USD Rally Overextended Despite December Fed Rate Cut Uncertainty

The US dollar's recent rally appears overextended across major pairs, with technical indicators flashing overbought signals despite growing uncertainty about a December Federal Reserve rate cut. EUR/USD trades near 1.0540, showing signs of consolidation after dropping from 1.0650 last week. GBP/USD hovers at 1.2640, finding support despite UK economic headwinds, while USD/JPY faces resistance at 155.00 amid intervention warnings. EUR/GBP has climbed to 0.8350, reflecting relative euro strength against the pound. Market pricing now shows only a 60% probability of a December Fed cut, down from 80% two weeks ago, supporting the dollar's gains. However, positioning data reveals extreme long USD positions, suggesting vulnerability to profit-taking. Key support levels to watch include 1.0520 for EUR/USD and 1.2600 for GBP/USD, with any dovish Fed communications potentially triggering sharp reversals.