SmartFX Weekly Market Outlook

Major FX Pairs: Looking for Seasonal & Fundamental Confirmation

The US Dollar Index (DXY) remains under considerable pressure as policy divergence risks continue to grow. With a rate cut to potentially push the Fed Funds rate to 3.75%–4.00% expected this week, the short-term outlook for the Dollar is distinctly bearish. Historically, December has shown a seasonal tendency for USD weakness against pairs like the Euro and the Pound. While some long-term forecasts remain bullish on structural reasons, the immediate catalyst for a downside breakout in the DXY is the FOMC. Any rhetoric that signals a slower pace of cuts for 2026, however, could see the Dollar stage a sharp but temporary recovery as traders unwind aggressive short positions. Conversely, a cut accompanied by highly dovish guidance could accelerate the DXY’s decline into the year-end.

Major FX Pairs: Looking for Seasonal & Fundamental Confirmation
The anticipated Fed easing is providing fundamental tailwinds for non-Dollar major currencies:
EUR/USD: The pair is trading near the 1.1650 level, struggling to decisively break above the key resistance at 1.1700. The strong historical seasonality of December being the most bullish month for EUR/USD (averaging a +1.2% return over the last 50+ years) aligns perfectly with the current fundamental outlook. A confirmed Fed cut is expected to provide the necessary momentum for the pair to test and break past 1.1700, opening the path towards the mid-1.17s.

GBP/USD: The British Pound has posted recent gains but has stalled above 1.3350. The outlook remains balanced, with divergent long-term forecasts ranging from a retreat to 1.30 by late 2026 to bullish projections towards 1.45. The immediate focus is whether the expected Fed cut, combined with the Pound’s favorable December seasonality, can sustain the recent rally and help it clear key medium-term resistance levels.

USD/JPY: The pair has seen significant movement, breaking below its established bullish trend channel and trading around the 155.3 area. The bearish December seasonality for USD/JPY, coupled with renewed hopes of an eventual Bank of Japan (BoJ) rate hike, is reinforcing the short-term corrective movement. While an immediate, deeper pullback is expected toward the 153.3–154.6 support zone, the long-term bullish target of 160.00 remains in view if the pullback is contained and risk sentiment stabilizes.
Commodity Spotlight: Gold Holds High, Oil Gains Traction Gold (XAU/USD) - The Safe-Haven Rally Gold prices are maintaining their elevated status, trading comfortably above the $4,200 per ounce level. The bullish trend in Gold is being sustained by two primary drivers: persistent geopolitical and geo-economic uncertainty, and the expectation of lower US interest rates. The expected 25bp Fed cut this week is critical, as lower rates decrease the opportunity cost of holding the non-yielding metal. Technically, Gold’s immediate resistance sits near $4,260. A dovish Fed announcement could provide the spark needed for XAU/USD to test this resistance and potentially set new short-term highs as safe-haven demand continues to outpace selling pressure.

Crude Oil (WTI/Brent) - Demand Hopes Drive Price
Crude oil prices (WTI hovering near $60, Brent near $63) have gained positive momentum, largely fueled by expectations that an easier Fed policy will support global economic activity and thus boost energy demand in 2026. While long-term fundamentals still present headwinds due to increased supply from non-OPEC+ producers and soft global demand projections, the short-term technical picture suggests a move higher. Key resistance for WTI Crude is seen around the $60.20–$62.00 range. Sustained breaks above this level could indicate strong bullish conviction driven by economic optimism following the Fed’s move.

Conclusion and Key Risk Factors

This week is poised to be decisive for the final market trajectory of 2025. The FOMC decision on December 10th is the ultimate risk event. Traders should monitor the following key levels: EUR/USD resistance at 1.1700, Gold support at $4,195, and WTI resistance at $60.20. Beyond monetary policy, escalating geopolitical risk in various regions and lingering global trade tensions remain latent threats that could instantly shift market sentiment back into full risk-aversion mode, favoring assets like the US Dollar and Gold.