The US Dollar Index (DXY), which tracks the value of the U.S. Dollar (USD) against a basket of major currencies, strengthened on Thursday, avoiding further downside pressure. Traders are closely monitoring the Federal Reserve’s recent policy decisions, which reinforced expectations of two rate cuts in 2025. Despite strong economic data, the index remains range-bound between 103.00 and 104.00.
Fed‘s Steady Policy and Rising Geopolitical Tensions
The Federal Reserve opted to leave interest rates unchanged, maintaining projections for two rate cuts in 2025. Fed Chair Jerome Powell played down the inflationary impact of tariffs, calling it a temporary effect but acknowledging the uncertainty surrounding its broader consequences. While recession risks have risen slightly, Powell indicated that they remain relatively low at the moment.
In economic data, US jobless claims came in lower than expected, pushing the US Dollar higher above the 104.00 level. Meanwhile, geopolitical risks remain elevated, with ongoing tensions in Ukraine, Turkey, and Gaza, further complicating the global outlook.
In response to these uncertainties, US bond yields have fallen as investors seek safety in Treasuries. The anticipation of lower yields once the Fed begins its rate cuts is further boosting demand for US bonds.
Mixed Market Sentiment and Stock Caution
European markets have shown a mixed sentiment, while US stocks are trading cautiously following the Fed’s policy decision, with investors uncertain about the future trajectory of interest rates.
US Dollar Stabilizes Below Key Resistance Levels
The US Dollar Index continues to exhibit signs of stabilization, though upward momentum remains limited. The Relative Strength Index (RSI) is gradually moving higher, while the Moving Average Convergence Divergence (MACD) histogram stays in negative territory, suggesting that bearish pressure is easing.
Immediate resistance for the DXY stands at 104.20, with further hurdles at 104.80 and 105.20. On the downside, initial support is seen at 103.40, and a break below this level could expose 102.90. A bearish crossover between the 20-day and 100-day simple moving averages (SMAs) around the 105.00 level could signal further downside risks, potentially acting as a sell signal if sustained.
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