The US dollar index consolidated slightly, with market sentiment leaning cautious as it awaits a directional move.
2025-12-16 14:07:30
On Tuesday morning in Europe, the US dollar index continued to be under pressure, fluctuating around 98.25. Overall market sentiment was cautious, mainly due to the upcoming release of several important US macroeconomic data points, particularly the delayed non-farm payroll report, which made investors hesitant to make any directional moves.
This year's non-farm payroll report will cover data from both October and November, and is considered a crucial indicator of the current state of the US labor market. If the data points to slower job growth or rising unemployment, the market will further strengthen its expectations for continued interest rate cuts by the Federal Reserve, thus putting new downward pressure on the US dollar.
Conversely, if employment figures significantly exceed expectations, it could alleviate market concerns about an economic slowdown in the short term, providing some support for the US dollar. From a monetary policy perspective, the Federal Reserve implemented its third and final interest rate cut of the year last week, reducing the target range for the federal funds rate to 3.50%–3.75%.
This move reflects the continued high level of concern among policymakers regarding employment risks. Based on interest rate futures pricing, the market currently widely expects the Federal Reserve to maintain interest rates unchanged early next year, but the medium-term policy path remains highly dependent on data performance.
Recent statements from Federal Reserve officials have generally leaned towards caution. New York Fed President Williams pointed out that, given the current environment of still high employment risks and somewhat easing inflationary pressures, monetary policy is in a relatively appropriate position.
Some officials, however, believe that current policies remain too tight, which has intensified market discussions about the future direction of policy. As more officials deliver speeches, their statements may have a marginal impact on the dollar's performance in the short term.
Overall, the US dollar index remains uncertain until employment data and policy signals become clearer, and the market is more likely to fluctuate at low levels in the short term while waiting for new driving factors.
From a technical perspective, the US dollar index remains in a weak trading range. The price continues to be pressured below major medium-term moving averages, reflecting that market confidence in the dollar's medium-term prospects has not yet recovered. Recent attempts to rebound have repeatedly failed at key resistance levels, indicating significant selling pressure above.
On the downside chart, the area around 98.00 forms the primary support zone, serving as both a psychological level and a previous consolidation low. If this support is broken after the release of important data, the US dollar index could potentially fall further to around 97.50, opening up new downside potential.
On the upside, the 99.00 area forms a short-term resistance zone. This range is both the previous rebound high and a key area for short-term bullish and bearish battles. If the US dollar index can regain its footing in this area, it is expected to undergo a technical correction in the short term, with a further target of around 99.50.
However, without a clear shift in fundamentals, the rebound is more likely to be seen as a correction. Overall, with technical and fundamental factors converging, the US dollar index is expected to remain weak in the short term, and its direction will heavily depend on the upcoming US employment data.
Editor's Note:
The current weakness of the US dollar index essentially reflects the market's continued digestion of the US economic slowdown and monetary policy shift. Before the release of non-farm payroll data, the dollar lacks clear upward momentum. If the employment data confirms a cooling labor market, the dollar index may face further pressure.
Conversely, even with strong data, the dollar's upside potential may be limited by expectations of medium-term interest rate cuts. In the short term, the dollar is more likely to remain in a low-level consolidation phase, awaiting new macroeconomic signals to guide its direction.
This year's non-farm payroll report will cover data from both October and November, and is considered a crucial indicator of the current state of the US labor market. If the data points to slower job growth or rising unemployment, the market will further strengthen its expectations for continued interest rate cuts by the Federal Reserve, thus putting new downward pressure on the US dollar.
Conversely, if employment figures significantly exceed expectations, it could alleviate market concerns about an economic slowdown in the short term, providing some support for the US dollar. From a monetary policy perspective, the Federal Reserve implemented its third and final interest rate cut of the year last week, reducing the target range for the federal funds rate to 3.50%–3.75%.
This move reflects the continued high level of concern among policymakers regarding employment risks. Based on interest rate futures pricing, the market currently widely expects the Federal Reserve to maintain interest rates unchanged early next year, but the medium-term policy path remains highly dependent on data performance.
Recent statements from Federal Reserve officials have generally leaned towards caution. New York Fed President Williams pointed out that, given the current environment of still high employment risks and somewhat easing inflationary pressures, monetary policy is in a relatively appropriate position.
Some officials, however, believe that current policies remain too tight, which has intensified market discussions about the future direction of policy. As more officials deliver speeches, their statements may have a marginal impact on the dollar's performance in the short term.
Overall, the US dollar index remains uncertain until employment data and policy signals become clearer, and the market is more likely to fluctuate at low levels in the short term while waiting for new driving factors.
From a technical perspective, the US dollar index remains in a weak trading range. The price continues to be pressured below major medium-term moving averages, reflecting that market confidence in the dollar's medium-term prospects has not yet recovered. Recent attempts to rebound have repeatedly failed at key resistance levels, indicating significant selling pressure above.
On the downside chart, the area around 98.00 forms the primary support zone, serving as both a psychological level and a previous consolidation low. If this support is broken after the release of important data, the US dollar index could potentially fall further to around 97.50, opening up new downside potential.
On the upside, the 99.00 area forms a short-term resistance zone. This range is both the previous rebound high and a key area for short-term bullish and bearish battles. If the US dollar index can regain its footing in this area, it is expected to undergo a technical correction in the short term, with a further target of around 99.50.
However, without a clear shift in fundamentals, the rebound is more likely to be seen as a correction. Overall, with technical and fundamental factors converging, the US dollar index is expected to remain weak in the short term, and its direction will heavily depend on the upcoming US employment data.
Editor's Note:
The current weakness of the US dollar index essentially reflects the market's continued digestion of the US economic slowdown and monetary policy shift. Before the release of non-farm payroll data, the dollar lacks clear upward momentum. If the employment data confirms a cooling labor market, the dollar index may face further pressure.
Conversely, even with strong data, the dollar's upside potential may be limited by expectations of medium-term interest rate cuts. In the short term, the dollar is more likely to remain in a low-level consolidation phase, awaiting new macroeconomic signals to guide its direction.
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