Key Points
- USDX trades at 99.55, just below Friday’s three-month peak of 99.84.
- Markets price in a 68% probability of a December rate cut, per LSEG data.
- Fed officials remain divided on further easing, keeping traders cautious.
The U.S. dollar index steadied near recent highs on Monday, holding firm after last week’s Federal Reserve meeting left markets uncertain about the central bank’s next move.
The Fed delivered a 25-basis-point rate cut as expected, lowering the target range to 3.75%–4.00%, but Chair Jerome Powell’s remarks signalled a pause in policy easing may be possible.
Policy Divergence Within the Fed
Powell stated that another rate cut in December was “not a foregone conclusion,” underscoring diverging opinions within the Fed.
While Governor Christopher Waller backed another cut this year, both Beth Hammack and Lorie Logan voiced caution, saying they saw no urgency to ease further.
Markets remain divided as well, with futures data showing a 68% chance of a December reduction, down from near 90% before the Fed meeting.
The shift in expectations has helped the dollar consolidate its position against major peers, particularly as U.S. yields remain elevated.
Technical Analysis
The U.S. Dollar Index (USDX) hovered near 99.55, edging slightly higher as markets steadied following the Trump–Xi meeting, which eased geopolitical tensions but left monetary policy expectations in focus.
The tone of cooperation between Washington and Beijing on trade, supply chains, and currency stability helped limit downside pressure on the greenback while keeping investors cautious ahead of this week’s ISM and NFP data.
Technically, the USDX is attempting a breakout above the 99.60 resistance zone, with short-term moving averages (5, 10, 30) showing signs of bullish alignment. The MACD has turned positive, indicating improving momentum after weeks of sideways trading.
While the diplomatic thaw capped haven demand, the dollar remains supported by relatively strong U.S. yields and expectations that the Fed will maintain its cautious stance on rate cuts.
A sustained close above 99.60 could open the door toward the 100.00 psychological level, whereas immediate support sits around 98.80.
Outlook
The dollar is likely to stay range-bound ahead of this week’s U.S. inflation and labour data, with traders watching for signs that could tilt the Fed’s stance either way.
Persistent divisions among policymakers and Powell’s cautious tone leave markets data-dependent, with short-term moves likely driven by macro releases and risk sentiment.
