The dollar index remained around 99.50, with traders balancing Powell's comments with bets on interest rate cuts.
2025-10-31 18:09:45
On Friday (October 31), during the European trading session, the US dollar index (DXY) hovered around 99.50. The impact of Fed Chairman Powell's hawkish comments was diminished as market expectations for further interest rate cuts increased, resulting in little fluctuation in the dollar's exchange rate.
According to the CME FedWatch Tool, traders currently see a 71% probability of a December rate cut. This figure is up from 66% the previous day, but down from 91% last week. Powell noted that due to the ongoing US government shutdown and the resulting disruption to official data releases, policymakers may need to wait for the latest economic data before adjusting their policies.
ING analysts stated that the short-term outlook for the US dollar is more about a "lack of clear direction" than a sustained rebound. This is due to the lack of significant economic data releases—data that could have helped the market make a clearer judgment on the extent of the Federal Reserve's easing policy. The US dollar index lacks the momentum to break through 100.0. The release of today's PCE inflation data may be delayed.
OCBC foreign exchange analysts Frances Cheung and Christopher Wong noted, "We still believe the US dollar will experience a moderate depreciation trend, but due to the lack of US economic data and Powell's lack of clear statements, the market may see some initial adjustments. The Fed's accommodative monetary policy and the improvement in US-China relations should support the renminbi and other risk-hedging currencies, including the Australian dollar; while the US dollar may be pressured as a result. Of course, this is unlikely to happen unless there is a sudden and sharp fluctuation in stock market sentiment."
The Fed's divergent decisions foreshadow future uncertainty.
The Federal Reserve lowered its benchmark interest rate by 25 basis points to a range of 3.75%-4.0% by a vote of 10 to 2. This decision exposed internal divisions: Governor Stephen Miran supported a 50 basis point cut, while Kansas City Fed President Jeffrey Schmid preferred to keep the rate unchanged.
Powell emphasized that the central bank still faces the challenge of balancing inflation control and employment support.
Trade optimism provides modest support
President Trump and President Xi Jinping reached an agreement in which the United States agreed to reduce tariffs on Chinese goods from 57% to 47%. China, in turn, pledged to restrict fentanyl exports, increase purchases of US soybeans, and ease restrictions on rare earth elements. These measures may provide short-term relief to market sentiment.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 99.50, continuing its rebound after breaking through the key downtrend line at 99.35. This breakout confirms the short-term bullish tone, with the 50-EMA crossing above the 200-EMA providing further support—a signal typically seen as a shift in momentum towards buyers.
The 4-hour chart shows that the US dollar index has formed a series of higher lows, reflecting improved market sentiment as traders lowered their expectations for rate cuts following the Fed's latest moves. The RSI value is 62, within the neutral-to-strong range of 50-70, and has not yet entered the overbought zone (above 70), indicating that there is still room for bullish momentum to be released, and the short-term upward trend has not yet shown significant overbought pressure.
If the momentum continues, the next upside target is around 100.26, followed by 100.54. This level is both a previous resistance level and aligns with the overall trendline structure.
According to the CME FedWatch Tool, traders currently see a 71% probability of a December rate cut. This figure is up from 66% the previous day, but down from 91% last week. Powell noted that due to the ongoing US government shutdown and the resulting disruption to official data releases, policymakers may need to wait for the latest economic data before adjusting their policies.
ING analysts stated that the short-term outlook for the US dollar is more about a "lack of clear direction" than a sustained rebound. This is due to the lack of significant economic data releases—data that could have helped the market make a clearer judgment on the extent of the Federal Reserve's easing policy. The US dollar index lacks the momentum to break through 100.0. The release of today's PCE inflation data may be delayed.
OCBC foreign exchange analysts Frances Cheung and Christopher Wong noted, "We still believe the US dollar will experience a moderate depreciation trend, but due to the lack of US economic data and Powell's lack of clear statements, the market may see some initial adjustments. The Fed's accommodative monetary policy and the improvement in US-China relations should support the renminbi and other risk-hedging currencies, including the Australian dollar; while the US dollar may be pressured as a result. Of course, this is unlikely to happen unless there is a sudden and sharp fluctuation in stock market sentiment."
The Fed's divergent decisions foreshadow future uncertainty.
The Federal Reserve lowered its benchmark interest rate by 25 basis points to a range of 3.75%-4.0% by a vote of 10 to 2. This decision exposed internal divisions: Governor Stephen Miran supported a 50 basis point cut, while Kansas City Fed President Jeffrey Schmid preferred to keep the rate unchanged.
Powell emphasized that the central bank still faces the challenge of balancing inflation control and employment support.
Trade optimism provides modest support
President Trump and President Xi Jinping reached an agreement in which the United States agreed to reduce tariffs on Chinese goods from 57% to 47%. China, in turn, pledged to restrict fentanyl exports, increase purchases of US soybeans, and ease restrictions on rare earth elements. These measures may provide short-term relief to market sentiment.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 99.50, continuing its rebound after breaking through the key downtrend line at 99.35. This breakout confirms the short-term bullish tone, with the 50-EMA crossing above the 200-EMA providing further support—a signal typically seen as a shift in momentum towards buyers.
The 4-hour chart shows that the US dollar index has formed a series of higher lows, reflecting improved market sentiment as traders lowered their expectations for rate cuts following the Fed's latest moves. The RSI value is 62, within the neutral-to-strong range of 50-70, and has not yet entered the overbought zone (above 70), indicating that there is still room for bullish momentum to be released, and the short-term upward trend has not yet shown significant overbought pressure.
If the momentum continues, the next upside target is around 100.26, followed by 100.54. This level is both a previous resistance level and aligns with the overall trendline structure.
- 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.
