The dollar index continued its correction as safe-haven demand waned and a wait-and-see attitude prevailed ahead of employment data.
2026-05-06 15:06:34
The US dollar index fell to around 98.30 during Asian trading hours on Wednesday, mainly due to reduced safe-haven demand resulting from easing tensions in the Middle East. This followed the US announcement that it would pause some actions to facilitate an agreement, which significantly improved market risk sentiment and diminished the dollar's appeal as a safe-haven asset.
The United States stated that it will suspend related operations to observe the possibility of an eventual agreement. The US Secretary of State indicated that the relevant military operations have ended, and the focus is now on follow-up arrangements.
Amid a rebound in risk appetite, funds flowed out of the US dollar and into riskier assets, causing a pullback in the dollar index. However, from a fundamental perspective, US economic data remains relatively resilient, providing some support for the dollar.
Newly released data shows that the US ISM Services PMI for April came in at 53.6, a slight decrease from the previous month's 54.0, but still within the expansionary range. The continued expansion of the services sector indicates that the fundamentals of the US economy have not weakened significantly, which to some extent limits the downside potential of the US dollar.
Meanwhile, the Federal Reserve's policy remains in a critical observation phase. Previously, the Fed had maintained interest rates at 3.50% to 3.75% for the third consecutive time, reflecting a policy stance of maintaining a balance between inflation and growth. Despite inflation uncertainty caused by energy price volatility, policymakers remain flexible regarding the future path of interest rates.
Federal Reserve Chairman Jerome Powell indicated that the policy stance may be adjusted at future meetings.
Policy uncertainty is keeping markets cautious ahead of key data releases. Current market focus is on the upcoming ADP employment data and Friday's non-farm payroll report. The market widely expects approximately 60,000 new jobs to be added in April, with the unemployment rate remaining around 4.3%. Weak employment data could strengthen expectations of a policy shift, further pressuring the dollar; conversely, strong data could provide support for the dollar.
From a technical perspective, the US dollar index is showing a volatile downward trend on the daily chart, entering a correction phase after breaking below short-term moving average support. Currently, the index is trading around 98.30, with resistance levels at 99.00 and 99.80, and support levels around 97.80 and 97.00. The RSI has fallen to neutral territory, and the MACD has formed a death cross, indicating weak short-term momentum, but the overall trend has not yet fully turned bearish.
On the 4-hour chart, the US dollar index is trending downwards with short-term moving averages turning downwards, and the price is trading below the moving average system, indicating that bears are in control. The MACD remains below the zero line, and the RSI is around 40, reflecting a weak market. If the price breaks below the 97.80 support level, it may further test the 97.00 area; if it rebounds and breaks through 99.00, it may enter a period of consolidation.
Editor's Summary:
The US dollar index is currently influenced by multiple factors. On the one hand, the easing of tensions in the Middle East has reduced safe-haven demand; on the other hand, resilient US economic data continues to provide support. Employment data and policy expectations will be key variables determining its future trend. If the job market weakens, the dollar may face further pressure; conversely, if the data is strong, the dollar may rebound. Overall, the market is in a wait-and-see phase, and short-term volatility may intensify.
The United States stated that it will suspend related operations to observe the possibility of an eventual agreement. The US Secretary of State indicated that the relevant military operations have ended, and the focus is now on follow-up arrangements.
Amid a rebound in risk appetite, funds flowed out of the US dollar and into riskier assets, causing a pullback in the dollar index. However, from a fundamental perspective, US economic data remains relatively resilient, providing some support for the dollar.
Newly released data shows that the US ISM Services PMI for April came in at 53.6, a slight decrease from the previous month's 54.0, but still within the expansionary range. The continued expansion of the services sector indicates that the fundamentals of the US economy have not weakened significantly, which to some extent limits the downside potential of the US dollar.
Meanwhile, the Federal Reserve's policy remains in a critical observation phase. Previously, the Fed had maintained interest rates at 3.50% to 3.75% for the third consecutive time, reflecting a policy stance of maintaining a balance between inflation and growth. Despite inflation uncertainty caused by energy price volatility, policymakers remain flexible regarding the future path of interest rates.
Federal Reserve Chairman Jerome Powell indicated that the policy stance may be adjusted at future meetings.
Policy uncertainty is keeping markets cautious ahead of key data releases. Current market focus is on the upcoming ADP employment data and Friday's non-farm payroll report. The market widely expects approximately 60,000 new jobs to be added in April, with the unemployment rate remaining around 4.3%. Weak employment data could strengthen expectations of a policy shift, further pressuring the dollar; conversely, strong data could provide support for the dollar.
From a technical perspective, the US dollar index is showing a volatile downward trend on the daily chart, entering a correction phase after breaking below short-term moving average support. Currently, the index is trading around 98.30, with resistance levels at 99.00 and 99.80, and support levels around 97.80 and 97.00. The RSI has fallen to neutral territory, and the MACD has formed a death cross, indicating weak short-term momentum, but the overall trend has not yet fully turned bearish.
On the 4-hour chart, the US dollar index is trending downwards with short-term moving averages turning downwards, and the price is trading below the moving average system, indicating that bears are in control. The MACD remains below the zero line, and the RSI is around 40, reflecting a weak market. If the price breaks below the 97.80 support level, it may further test the 97.00 area; if it rebounds and breaks through 99.00, it may enter a period of consolidation.
Editor's Summary:
The US dollar index is currently influenced by multiple factors. On the one hand, the easing of tensions in the Middle East has reduced safe-haven demand; on the other hand, resilient US economic data continues to provide support. Employment data and policy expectations will be key variables determining its future trend. If the job market weakens, the dollar may face further pressure; conversely, if the data is strong, the dollar may rebound. Overall, the market is in a wait-and-see phase, and short-term volatility may intensify.
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