US Dollar Price Forecast: Upward Momentum Weakening, Range-bound Trading Expected
2025-11-06 18:11:08
On Thursday (November 6), during the European session, the US dollar index (DXY) was trading around 99.95, having retreated slightly after Wednesday's volatile trading. The dollar has fallen from recent highs as traders digested mixed US economic data, while investors turned their attention to major central bank meetings.
Meanwhile, the positive ADP employment change data and ISM non-manufacturing PMI data released on Wednesday further diminished market expectations for a dovish stance at the Fed's December meeting.
The CME FedWatch Tool shows that the probability of the Federal Reserve cutting interest rates by 25 basis points to 3.50%-3.75% at its December meeting has fallen from 68.6% on Tuesday to 62.5%.
ING believes the dollar's upward momentum is weakening, but the market also lacks strong drivers to rebuild short dollar positions. A lack of data and the Federal Reserve's cautious communication tone mean there are unlikely to be any clear catalysts in the short term. The dollar is expected to trade within a range today, with its current high valuation still posing a risk of pullback.
OCBC believes the dollar's rally has come to an end. "The market as a whole remains on an upward trend, but the Relative Strength Index (RSI) has shown signs of turning from overbought territory. We will continue to monitor the situation closely to determine whether the dollar's rally has truly ended."
US data released mixed signals on Wednesday
The US ADP non-farm payrolls data unexpectedly improved, with 42,000 new jobs added in October, higher than the expected 32,000 and a significant rebound from the previous month's decrease of 29,000.
However, this improvement was not enough to trigger a sustained strengthening of the US dollar, as the ISM non-manufacturing PMI came in at 52.4, only slightly higher than September's 50.0, indicating moderate economic expansion.
Subsequently, President Trump's remarks had a limited impact on the market, with traders still awaiting more specific policy clues.
The focus shifts to the Bank of England and US data.
Thursday's market focus will shift to the Bank of England's (BOE) policy report and Governor Bailey's speech. The market expects the BOE to maintain its official benchmark interest rate at 4.00%, with a predicted vote of 0-3-6 (for a rate hike - no change - for a rate cut), indicating cautious optimism despite weak UK economic growth. Meanwhile, the market will closely watch for signals regarding future rate hikes or a dovish adjustment.
Japanese officials have been testing the market with verbal interventions, but without concrete action to back them up, such measures often lose their effectiveness over time. If risk aversion fails to effectively boost the yen, USD/JPY is expected to see more speculative upward movement, testing the Bank of Japan's tolerance range (155.0 is clearly a key target).
In the US, speeches by Federal Open Market Committee (FOMC) member Waller later today, and the University of Michigan consumer sentiment index to be released on Friday (expected at 53.0, lower than the previous reading of 53.6), will influence the short-term momentum of the US dollar. Overall, due to divergent monetary policies and slowing global economic growth, the dollar's trajectory remains uncertain, and traders remain cautious.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index hovered around 99.95, retreating slightly after failing to hold above the 100.35 resistance level. The price is currently testing the 23.6% Fibonacci retracement level (around 99.23), with key support levels at 99.67, 99.46, and 99.25.
If it falls below 99.25, it may further retrace to 98.57 or even 98.09, with the 200-period exponential moving average (98.88) providing dynamic support. The Relative Strength Index (RSI) is at 55, indicating cooling momentum. Unless the bulls reclaim the 100.35-100.65 range, the upside potential is limited.
Meanwhile, the positive ADP employment change data and ISM non-manufacturing PMI data released on Wednesday further diminished market expectations for a dovish stance at the Fed's December meeting.
The CME FedWatch Tool shows that the probability of the Federal Reserve cutting interest rates by 25 basis points to 3.50%-3.75% at its December meeting has fallen from 68.6% on Tuesday to 62.5%.
ING believes the dollar's upward momentum is weakening, but the market also lacks strong drivers to rebuild short dollar positions. A lack of data and the Federal Reserve's cautious communication tone mean there are unlikely to be any clear catalysts in the short term. The dollar is expected to trade within a range today, with its current high valuation still posing a risk of pullback.
OCBC believes the dollar's rally has come to an end. "The market as a whole remains on an upward trend, but the Relative Strength Index (RSI) has shown signs of turning from overbought territory. We will continue to monitor the situation closely to determine whether the dollar's rally has truly ended."
US data released mixed signals on Wednesday
The US ADP non-farm payrolls data unexpectedly improved, with 42,000 new jobs added in October, higher than the expected 32,000 and a significant rebound from the previous month's decrease of 29,000.
However, this improvement was not enough to trigger a sustained strengthening of the US dollar, as the ISM non-manufacturing PMI came in at 52.4, only slightly higher than September's 50.0, indicating moderate economic expansion.
Subsequently, President Trump's remarks had a limited impact on the market, with traders still awaiting more specific policy clues.
The focus shifts to the Bank of England and US data.
Thursday's market focus will shift to the Bank of England's (BOE) policy report and Governor Bailey's speech. The market expects the BOE to maintain its official benchmark interest rate at 4.00%, with a predicted vote of 0-3-6 (for a rate hike - no change - for a rate cut), indicating cautious optimism despite weak UK economic growth. Meanwhile, the market will closely watch for signals regarding future rate hikes or a dovish adjustment.
Japanese officials have been testing the market with verbal interventions, but without concrete action to back them up, such measures often lose their effectiveness over time. If risk aversion fails to effectively boost the yen, USD/JPY is expected to see more speculative upward movement, testing the Bank of Japan's tolerance range (155.0 is clearly a key target).
In the US, speeches by Federal Open Market Committee (FOMC) member Waller later today, and the University of Michigan consumer sentiment index to be released on Friday (expected at 53.0, lower than the previous reading of 53.6), will influence the short-term momentum of the US dollar. Overall, due to divergent monetary policies and slowing global economic growth, the dollar's trajectory remains uncertain, and traders remain cautious.
Technical Analysis
(US Dollar Index 4-hour chart source: FX678)
The US dollar index hovered around 99.95, retreating slightly after failing to hold above the 100.35 resistance level. The price is currently testing the 23.6% Fibonacci retracement level (around 99.23), with key support levels at 99.67, 99.46, and 99.25.
If it falls below 99.25, it may further retrace to 98.57 or even 98.09, with the 200-period exponential moving average (98.88) providing dynamic support. The Relative Strength Index (RSI) is at 55, indicating cooling momentum. Unless the bulls reclaim the 100.35-100.65 range, the upside potential is limited.
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