $1.2476, followed by the next key level at $1.2328.

Technical indicators underline the bearish sentiment. The 50-day EMA, at $1.2765, remains below the 200-day EMA at $1.2808, confirming the downtrend. The price action suggests sellers remain in control unless the pair breaks above the downward trendline.

For now, GBP/USD is locked in a selling mode, with further declines likely if the pair fails to reclaim the $1.2725 level. Buyers will need a strong breakout to shift momentum.

EUR/USD Technical Forecast

The EUR/USD is trading near $1.0439, recovering from strong double-bottom support at $1.0342. However, the pair remains below the 23.6% Fibonacci retracement level at $1.0483, which currently acts as a pivot point and critical resistance. A break above this level could target the next resistance at $1.0570, aligning with the 38.2% Fibonacci level.

The 50 EMA at $1.0619 and 200 EMA at $1.0790 continue to slope downward, underscoring bearish momentum. On the downside, immediate support remains at $1.0342, followed by $1.0250.

The recent recovery highlights buyer activity, but sustained gains will require a breakout above $1.0483 to challenge higher resistance zones and shift sentiment.