The US dollar index came under pressure during Tuesday's session, extending its four-day correction from the October 22 high of 99.139 to 98.668. The price broke through the minor pivot point of 98.797 and the 61.8% retracement of the 98.650 move, reaching a low of 98.565. Traders are watching the 50-day moving average at 98.132, which could act as support for bargain hunters or trigger a deeper decline towards 97.462 if broken.



From a technical perspective, the US dollar index's trend remains intact as long as it remains above its 50-day moving average. However, unless bulls can break through 99.139 and reclaim 99.563, the market will remain in a weak uptrend. This situation will not change without new hawkish signals from the Federal Reserve, which currently seems unlikely.

Fed rate cuts are priced in, focus on Powell's guidance

Ahead of the Fed's decision, the yield curve as a whole edged lower, with the 10-year Treasury yield hovering just below 4% at 3.976%. The bond market has fully priced in a 25 basis point rate cut, lowering the federal funds rate range to 3.75%-4.00%. Traders also see a near 80% chance of another rate cut in December, though that expectation is not yet a certainty.

With economic data scarce due to the government shutdown, the market is relying on assumptions, and Powell's tone will be particularly important. If he hints at the possibility of more rate cuts, the US dollar index is likely to remain under pressure. If he demurs, the dollar could rebound, but with subdued inflation and slowing job growth, Powell's case for a hawkish stance is weak.

Yen strengthens as Bessant pushes Bank of Japan to normalize interest rates

The dollar also fell against the yen after U.S. Treasury Secretary Scott Besant called on the Bank of Japan to pursue a "prudent monetary policy." Traders interpreted this as a hint of a rate hike, pushing the USD/JPY exchange rate down to 151.225. The market is now watching to see whether the Bank of Japan will provide a timeline for tightening policy at its upcoming meeting.

Trump's meeting with Chinese leader keeps trade hopes alive

Meanwhile, hopes for a breakthrough in US-China trade are helping to maintain risk appetite while also weakening the dollar. Thursday's meeting between the two presidents is now an uncertain factor. Even if a comprehensive solution remains elusive, any progress on trade could boost stock markets and further pressure the dollar.

Outlook: Bearish until Powell or data changes view


(Source of US Dollar Index daily chart: Yihuitong)

Unless Powell signals a pause in rate cuts or inflation data forces a rethink, the dollar remains vulnerable to further weakness. Technically, the dollar index is poised to test its 50-day moving average at 98.132. A break below that level could trigger sellers to pressure the index towards 97.462. Markets don't chase strength without reason, and currently, there's no such reason.