Key Points
- Dollar Index (USDX) traded near 99.6, holding weekly gains as traders reassessed Fed rate cut expectations.
- Markets now see a 47% probability of a 25 bps cut in December, down from over 90% a month ago.
The US dollar index remained little changed around 99.6 on Wednesday, consolidating its early-week gains as traders weighed mixed signals from Federal Reserve policymakers ahead of crucial US employment data.
Markets have sharply repriced expectations for policy easing, now seeing less than even odds of a December rate cut. According to CME FedWatch, traders assign a 47% chance of a 25 basis point cut, compared with over 90% a month earlier.
Recent remarks from several Fed officials leaned hawkish, cautioning against premature easing amid lingering inflationary pressures.
However, Fed Governor Christopher Waller maintained that further rate cuts remain appropriate given persistent signs of weakness in the US labour market.
Labour Market and Retail Earnings in Focus
The latest Labor Department data showed initial jobless claims at 232,000 for the week ending October 18, with continuing claims rising to 1.957 million — the highest since August.
The increase suggests some cooling in employment conditions, aligning with recent private payroll data that pointed to slowing hiring momentum.
Traders are now turning their attention to the September nonfarm payrolls report, due Thursday, for clues on the pace of job creation and wage growth heading into year-end.
Meanwhile, earnings from major US retailers this week are expected to offer insights into consumer spending resilience, a key driver of the broader economy.
Technical Analysis
The Dollar Index (USDX) trades around 99.52, up 0.08% intraday. On the daily chart, the index continues to consolidate near the 99.50 level, supported by the 30-day moving average, with short-term momentum stabilising after recent gains.
The MACD indicator remains flat around the zero line, suggesting a period of indecision. Resistance is seen near 99.85–100.00, while initial support lies at 99.10, followed by 98.60.
Cautious Forecast
The USDX’s near-term direction hinges on this week’s US jobs data. Strong payroll figures could revive talk of a policy pause and push the dollar higher toward 100.00, while a weak reading would likely reinforce rate cut expectations, pulling the index back toward 99.00.
For now, traders remain positioned defensively, awaiting clearer signals from both the labour market and consumer spending indicators before adjusting positions further.
