US Dollar Outlook: Dollar Index Holds Steady Ahead of Fed Meeting, Market Prepares for Volatility
2025-10-29 17:58:51
On Wednesday (October 29), during the European session, the US dollar index (DXY) is currently trading around 98.858. The price initially declined before rising. It briefly dipped to around 98.62 in the morning before rebounding and surging to an intraday high of nearly 99.00 in the afternoon. It has since retreated somewhat but remains at a relatively high level.
The Conference Board's consumer confidence index, released on Tuesday, rose to 94.6, slightly above the expected value of 93.4, indicating that household sentiment remains resilient.
Meanwhile, the S&P/Case-Shiller 20-City Index rose 1.6% year-over-year, indicating a strong housing market.
However, the Richmond Manufacturing Index only recovered slightly from -17 to -4, indicating that regional manufacturing activity remained weak. These figures helped stabilize the dollar, as investors were reluctant to establish large positions ahead of the central bank's decision.
Volatility is emerging, with the Fed's interest rate cut becoming the focus.
Markets expect the Federal Reserve to cut interest rates by 25 basis points to 4.00% later today. The Federal Open Market Committee (FOMC) statement and Chairman Jerome Powell's press conference will be closely watched for guidance on future monetary policy.
If the statement releases a dovish tone (suggesting a pause in rate cuts or a slowdown in the pace of tightening), it could lead to a weaker dollar; while any signals indicating continued caution regarding inflation could support a short-term rebound in the dollar.
Traders will also be watching pending home sales data and crude oil inventory data for further clues about demand trends and inflationary pressures.
Overall, the US dollar is currently trading within a range, but further volatility is likely. The Federal Reserve's interest rate decision may reshape market expectations and set the tone for the November trading cycle.
There are upside risks, but they are far less than the risks seen in September.
The dollar rose when the Federal Reserve announced a 25-basis-point rate cut in September. At the time, short positions in the dollar were extremely large, and some of Powell's comments, which were seen as hawkish, further fueled the dollar's rebound.
From a price trend perspective, today's Federal Reserve monetary policy meeting is similar to that of the past: the market has been anticipating a 25 basis point rate cut by the Fed for over a month, the market consensus is consistent, and the market expectation of another rate cut in December is almost entirely priced in. Therefore, all the conditions for another dollar rally driven by "believing rumors and selling the facts" are in place.
This time, the dollar's movement is significantly different from previous ones. Due to the government shutdown, data from the Commodity Futures Trading Commission is unavailable, but options market data shows a more balanced picture. Last week's relatively mild US CPI data gives Powell little reason to adopt a more hawkish stance.
Although official employment data has not yet been released, both the ADP report and the Federal Reserve's Beige Book indicate that labor market conditions are still deteriorating. Therefore, while the upside risks to the dollar have increased slightly today, any upward movement should be much smaller and less sustained than in September. Furthermore, if the Federal Reserve announces the end of quantitative easing, this could also limit further upside for the dollar.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 98.858, within a gradually narrowing symmetrical triangle pattern. The 50-day exponential moving average (50-EMA) is at 98.81, and the 200-day exponential moving average (200-EMA) is at 98.67. The two moving averages are gradually converging, indicating that the market is in a wait-and-see state before a breakout.
If the closing price is above 99.13, it may trigger an upward trend, targeting 99.47 and 99.83; if it falls below 98.56, it may open up downward space, targeting 98.31 and 98.02.
The Relative Strength Index (RSI) is currently around 51, indicating that after a mild rebound from oversold levels, the momentum of both buyers and sellers is becoming balanced, with neither side showing a strong dominant intention.
The Conference Board's consumer confidence index, released on Tuesday, rose to 94.6, slightly above the expected value of 93.4, indicating that household sentiment remains resilient.
Meanwhile, the S&P/Case-Shiller 20-City Index rose 1.6% year-over-year, indicating a strong housing market.
However, the Richmond Manufacturing Index only recovered slightly from -17 to -4, indicating that regional manufacturing activity remained weak. These figures helped stabilize the dollar, as investors were reluctant to establish large positions ahead of the central bank's decision.
Volatility is emerging, with the Fed's interest rate cut becoming the focus.
Markets expect the Federal Reserve to cut interest rates by 25 basis points to 4.00% later today. The Federal Open Market Committee (FOMC) statement and Chairman Jerome Powell's press conference will be closely watched for guidance on future monetary policy.
If the statement releases a dovish tone (suggesting a pause in rate cuts or a slowdown in the pace of tightening), it could lead to a weaker dollar; while any signals indicating continued caution regarding inflation could support a short-term rebound in the dollar.
Traders will also be watching pending home sales data and crude oil inventory data for further clues about demand trends and inflationary pressures.
Overall, the US dollar is currently trading within a range, but further volatility is likely. The Federal Reserve's interest rate decision may reshape market expectations and set the tone for the November trading cycle.
There are upside risks, but they are far less than the risks seen in September.
The dollar rose when the Federal Reserve announced a 25-basis-point rate cut in September. At the time, short positions in the dollar were extremely large, and some of Powell's comments, which were seen as hawkish, further fueled the dollar's rebound.
From a price trend perspective, today's Federal Reserve monetary policy meeting is similar to that of the past: the market has been anticipating a 25 basis point rate cut by the Fed for over a month, the market consensus is consistent, and the market expectation of another rate cut in December is almost entirely priced in. Therefore, all the conditions for another dollar rally driven by "believing rumors and selling the facts" are in place.
This time, the dollar's movement is significantly different from previous ones. Due to the government shutdown, data from the Commodity Futures Trading Commission is unavailable, but options market data shows a more balanced picture. Last week's relatively mild US CPI data gives Powell little reason to adopt a more hawkish stance.
Although official employment data has not yet been released, both the ADP report and the Federal Reserve's Beige Book indicate that labor market conditions are still deteriorating. Therefore, while the upside risks to the dollar have increased slightly today, any upward movement should be much smaller and less sustained than in September. Furthermore, if the Federal Reserve announces the end of quantitative easing, this could also limit further upside for the dollar.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 98.858, within a gradually narrowing symmetrical triangle pattern. The 50-day exponential moving average (50-EMA) is at 98.81, and the 200-day exponential moving average (200-EMA) is at 98.67. The two moving averages are gradually converging, indicating that the market is in a wait-and-see state before a breakout.
If the closing price is above 99.13, it may trigger an upward trend, targeting 99.47 and 99.83; if it falls below 98.56, it may open up downward space, targeting 98.31 and 98.02.
The Relative Strength Index (RSI) is currently around 51, indicating that after a mild rebound from oversold levels, the momentum of both buyers and sellers is becoming balanced, with neither side showing a strong dominant intention.
- Risk Warning and Disclaimer
- 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.
