Insights 
VT 
The US Dollar (USD) continued its upward trend, influenced by differing views from Federal Reserve officials. The DXY index was last recorded at 99.96. Federal Reserve members expressed varying concerns, with some focusing on inflation risks, while others highlighted labour market threats.
The absence of US economic data due to a government shutdown and differing Fed views may cause a short squeeze for USD in the near term. Market expectations for another interest rate cut in December remain uncertain. A funding squeeze increases the cost of shorting USD, potentially boosting its value temporarily. Analysts noted that as the funding situation stabilises, any USD strength could diminish.
Bullish Trend Analysis
There is evidence of a bullish trend, with resistance around the 100.50/60 range and support levels at 99.80 and 99.10. Recent data showed the ISM manufacturing sector contracting further. Upcoming data and events, including ADP employment figures and ISM services data, will be closely watched. Additionally, US corporate earnings and Federal Reserve communications will be scrutinised for further economic insights. The FXStreet Insights Team provides a selection of expert market observations with contributions from both commercial analysts and internal teams.
The US Dollar continues to show strength, with the DXY index currently trading around the 106.20 level. This is fueled by a divided Federal Reserve, where some officials remain nervous about inflation while others are more concerned about a weakening job market. This uncertainty makes clear direction difficult, supporting the dollar as a safe haven.
We believe this two-sided debate will persist, especially after the latest inflation report for October 2025 came in slightly higher than expected at 3.4%. At the same time, the most recent jobs report showed payrolls cooling to a gain of 170,000, which gives ammunition to both sides of the rate-cut argument. This mirrors the kind of data-dependent indecision we saw from the Fed throughout late 2023 and 2024.
Traders Strategic Considerations
For derivative traders, this environment suggests that outright directional bets on the dollar are risky. Instead, options strategies that benefit from choppy price action and rising volatility, such as straddles on major currency pairs, may be more suitable in the coming weeks. The conflicting signals from economic data are likely to keep the dollar trading within a range, albeit with a bias to the upside.
A key technical factor is the rising cost to bet against the dollar due to year-end funding pressures, which could cause a short-term squeeze higher. When this funding situation normalizes after the new year, this tailwind for the dollar could fade. Therefore, any sudden upward spikes might be temporary technical moves rather than a change in the fundamental outlook.
Traders should monitor the DXY for a test of resistance near the 107.00 level, which marked the peak from earlier this year. On the downside, initial support can be found near 105.50. Upcoming speeches from Fed officials and corporate earnings reports will be the main catalysts to watch for hints about the economy’s direction.
