The US dollar index fell to around 98.58 during European trading hours on Thursday (October 16), hitting a one-week low. This was the third consecutive trading day of decline for the US dollar index. The US dollar has been under pressure as traders expect the Federal Reserve to adopt a more dovish stance and continue to pay attention to developments in the political and trade fields.



Dovish Fed outlook weighs on dollar

Expectations of rate cuts continue to weigh on the dollar. The market has already largely priced in two 25 basis point rate cuts in October and December, a signal that monetary policy is shifting in a more accommodative direction.

This outlook has weakened investors' confidence in a short-term rebound in the US dollar, with the market believing that loose monetary policy will limit the momentum of further gains for the US dollar.

Government shutdown and trade risks add to headwinds

Adding to the uncertainty is a prolonged political deadlock within the U.S. government, which is in its third week with no progress in negotiations on a funding bill.

Meanwhile, trade frictions are putting further pressure on the US dollar. Market sentiment has been dampened by recent tightening of technology restrictions and increased port fees imposed by both China and the US.

Influence of the political situation in France and Japan

Elsewhere, positive news from France supported the euro and pushed down the US dollar index.

However, the US dollar index could find further support tomorrow if Liberal Democratic Party President Sanae Takaichi can reach an agreement with the Japan Restoration Party. This move would re-establish a minority coalition government and increase the likelihood of Takaichi being elected as Japan's next prime minister on October 21st. Her policies are widely believed to have a negative impact on the yen.

Outlook: Key Fed speech coming soon

Today's US economic data release has been delayed. Two dovish Federal Reserve officials, Christopher Waller and Stephen Miran, will speak in the early hours of Friday morning Beijing time. Their comments may put slight downward pressure on the US dollar. The US dollar index is not expected to deviate significantly from 98.50 today.

Technical Analysis


(Source: 4-hour chart of the US dollar index: Yihuitong)

After breaking below its short-term rising trendline, the US dollar index is consolidating around 98.58. The price is currently facing resistance at 98.75 (50-period exponential moving average) and 99.00, while support lies at 98.20 and 98.03. A sustained break below this support range could lead to a further drop to 97.25.

The 200-period exponential moving average (200-EMA) at 98.24 has become a key pivot point, reflecting hesitation among both bulls and bears. The relative strength index (RSI) is approaching 40, indicating weak momentum and a slight bearish advantage.

If the price rebounds above 98.77, the US dollar index is expected to retest 99.55; however, if it fails to retake this level, it will further strengthen the bearish trend. Currently, traders are closely watching whether the index can stabilize above the 200-period exponential moving average to avoid a larger decline.

At 18:10 Beijing time, the US dollar index was at 98.5860/6010, down 0.07%.