US dollar struggles near pre-election lows
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The US Dollar Index (DXY) remained under pressure, hovering around 103.40, after Federal Reserve Chair Jerome Powell reaffirmed the central bank’s plan for two rate cuts in 2025. Despite this reassuring tone for risk assets, the greenback failed to capitalize on the event, with traders remaining cautious amid ongoing tariff uncertainties and mixed economic signals.
Muted Dollar Reaction to Powell’s Rate Guidance
While Powell’s press conference initially triggered a strong rally in equities, the dollar failed to follow suit, suggesting that FX markets had already priced in the central bank’s stance. DXY remains 6.5% below its mid-January peak of 110.17, as traders position for an easing cycle while monitoring Trump’s tariff policy impact on inflation and global trade.
Despite Powell’s optimistic tone, the Fed remains data-dependent, meaning the pace and extent of cuts could shift depending on inflation surprises and economic growth trends. For now, the dollar’s inability to bounce suggests that traders are still favoring rival currencies, particularly the euro and emerging market FX, which are benefiting from shifting capital flows.
Technical Analysis: Key Levels to Watch
From a technical perspective, the US Dollar Index is nearing a critical support zone, aligning with pre-election lows from November 5.
Bearish Scenario: If DXY fails to hold the current levels, a break below 103 could lead to a retest of the psychological 100 level, reinforcing bearish sentiment.
Bullish Scenario: A recovery above 107.70 (previous resistance and confluence of the 50-day and 100-day moving averages) could signal a reversal and a potential attempt to regain momentum toward 110.
Market Implications and Outlook
The dollar’s subdued reaction underscores market skepticism about the Fed’s ability to maintain an easing cycle in the face of Trump’s trade policy risks and potential inflationary pressures. While lower rates should theoretically weaken the dollar, persistent global uncertainties could still favor USD as a safe-haven asset in periods of risk-off sentiment.
For now, FX traders will focus on upcoming US economic data—including inflation prints and labor market indicators—to assess whether Powell’s dovish tone aligns with economic fundamentals. In the absence of a clear catalyst, range-bound trading may dominate, with DXY fluctuating between 103 and 107 in the near term.
Muted Dollar Reaction to Powell’s Rate Guidance
While Powell’s press conference initially triggered a strong rally in equities, the dollar failed to follow suit, suggesting that FX markets had already priced in the central bank’s stance. DXY remains 6.5% below its mid-January peak of 110.17, as traders position for an easing cycle while monitoring Trump’s tariff policy impact on inflation and global trade.
Despite Powell’s optimistic tone, the Fed remains data-dependent, meaning the pace and extent of cuts could shift depending on inflation surprises and economic growth trends. For now, the dollar’s inability to bounce suggests that traders are still favoring rival currencies, particularly the euro and emerging market FX, which are benefiting from shifting capital flows.
Technical Analysis: Key Levels to Watch
From a technical perspective, the US Dollar Index is nearing a critical support zone, aligning with pre-election lows from November 5.
Bearish Scenario: If DXY fails to hold the current levels, a break below 103 could lead to a retest of the psychological 100 level, reinforcing bearish sentiment.
Bullish Scenario: A recovery above 107.70 (previous resistance and confluence of the 50-day and 100-day moving averages) could signal a reversal and a potential attempt to regain momentum toward 110.
Market Implications and Outlook
The dollar’s subdued reaction underscores market skepticism about the Fed’s ability to maintain an easing cycle in the face of Trump’s trade policy risks and potential inflationary pressures. While lower rates should theoretically weaken the dollar, persistent global uncertainties could still favor USD as a safe-haven asset in periods of risk-off sentiment.
For now, FX traders will focus on upcoming US economic data—including inflation prints and labor market indicators—to assess whether Powell’s dovish tone aligns with economic fundamentals. In the absence of a clear catalyst, range-bound trading may dominate, with DXY fluctuating between 103 and 107 in the near term.