The US Dollar Index (DXY) extends retreat from its recent highs, edging toward the lower end of the 106 range on Tuesday. The dollar's easing occurs even as investors remain wary of political upheavals in France, where a pending no-confidence vote against President Macron's administration adds uncertainty to European markets.

Market participants are also keenly awaiting commentary from several Federal Reserve officials, in light of recent dovish signals that have bolstered expectations for a December interest rate cut. Fed’s official Christopher Waller has signaled a propensity to support a rate reduction in December, suggesting a potential shift in the Fed's monetary policy trajectory. Echoing this sentiment, New York Fed President John Williams highlighted the need for further easing, citing a more balanced risk landscape between inflation and employment.

Atlanta Fed President Raphael Bostic added to the dovish chorus, expressing openness to a December rate cut. He noted that with risks to the labor market and inflation roughly balanced, it might be appropriate to steer monetary policy toward a neutral stance that neither stimulates nor constrains economic activity. These collective insights have amplified market expectations for a 25 basis point reduction at the Fed's upcoming meeting. Interest rate futures indicate that implied probability of a rate cut in December rose to 72.3% following the comments, with a 27.7% chance of rates holding steady. This marks an sharp increase in rate cut expectations, influenced by the Fed communications and minutes that have hinted at a more accommodative stance:

From a technical perspective, analyzing the USD against its major counterpart, the Euro, reveals that the price remains confined within the 1.05–1.06 range, with attempts on both sides to break out of this consolidation zone. The prospects for a sustained rally hinge on a successful breakout above the 1.06 level. Notably, on two previous occasions, the price rebounded lower after testing this level, underscoring its importance as a key bullish hurdle. A breakout above this resistance could trigger buying momentum, offering scalping traders attractive opportunities.

On the bearish side, a significant hawkish surprise in the upcoming JOLTS, ADP and NFP reports could shift market expectations towards the “no-cut” scenario in December. This may increase downside pressure on the pair, potentially breaching the 1.05 support level, at least in the short term:

The British Pound is struggling to gain traction despite the dollar's softness, weighed down by disappointing economic indicators from the UK. The final reading of November's Manufacturing PMI slipped to 48.0—a nine-month low—falling short of both the previous month's figure and preliminary estimates. Additionally, the British Retail Consortium reported a surprising 3.4% decline in like-for-like retail sales for November, a stark contrast to the modest gains anticipated by analysts. These lackluster data points strengthen the case for the Bank of England to consider easing monetary policy at its forthcoming meeting.

Nevertheless, short-term technical picture for GBP/USD indicates that the price has managed to climb back above a crucial ascending support line, following a successful retest and subsequent bounce higher. This development strengthens the case for a bullish scenario on the pair, suggesting that the earlier break below the support line was a false breakout. This likely discourages bearish momentum, as sellers appear to have lost their grip on the market. In the short term, the outlook for the pair remains bullish, with a potential target for buyers at the 1.275 horizontal resistance level: