USD Index Futures decline as Fed signals cautious 2026 approach

The US Dollar Index has shown weakness following the Federal Reserve's third consecutive rate decision, with markets pricing in more cautious monetary policy moves for 2026. EUR/USD has gained 0.2% to trade near 1.0580, while USD/JPY retreated 0.4% to 149.85 as dollar strength waned. The Fed's latest communication suggests a slower pace of policy adjustments next year, contrasting with earlier hawkish expectations. Market participants are reassessing dollar positions amid growing uncertainty about the central bank's future trajectory. Technical indicators show the Dollar Index testing support at 106.20, with resistance at 107.00. The shift in Fed sentiment has prompted traders to reduce long dollar positions, particularly against the euro and yen. Near-term dollar direction will depend on upcoming US economic data releases and any further clarity from Fed officials regarding their 2026 outlook.