USD faces pressure ahead of potentially final Powell rate cut

The US Dollar Index (DXY) has retreated 0.2% to 106.45 as markets position for Wednesday's FOMC meeting, where a 25 basis point rate cut is widely expected with 95% probability according to Fed funds futures. This could mark Jerome Powell's final easing move before potential policy shifts under the incoming administration. Recent economic data shows US inflation remains sticky at 2.7% year-over-year, above the Fed's 2% target, while unemployment sits at 4.2%. USD/JPY has declined 0.4% to 151.20 as safe-haven flows favor the yen amid uncertainty. Technical indicators suggest DXY support at 106.00, with resistance at 107.00. Markets are particularly focused on the Fed's dot plot projections and Powell's forward guidance, as any hawkish tilt could reverse dollar weakness. Traders should monitor the 2pm ET rate decision and subsequent press conference for volatility triggers.