The US dollar closed Friday’s session and the week with a decidedly bearish tone, yielding ground against its main rivals as traders consolidate their bets ahead of next week’s critical Federal Reserve meeting. In a market environment marked by the lack of official employment data due to the recent government shutdown, the dollar index (DXY) retreated 0.1% to stand at 98.994, remaining dangerously close to its five-week lows.
The dominant narrative this Saturday, December 6, 2025, revolves around the market’s near-absolute conviction that the Fed will cut interest rates. According to the latest LSEG data, traders are now pricing in a probability close to 90% of a rate reduction at next week’s meeting, a figure that has increased significantly following dovish comments from various central bank officials and perceived weakness in alternative labor data.
“The convergence of major banks like Morgan Stanley toward the expectation of a December cut, combined with a 90% implied probability, leaves the dollar in a vulnerable position: the market has priced in dovish perfection, leaving little room for disappointment.”
Market Context: Navigating Blind Through the ‘Data Blackout’
The current market situation is unusual due to the “data vacuum” caused by the government shutdown, which has delayed the publication of the official non-farm payrolls (NFP) report that traditionally sets the market’s pace on the first Friday of the month. In the absence of these official figures from the Bureau of Labor Statistics, investors have had to resort to private sector indicators and alternative sources to gauge the health of the US economy.
Antonio Ruggiero, macro and FX strategist at Convera, noted that “some soft labor market data from alternative sources has helped crystallize what still appears to be an exaggerated 90% probability of a cut next week.” This reliance on unofficial data has increased market sensitivity to any dovish signal.
A crucial development this weekend has been Morgan Stanley’s stance shift. The banking giant announced Friday that it now expects the Federal Reserve to deliver a quarter-point rate cut in December, thus joining other heavyweights like JPMorgan and BofA Global Research. Previously, all three firms anticipated the Fed would hold rates steady. This institutional consensus has been a key catalyst for the greenback’s weakness at the weekly close.
Technical and Fundamental Analysis of Affected Pairs
The impact of this repositioning has been evident in the major currency crosses. EUR/USD has directly benefited from dollar weakness, closing the week virtually flat but at elevated levels, trading at 1.1643. This level represents a consolidation near the three-week highs recorded Thursday at 1.1681.
The euro’s behavior is notable considering the political noise in France, suggesting the market is prioritizing Fed monetary policy over European political risks for now. The market considers the dollar “overvalued” relative to its peers, justifying the current softer tone.
On the other hand, US consumer sentiment, which showed improvement in preliminary December data released Friday, did little to boost the dollar, confirming that investor focus is unidirectional: the Fed’s rate decision.
| Pair / Index | Current Quote | Immediate Trend |
|---|---|---|
| Dollar Index (DXY) | 98.994 | Bearish (Testing key supports) |
| EUR/USD | 1.1643 | Neutral-Bullish (Consolidation) |
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Comenzar ahoraImplications for Retail Traders
For retail Forex traders, the coming week presents a high-risk, high-reward scenario. The 90% probability of a cut is already “in the price.” This creates a dangerous asymmetry: if the Fed cuts, the dollar may not fall much further (already priced in), but if the Fed surprises by holding rates or with a less dovish tone, the dollar bounce could be violent (short squeeze).
Key points to consider:
* Watch the 98.765 level on DXY: This was the five-week low touched Thursday. A clear break below this level could open the door to more pronounced weakness toward the 98.50 zone.
* Caution with EUR/USD at 1.1700: Although the trend favors bulls, the 1.1680-1.1700 zone is formidable technical resistance. Without a new catalyst (Fed confirmation), it could be difficult to break.
* Expectation management: Remember that the market sometimes “buys the rumor and sells the news.” With a 90% probability already assigned, the cut is the “rumor” that has been bought (selling dollars) all week.
* The Yen factor: Although focus is on the dollar, the Yen has also strengthened on Bank of Japan speculation. JPY crosses could offer additional volatility independent of USD.
Short-Term Outlook
Looking ahead to Monday’s opening and the days before the Fed meeting (Tuesday/Wednesday), we will likely see a continuation of consolidation in current ranges. Volume could decrease as traders stay on the sidelines waiting for the official decision.
The key will be whether leaks or new comments emerge in financial press (like WSJ) over the weekend that confirm or refute the market’s aggressive bet. If there’s no “pushback” against the 90% probability, the dollar will remain heavy. However, any signal that the Fed isn’t as decided as the market believes could trigger a tactical bullish correction in USD before Wednesday. The general recommendation is extreme caution and leverage reduction ahead of binary events of this magnitude.