Key Points
- USDX slipped to 98.77, its lowest in nearly a week.
- Powell’s remarks fuel expectations of a rate cut at the October 29 Fed meeting.
The US dollar fell to its lowest level in almost a week on Wednesday, retreating to around 98.77 against a basket of major currencies as markets digested Federal Reserve Chair Jerome Powell’s dovish comments and escalating US-China trade frictions.
Speaking at a conference in Philadelphia, Powell cautioned that the US labour market faces “significant downside risks,” a comment traders interpreted as a signal the Fed may be ready to support another interest rate cut at its upcoming October 29 policy meeting.
Our research desk noted that the tone of Powell’s speech aligned with the recent softening in US economic data, reinforcing expectations of a near-term policy adjustment.
Futures markets are now pricing in a high probability of a 25-basis-point rate cut, extending the dollar’s pullback.
Trade Tensions Resurface
Adding further pressure on the greenback, President Donald Trump threatened to terminate certain trade ties with China, including exports related to cooking oil, in retaliation for Beijing’s continued refusal to purchase US soybeans.
The comments reignited market anxiety over the durability of bilateral trade relations between the world’s two largest economies.
The combination of dovish monetary expectations and trade uncertainty led traders to trim dollar exposure, supporting currencies such as the euro and yen, while gold edged higher on renewed safe-haven demand.
Technical Analysis
The U.S. Dollar Index (USDX) is trading at 98.48, down 0.32% on the day, as investors reassess the Federal Reserve’s rate outlook following a softer round of U.S. inflation and retail sales data.
The pullback suggests mild profit-taking after the index’s recent rebound from the 95.80 support region, while market sentiment shifts cautiously ahead of upcoming Fed speeches and macro data releases.
From a technical standpoint, the dollar index remains in a fragile recovery phase. After bottoming near 95.82 in late September, the USDX climbed steadily but has yet to reclaim its 100.00 resistance zone.
The latest rejection near 99.00–99.20 signals a potential short-term pause in momentum. The index is currently hovering around the 30-day moving average, while the 5- and 10-day MAs are showing signs of convergence — a possible indicator of consolidation.
The MACD reflects waning bullish momentum, with the histogram narrowing and the signal line flattening. A crossover below the MACD line would confirm a renewed bearish shift.
Immediate support lies at 97.80, followed by 96.50, while resistance remains capped at 99.50–100.00.
On the fundamental front, easing U.S. CPI figures have tempered expectations for further Fed tightening, while geopolitical jitters and uneven global growth are keeping safe-haven demand for the dollar in check. Meanwhile, stronger performances from European and Asian currencies have contributed to mild downside pressure on the greenback.
Outlook
The outlook for the dollar appears cautiously bearish as traders anticipate policy easing and watch for developments in the US-China trade dispute.
While short-term volatility may persist, the trend bias has shifted modestly in favour of risk assets and non-dollar currencies.
