Key Points
- USDX fell over 1% across two sessions, now hovering at 96.76.
- China reportedly limits US Treasury exposure, dampening demand.
The US Dollar Index (USDX) slipped to 96.761 after back-to-back declines exceeding 1%, holding beneath the psychological 97 level.
The fall follows renewed unease over demand for US Treasuries, sparked by reports that Chinese regulators advised institutions to cut exposure to American government bonds.
Beijing’s move is seen as a pre-emptive hedge against future policy volatility out of Washington.
Policy Outlook Under Scrutiny
Trader focus has shifted toward the delayed US jobs and inflation data due this week. Any dovish surprise could cement expectations for a looser Fed later in the year. Markets currently price in two rate cuts in 2026, with the first expected around June.
White House economic adviser Kevin Hassett added to the caution, warning that job gains may taper in coming months due to shrinking labour force participation and a rise in productivity. This reinforces the view that while the US economy remains resilient, its capacity to add jobs may be waning.
Fed officials continue to signal patience. A March rate hold is all but confirmed, with the central bank awaiting clearer signals from both inflation and wage pressures before adjusting policy.
Technical Analysis
The US Dollar Index (USDX) is trading at 96.761, up slightly by +0.057 (+0.06%), but remains under pressure following a sharp reversal from recent highs.
After peaking near 100.321 in November, the index has entered a prolonged downtrend, marked by a series of lower highs and lower lows. A brief rebound off the recent low of 95.339 offered some relief, but upside momentum has since faltered.
Currently, the price is trading below all major moving averages—with the MA5 at 97.263, MA10 at 96.999, and MA30 at 97.813—indicating a bearish structure.
The short-term bounce failed to clear resistance around the 97.5–97.8 zone, and selling pressure has resumed. Volume remains moderate, and without a clear catalyst, the dollar could revisit its recent lows.
A break below 95.339 would open the door toward 94.90, while reclaiming the 97.80 handle is needed to shift sentiment back to bullish.
Cautious Outlook
In the near term, USDX may remain rangebound between 95.50 and 97.30 as traders await the upcoming CPI and NFP releases. The market appears cautious, with risk appetite fragile and the dollar lacking strong directional momentum.
Should inflation surprise to the downside or job growth slow materially, expectations for rate cuts may firm, potentially adding further pressure to the dollar.
Markets will also keep a close eye on China’s future bond-buying behaviour and any fresh commentary from Fed Chair Jerome Powell that may shift the tone of policy expectations.
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