USD Index: Bulls Defend 98.5 Support Ahead of Fed Rate Decision

The US Dollar Index is testing critical support at 98.5 as markets position ahead of the Federal Reserve's expected rate cut decision. The dollar has weakened 0.2% against major currencies, with EUR/USD rising to 1.0580 and USD/JPY pulling back to 149.80. Market consensus points to a 25 basis point rate cut at the upcoming FOMC meeting, with futures pricing in an 85% probability. Technical indicators show the DXY struggling to maintain momentum above the 98.5 level, which represents the 50-day moving average and a key psychological threshold. A breakdown below this support could accelerate dollar selling toward 97.80, while successful defense might trigger a rebound to 99.20 resistance. Traders are closely monitoring US economic data releases this week, including inflation figures that could influence the Fed's dovish stance and determine whether the dollar's recent strength can be sustained.