The US Dollar Index (DXY) held above 97.00 on Wednesday and traded near 97.29, up about 0.20%. Trading was cautious ahead of US Industrial Production data and the FOMC meeting minutes.<\/p>\n
US Durable Goods Orders fell 1.4% in December, less than the 2% expected, after a 5.4% rise in November. Orders excluding transportation rose 0.9%, up from 0.5% previously.<\/p>\n
Markets are pricing nearly 60 basis points of Fed easing in 2026, with the first cut seen in June, according to the CME FedWatch Tool. Recent labour data reduced expectations for near-term cuts, while softer inflation data kept the prospect of easing later in the year.<\/p>\n
Major central banks have been reducing USD holdings amid concerns about US trade policy and the Federal Reserve\u2019s independence. This has affected confidence in US policy and raised questions about the Dollar\u2019s reserve status.<\/p>\n
DXY rebounded from four-year lows near 95.56 in late January but remains below key moving averages. The 21-day SMA is below the 100-day SMA, the 21-day SMA is around 97.19, and 98.00 is now resistance.<\/p>\n
Support is near 96.50, with a break risking a retest of the 95.56 low. MACD has turned slightly positive, while RSI is 45.84.<\/p>\n
Given the US Dollar Index is holding near 97.29, we should be cautious about its short-term strength. The market is already pricing in about 60 basis points of Federal Reserve rate cuts for this year, likely starting in June. This expectation creates an underlying bearish pressure on the dollar, making any rally a potential opportunity to position for a downturn.<\/p>\n
The recent economic data from late 2025 and early 2026 paints a conflicting picture that is creating this temporary stability. For instance, the surprisingly strong nonfarm payrolls report for January, which added 225,000 jobs, pushed back the most aggressive rate cut bets. However, last week\u2019s Consumer Price Index showed core inflation moderating to 2.1%, giving the Fed plenty of justification to ease policy later this year.<\/p>\n
From a technical standpoint, the dollar is struggling to overcome immediate resistance at the 21-day moving average around 97.19. We see this level as a cap on any upward moves, with the much larger psychological hurdle at 98.00 seeming distant. For derivative traders, this setup suggests selling call spreads above 98.00 could be a viable strategy to collect premium while betting that the rally will fail.<\/p>\n
The downside remains the more probable direction over the coming weeks. A break below the 96.50 support level would signal that the bearish trend is resuming, likely leading to a retest of the four-year lows near 95.56 we touched in January. Traders could consider buying DXY puts with expiration dates after the June FOMC meeting to position for this expected weakness.<\/p>\n
Longer-term structural issues continue to weigh on the dollar, which supports holding a bearish bias. We are still feeling the effects of the protectionist trade policies from the last decade, which prompted a steady diversification away from the dollar by global central banks. The most recent IMF data from the fourth quarter of 2025 confirmed this, showing the dollar’s share of global reserves fell to 58.5%.<\/p>\n
Therefore, we should view the current stability as a temporary pause in a broader downtrend. The upcoming FOMC minutes may not offer a strong directional signal, but they will likely reinforce the Fed\u2019s data-dependent stance. This means that any future data pointing to economic softness will quickly accelerate bets on rate cuts and weigh heavily on the dollar.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Dollar Index holds above 97 amid cautious trading; Fed data awaited, easing bets persist, resistance near 98.00.<\/p>\n","protected":false},"author":62,"featured_media":16966,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-42193","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42193","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=42193"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/42193\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16966"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=42193"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=42193"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=42193"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}