The US dollar index remains below the key psychological level of 100, with the market holding its breath awaiting PMI data.
2025-11-03 18:21:21
On Monday (November 3), the US dollar index rose slightly during the European session, reaching 99.8780/960, a gain of 0.17%. Prices were relatively calm during the trading session, with the dollar supported by rising Treasury yields. Meanwhile, market sentiment remained cautious following the Federal Reserve's announcement of a 25 basis point rate cut last week.
ING expects the dollar index to hover near the high of its three-month range of 100.00-100.25, unless US jobs data prompts the market to re-price the probability of a December Fed rate cut to 100%.
OCBC analysts believe that "the government shutdown preventing the release of relevant US data, coupled with the Federal Reserve's more cautious and less hawkish stance, could trigger a wave of short-covering in the dollar in the short term." The analysts also stated, "Furthermore, market expectations for another Fed rate cut in 2026 may be too high; if these expectations continue to be lowered, it could lead to further appreciation of the dollar."
The market is reassessing the strength of the Federal Reserve's easing cycle.
According to the CME Group's Fed Watch Tool, market expectations for another rate cut in December have fallen from over 90% to 71%.
The market is beginning to reassess the strength of the Federal Reserve's easing cycle. The focus will now be on the signals from private sector data. Today, the November ISM Manufacturing Index, which includes an employment component, will be released.
It remains unclear whether the Job Openings and Labor Turnover Survey (JOLTS) data will be released tomorrow, but Wednesday's monthly ADP employment report will have a significant impact on the market, potentially marking the biggest opportunity for a renewed dollar bear market this week.
Last Friday, two Federal Reserve officials—Lori Logan and Beth Hamork—said they would vote against the Fed's decision to cut interest rates last week if they had a vote. These two officials will join the Federal Open Market Committee (FOMC), which is responsible for setting policy, next year.
Tightness in the US money market
The second factor supporting dollar buying is the tightness in the US money market. Through quantitative tightening, the Federal Reserve has been reducing bank reserves this year, and the US Treasury has increased its cash reserves (i.e., the Treasury's general account) from $300 billion to $950 billion. The US money market has shifted from an environment of excess liquidity to its current state of tightness. Data from last Friday exemplifies this, showing that banks obtained $50 billion in overnight funding through the Fed's standing repurchase facility. Although market interest rates should have been in the middle of the Fed's 3.75%-4.00% range, banks paid 4.00% for this purpose.
Tightness in the currency market typically supports the US dollar. It's worth noting whether the difficulty in dollar funding will spill over into the international cross-currency basis swap market, such as banks converting euros for dollar funding. If this were to occur, the euro/dollar exchange rate would face significant downward pressure, but there are currently no signs of this.
ISM and PMI will test the dollar's momentum.
Later today, the U.S. ISM Manufacturing PMI is expected to be 49.4, slightly higher than September's 49.1; the ISM Price Index is expected to be 62.4, higher than the previous value of 61.9.
If the data is stronger than expected, it could reinforce the Federal Reserve's cautious stance and push the dollar higher.
If the data falls short of expectations, it could reignite market expectations for interest rate cuts.
In addition, several members of the Federal Open Market Committee (FOMC) will deliver speeches. Against the backdrop of slowing global economic growth, traders will be closely watching these policy pronouncements for clues about the Fed's interpretation of the latest economic data.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 99.78, maintaining its upward trend after breaking through the downtrend line resistance at 99.41.
The 50-day exponential moving average (50EMA) is at 99.17, which is higher than the 200-day exponential moving average (200EMA) at 98.63, confirming a short-term bullish structure.
Momentum indicators show strength, with the Relative Strength Index (RSI) at 68, which is close to the overbought zone but has not yet shown signs of exhaustion.
Short-term resistance levels are around 100.10 and 100.63, while support levels are around 99.41 and 98.98.
As long as the price remains above 99.40, the upward trend is expected to continue; if it falls below 98.98, market sentiment may shift to consolidation.
ING expects the dollar index to hover near the high of its three-month range of 100.00-100.25, unless US jobs data prompts the market to re-price the probability of a December Fed rate cut to 100%.
OCBC analysts believe that "the government shutdown preventing the release of relevant US data, coupled with the Federal Reserve's more cautious and less hawkish stance, could trigger a wave of short-covering in the dollar in the short term." The analysts also stated, "Furthermore, market expectations for another Fed rate cut in 2026 may be too high; if these expectations continue to be lowered, it could lead to further appreciation of the dollar."
The market is reassessing the strength of the Federal Reserve's easing cycle.
According to the CME Group's Fed Watch Tool, market expectations for another rate cut in December have fallen from over 90% to 71%.
The market is beginning to reassess the strength of the Federal Reserve's easing cycle. The focus will now be on the signals from private sector data. Today, the November ISM Manufacturing Index, which includes an employment component, will be released.
It remains unclear whether the Job Openings and Labor Turnover Survey (JOLTS) data will be released tomorrow, but Wednesday's monthly ADP employment report will have a significant impact on the market, potentially marking the biggest opportunity for a renewed dollar bear market this week.
Last Friday, two Federal Reserve officials—Lori Logan and Beth Hamork—said they would vote against the Fed's decision to cut interest rates last week if they had a vote. These two officials will join the Federal Open Market Committee (FOMC), which is responsible for setting policy, next year.
Tightness in the US money market
The second factor supporting dollar buying is the tightness in the US money market. Through quantitative tightening, the Federal Reserve has been reducing bank reserves this year, and the US Treasury has increased its cash reserves (i.e., the Treasury's general account) from $300 billion to $950 billion. The US money market has shifted from an environment of excess liquidity to its current state of tightness. Data from last Friday exemplifies this, showing that banks obtained $50 billion in overnight funding through the Fed's standing repurchase facility. Although market interest rates should have been in the middle of the Fed's 3.75%-4.00% range, banks paid 4.00% for this purpose.
Tightness in the currency market typically supports the US dollar. It's worth noting whether the difficulty in dollar funding will spill over into the international cross-currency basis swap market, such as banks converting euros for dollar funding. If this were to occur, the euro/dollar exchange rate would face significant downward pressure, but there are currently no signs of this.
ISM and PMI will test the dollar's momentum.
Later today, the U.S. ISM Manufacturing PMI is expected to be 49.4, slightly higher than September's 49.1; the ISM Price Index is expected to be 62.4, higher than the previous value of 61.9.
If the data is stronger than expected, it could reinforce the Federal Reserve's cautious stance and push the dollar higher.
If the data falls short of expectations, it could reignite market expectations for interest rate cuts.
In addition, several members of the Federal Open Market Committee (FOMC) will deliver speeches. Against the backdrop of slowing global economic growth, traders will be closely watching these policy pronouncements for clues about the Fed's interpretation of the latest economic data.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index is currently trading around 99.78, maintaining its upward trend after breaking through the downtrend line resistance at 99.41.
The 50-day exponential moving average (50EMA) is at 99.17, which is higher than the 200-day exponential moving average (200EMA) at 98.63, confirming a short-term bullish structure.
Momentum indicators show strength, with the Relative Strength Index (RSI) at 68, which is close to the overbought zone but has not yet shown signs of exhaustion.
Short-term resistance levels are around 100.10 and 100.63, while support levels are around 99.41 and 98.98.
As long as the price remains above 99.40, the upward trend is expected to continue; if it falls below 98.98, market sentiment may shift to consolidation.
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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.
