The US Dollar Faces Pressure Ahead of US Trading Session
- The US Dollar turns flat, erasing earlier gains
- Profit taking leads to downside pressure on the Greenback
- US Dollar Index (DXY) trades below 107.00
On Friday, the US Dollar (USD) is experiencing pressure in the US trading session as traders reduce their positions in the Greenback. Profit taking is occurring before the weekend following a surge in the Greenback earlier in the week due to a weaker Euro and Yuan. Despite the release of Import and Export data on Friday, all numbers remained relatively flat.
The USD received a boost on Thursday after the Producer Price Index (PPI) data for November exceeded expectations. While the data did not alter the expectation of a 25 basis points interest rate cut by the US Federal Reserve (Fed) next week, it did lessen bets on further cuts in 2025.
Expectations of additional stimulus in other regions also supported the Greenback. In Europe, the European Central Bank (ECB) considered a 50 basis point rate cut but ultimately settled on a 25 basis point reduction. Similarly, China announced plans for a looser monetary policy and more proactive fiscal policy in 2025.
Daily Digest Market Movers: Fed in Focus Next Week
- China’s policymakers may allow the yuan to weaken in 2025
- Import-Export Price Index for November shows minimal movement
- Global equities show varied performance with Asian markets in the red
- CME FedWatch Tool predicts a 96.4% chance of a 25 bps rate cut by the Fed
- US 10-year benchmark rate reaches 4.35%, a weekly high
US Dollar Index Technical Analysis: Positioned for Growth
The US Dollar Index (DXY) is set for a rally fueled by bond market movements. The widening rate gap between the US and Europe, coupled with potential easing in China, is strengthening the Greenback. The breach of the 107.00 level signals a potential upward trend, with resistance at 107.35 and 108.7.
Support levels include 106.52, 105.53, and the 200-day Simple Moving Average at 104.17 in case of a pullback.
US Dollar Index: Daily Chart
Central Banks FAQs
- Central banks aim to maintain price stability by managing inflation
- Policy rates are adjusted to influence economic activity
- Central bank members have varying views on monetary policy
- Chairman leads meetings to reach consensus on policy decisions