The dollar's upward momentum has slowed, but fundamentals remain supportive, and it is expected to maintain range-bound trading in the short term.
2026-02-03 13:18:28
The US dollar index slowed its gains at the beginning of the week, ending its previous upward trend. During the Asian trading session, the index retreated slightly, indicating that some short-term funds chose to take profits at the recent highs, but the overall pullback was limited, and the market's medium-term outlook for the dollar remains cautiously optimistic.
From an interest rate perspective, the high level of US Treasury yields is a significant factor supporting the US dollar. After a sharp rise in the previous trading day, the 10-year US Treasury yield remained stable at around 4.27% on Tuesday, reflecting a repricing of market expectations regarding the resilience of the US economy and monetary policy tightening.
High yields help enhance the relative attractiveness of dollar assets. On the economic data front, an unexpected recovery in manufacturing has strengthened confidence in the US economy. The latest ISM manufacturing index rebounded significantly and returned to expansion territory, far exceeding previous cautious market expectations.
This data not only eased concerns about an economic slowdown but also prompted the market to reassess the pace of future interest rate cuts. In terms of policy expectations, the personnel changes at the Federal Reserve were seen by the market as a hawkish signal.
Following the president's nomination of Kevin Warsh as the next Federal Reserve chairman, investors generally believe that future policy will focus more on discipline and inflation control, rather than rapid easing. This assessment has further strengthened the medium-term support for the US dollar.
Furthermore, the temporary improvement in risk sentiment also benefited the dollar's performance. Progress in the US Congress on government funding effectively mitigated the risk of a shutdown. Simultaneously, the US announced a new trade arrangement with India, reducing bilateral tariffs and strengthening market expectations for the stability of the global trade environment, which to some extent boosted demand for the dollar.
Statements from several Federal Reserve officials also signaled a cautious stance. Policymakers generally believe that current interest rates are close to neutral or slightly restrictive, and there is no urgent need for rate cuts in the short term, which further bolstered the fundamental support for the US dollar.
From a daily chart perspective, the US dollar index has entered a consolidation phase after a rapid rebound. Previously, the index had been rising steadily from its lows, with concentrated momentum. Currently, it is experiencing brief fluctuations around 97.50, indicating that the bullish momentum is beginning to slow.
The candlestick pattern shows that after a continuous rise, the index formed a small-bodied candlestick, reflecting a near balance between short-term bullish and bearish forces. Although there are signs of a pullback, the price remains firmly above the key moving average system, indicating that the overall trend has not been broken.
From a structural perspective, the 97.00 level constitutes a significant short-term support area, corresponding to the previous breakout zone and a key technical node on the daily chart. As long as the index remains above this area, pullbacks are more likely to be seen as technical corrections within an uptrend.
On the upside, the area around 98.00 is a phased resistance zone. If it breaks through effectively with the support of fundamentals, the index is expected to reopen upside potential; otherwise, before a breakthrough, the trend may remain within the range and consolidate repeatedly.
Overall, the US dollar index is currently consolidating at a high level after a strong rebound. The short-term direction is not clear, but the medium-term structure remains relatively stable.
Editor's Note:
The US dollar index is currently in a period of cooling-off following a trend reassessment. Strong economic data and hawkish policy expectations have provided a solid bottom for the dollar, but a technical consolidation after a period of continuous gains in the short term is also normal.
The US dollar index is likely to continue rising in the short term, with its pullback reflecting more of a digestion of momentum than a trend reversal. Going forward, key attention should be paid to changes in US Treasury yields and further guidance from Federal Reserve officials regarding the policy path. If economic data continues to show resilience, the dollar will maintain its strength.
From an interest rate perspective, the high level of US Treasury yields is a significant factor supporting the US dollar. After a sharp rise in the previous trading day, the 10-year US Treasury yield remained stable at around 4.27% on Tuesday, reflecting a repricing of market expectations regarding the resilience of the US economy and monetary policy tightening.
High yields help enhance the relative attractiveness of dollar assets. On the economic data front, an unexpected recovery in manufacturing has strengthened confidence in the US economy. The latest ISM manufacturing index rebounded significantly and returned to expansion territory, far exceeding previous cautious market expectations.
This data not only eased concerns about an economic slowdown but also prompted the market to reassess the pace of future interest rate cuts. In terms of policy expectations, the personnel changes at the Federal Reserve were seen by the market as a hawkish signal.
Following the president's nomination of Kevin Warsh as the next Federal Reserve chairman, investors generally believe that future policy will focus more on discipline and inflation control, rather than rapid easing. This assessment has further strengthened the medium-term support for the US dollar.
Furthermore, the temporary improvement in risk sentiment also benefited the dollar's performance. Progress in the US Congress on government funding effectively mitigated the risk of a shutdown. Simultaneously, the US announced a new trade arrangement with India, reducing bilateral tariffs and strengthening market expectations for the stability of the global trade environment, which to some extent boosted demand for the dollar.
Statements from several Federal Reserve officials also signaled a cautious stance. Policymakers generally believe that current interest rates are close to neutral or slightly restrictive, and there is no urgent need for rate cuts in the short term, which further bolstered the fundamental support for the US dollar.
From a daily chart perspective, the US dollar index has entered a consolidation phase after a rapid rebound. Previously, the index had been rising steadily from its lows, with concentrated momentum. Currently, it is experiencing brief fluctuations around 97.50, indicating that the bullish momentum is beginning to slow.
The candlestick pattern shows that after a continuous rise, the index formed a small-bodied candlestick, reflecting a near balance between short-term bullish and bearish forces. Although there are signs of a pullback, the price remains firmly above the key moving average system, indicating that the overall trend has not been broken.
From a structural perspective, the 97.00 level constitutes a significant short-term support area, corresponding to the previous breakout zone and a key technical node on the daily chart. As long as the index remains above this area, pullbacks are more likely to be seen as technical corrections within an uptrend.
On the upside, the area around 98.00 is a phased resistance zone. If it breaks through effectively with the support of fundamentals, the index is expected to reopen upside potential; otherwise, before a breakthrough, the trend may remain within the range and consolidate repeatedly.
Overall, the US dollar index is currently consolidating at a high level after a strong rebound. The short-term direction is not clear, but the medium-term structure remains relatively stable.
Editor's Note:
The US dollar index is currently in a period of cooling-off following a trend reassessment. Strong economic data and hawkish policy expectations have provided a solid bottom for the dollar, but a technical consolidation after a period of continuous gains in the short term is also normal.
The US dollar index is likely to continue rising in the short term, with its pullback reflecting more of a digestion of momentum than a trend reversal. Going forward, key attention should be paid to changes in US Treasury yields and further guidance from Federal Reserve officials regarding the policy path. If economic data continues to show resilience, the dollar will maintain its strength.
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