US Dollar Outlook: ISM Non-Manufacturing Data Exceeds Expectations, US Dollar Index Climbs Towards 200-Day Moving Average
2025-11-06 01:15:25
On Wednesday (November 5), the US dollar index resumed its upward trend, reaching a high of 100.360, its highest level since early August. This performance puts it just below the 200-day moving average at 100.383—a technical resistance level that has now become a key battleground for determining the dollar's direction.
Unexpectedly positive non-manufacturing data led to a sharp rise in yields.
The rise in the US dollar index was driven by a sharp increase in yields. The October ISM non-manufacturing index came in at 52.4, higher than the expected 50.5, pushing the 10-year US Treasury yield above 4.14%. The new orders index jumped to 56.2, indicating robust demand at the start of the fourth quarter.
However, the employment data remained weak, recording 482,000, marking the fifth consecutive month in contraction territory. The market was not affected by this weak performance, and short-term Treasury yields also rose slightly. The 2-year Treasury yield was around 3.62%, reinforcing the view that the Federal Reserve is likely to maintain stable interest rates but will not shift to rate cuts in the short term.
Key resistance level under pressure again
The US dollar index is currently testing its 200-day moving average, a level that prevented buyers from pushing prices higher at the end of July. A confirmed break above this level would target the key summer resistance at 101.977. However, if the rally loses momentum here, the dollar index could retrace to the 50% Fibonacci retracement level of its recent gains at 99.463. Traders are closely watching daily closing prices and yield changes for further signals.
A blurred picture of government shutdown
The longer the dollar's rally continues, the less complete the supporting data becomes. With the US government shutdown entering its 36th day, official data such as third-quarter GDP have yet to be released. The Congressional Budget Office (CBO) estimates that the shutdown could reduce fourth-quarter economic growth by 1-2 percentage points, causing permanent losses of $7 billion to $14 billion. Traders have not yet priced in this drag, but if the shutdown continues until late November, the risks may become apparent.
The Supreme Court's hearing of Trump's tariff case has reignited interest in tariffs.
The U.S. Supreme Court is currently reviewing the legality of tariffs imposed under the Emergency Powers Act of 1977. If the ruling is unfavorable to the government, some tariffs could be eliminated, potentially impacting trade flows and altering inflation expectations. While the event has not yet affected the market, it warrants continued attention.
Summarize
(US Dollar Index Daily Chart Source: FX678)
The US dollar currently enjoys solid support: robust non-manufacturing demand, rising yields, and cautious market expectations regarding the Federal Reserve. However, the technical picture is at a critical juncture; a break above the 200-day moving average would open up upside potential for the dollar index towards 101.97. Failure to break through could see the dollar index pull back to around 99.46—especially if yield support weakens or the negative impact of a government shutdown begins to materialize. Fundamentals support the current trend, but technical confirmation is needed to solidify the gains.
Unexpectedly positive non-manufacturing data led to a sharp rise in yields.
The rise in the US dollar index was driven by a sharp increase in yields. The October ISM non-manufacturing index came in at 52.4, higher than the expected 50.5, pushing the 10-year US Treasury yield above 4.14%. The new orders index jumped to 56.2, indicating robust demand at the start of the fourth quarter.
However, the employment data remained weak, recording 482,000, marking the fifth consecutive month in contraction territory. The market was not affected by this weak performance, and short-term Treasury yields also rose slightly. The 2-year Treasury yield was around 3.62%, reinforcing the view that the Federal Reserve is likely to maintain stable interest rates but will not shift to rate cuts in the short term.
Key resistance level under pressure again
The US dollar index is currently testing its 200-day moving average, a level that prevented buyers from pushing prices higher at the end of July. A confirmed break above this level would target the key summer resistance at 101.977. However, if the rally loses momentum here, the dollar index could retrace to the 50% Fibonacci retracement level of its recent gains at 99.463. Traders are closely watching daily closing prices and yield changes for further signals.
A blurred picture of government shutdown
The longer the dollar's rally continues, the less complete the supporting data becomes. With the US government shutdown entering its 36th day, official data such as third-quarter GDP have yet to be released. The Congressional Budget Office (CBO) estimates that the shutdown could reduce fourth-quarter economic growth by 1-2 percentage points, causing permanent losses of $7 billion to $14 billion. Traders have not yet priced in this drag, but if the shutdown continues until late November, the risks may become apparent.
The Supreme Court's hearing of Trump's tariff case has reignited interest in tariffs.
The U.S. Supreme Court is currently reviewing the legality of tariffs imposed under the Emergency Powers Act of 1977. If the ruling is unfavorable to the government, some tariffs could be eliminated, potentially impacting trade flows and altering inflation expectations. While the event has not yet affected the market, it warrants continued attention.
Summarize
(US Dollar Index Daily Chart Source: FX678)
The US dollar currently enjoys solid support: robust non-manufacturing demand, rising yields, and cautious market expectations regarding the Federal Reserve. However, the technical picture is at a critical juncture; a break above the 200-day moving average would open up upside potential for the dollar index towards 101.97. Failure to break through could see the dollar index pull back to around 99.46—especially if yield support weakens or the negative impact of a government shutdown begins to materialize. Fundamentals support the current trend, but technical confirmation is needed to solidify the gains.
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