US Dollar Forecast: The Fed's stance suppresses easing expectations, and the US dollar index continues to rise
2025-09-24 23:48:13
On Wednesday, September 24, the US Dollar Index (DXY) surged 0.52% to 97.745, approaching key resistance levels: the 50-day moving average (98.029) and the 50% retracement level (98.238). These two technical indicators will remain key near-term resistance until the DXY breaks through the "double top" formations of 98.635 and 98.834. Near-term support is expected at 97.199.
The Fed's stance limits the downside for dollar bulls
The dollar resumed its gains after Federal Reserve Chairman Jerome Powell reiterated his caution about further interest rate cuts, saying policymakers remain concerned about inflation despite a weak labor market.
Although the market is still "digesting" expectations of two more rate cuts (25 basis points each) before the end of the year, Powell's remarks significantly curbed "dovish expectations." He warned that premature easing could reignite inflationary pressures, while excessive tightening could harm employment - a statement that highlights the Fed's "data-dependent" policy path.
Powell's views align with previous Fed statements, dampening market expectations of a significant shift toward easing policy. Meanwhile, upcoming US economic data (particularly Friday's PCE price index) is expected to be a key factor in determining the direction of the US dollar index. ING strategist Francesco Pessole noted that if the monthly increase in the data falls short of the expected 0.2%, it could further solidify market expectations of further rate cuts.
The dollar index was supported by weak German data and a weaker euro.
The euro fell 0.5% against the dollar to 1.1751 after Germany's Ifo Institute for Economic Research (IFO) business climate index fell below expectations (from 88.9 to 87.7). This weak data exacerbated market concerns about the weakness of the eurozone economy and boosted investor demand for the "safe haven" dollar.
GBP/USD also fell 0.4% to 1.3467, but GBP/EUR remained relatively stable.
Market focus on inflation data, U.S. Treasury yields rise slightly
(Source of US Dollar Index daily chart: Yihuitong)
U.S. Treasury yields rose slightly, with the 10-year Treasury yield at 4.129% and the 2-year Treasury yield at 3.592%. This move was driven by traders adjusting their positions ahead of Friday's PCE report and Thursday's revised GDP figures. Furthermore, new home sales data, which came in at 800,000 units (better than market expectations), further boosted bullish sentiment for Treasury yields. However, concerns about a potential U.S. government shutdown next week persist, increasing the risk of market volatility.
Market Forecast: US dollar index faces resistance range before PCE data release
Currently, the key resistance range for the US Dollar Index (DXY) is between the 50-day moving average (98.029) and the 50% retracement level (98.238). If it breaks through this range, the US Dollar Index may further test the resistance of the double top pattern at 98.635 and 98.834.
As traders are awaiting the release of PCE price index data on Friday, any weak data may reinforce market expectations of "two interest rate cuts this year" and thus curb the upward momentum of the US dollar index.
At present, Powell’s “hawkish restraint stance” and weak economic data in the eurozone provide support for the dollar’s “cautious bullish outlook”.
The Fed's stance limits the downside for dollar bulls
The dollar resumed its gains after Federal Reserve Chairman Jerome Powell reiterated his caution about further interest rate cuts, saying policymakers remain concerned about inflation despite a weak labor market.
Although the market is still "digesting" expectations of two more rate cuts (25 basis points each) before the end of the year, Powell's remarks significantly curbed "dovish expectations." He warned that premature easing could reignite inflationary pressures, while excessive tightening could harm employment - a statement that highlights the Fed's "data-dependent" policy path.
Powell's views align with previous Fed statements, dampening market expectations of a significant shift toward easing policy. Meanwhile, upcoming US economic data (particularly Friday's PCE price index) is expected to be a key factor in determining the direction of the US dollar index. ING strategist Francesco Pessole noted that if the monthly increase in the data falls short of the expected 0.2%, it could further solidify market expectations of further rate cuts.
The dollar index was supported by weak German data and a weaker euro.
The euro fell 0.5% against the dollar to 1.1751 after Germany's Ifo Institute for Economic Research (IFO) business climate index fell below expectations (from 88.9 to 87.7). This weak data exacerbated market concerns about the weakness of the eurozone economy and boosted investor demand for the "safe haven" dollar.
GBP/USD also fell 0.4% to 1.3467, but GBP/EUR remained relatively stable.
Market focus on inflation data, U.S. Treasury yields rise slightly
(Source of US Dollar Index daily chart: Yihuitong)
U.S. Treasury yields rose slightly, with the 10-year Treasury yield at 4.129% and the 2-year Treasury yield at 3.592%. This move was driven by traders adjusting their positions ahead of Friday's PCE report and Thursday's revised GDP figures. Furthermore, new home sales data, which came in at 800,000 units (better than market expectations), further boosted bullish sentiment for Treasury yields. However, concerns about a potential U.S. government shutdown next week persist, increasing the risk of market volatility.
Market Forecast: US dollar index faces resistance range before PCE data release
Currently, the key resistance range for the US Dollar Index (DXY) is between the 50-day moving average (98.029) and the 50% retracement level (98.238). If it breaks through this range, the US Dollar Index may further test the resistance of the double top pattern at 98.635 and 98.834.
As traders are awaiting the release of PCE price index data on Friday, any weak data may reinforce market expectations of "two interest rate cuts this year" and thus curb the upward momentum of the US dollar index.
At present, Powell’s “hawkish restraint stance” and weak economic data in the eurozone provide support for the dollar’s “cautious bullish outlook”.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
