The U.S. Dollar Index (DXY) remained under pressure during Friday's Asian trading session, hovering around the 99.00 level with a slight intraday decline of about 0.10%, continuing its downward trend over the past two weeks.
Ahead of the key PCE inflation data release, directional market bets slowed, and cautious sentiment intensified. The U.S. September PCE Price Index, set to be released today, serves as a crucial indicator for the Federal Reserve to assess inflation persistence.
Market surveys indicate that most institutions believe the PCE data will determine the Fed's rate-cut pace after December. Despite strong U.S. employment data released on Thursday, expectations for Fed rate cuts continue to strengthen.
The resilience in labor market data has not altered investors' belief in an extended easing cycle, limiting the dollar's rebound potential. Recently, Fed officials have repeatedly delivered dovish remarks.
Market surveys suggest that multiple officials have hinted at a near-certain December rate cut. CME's FedWatch Tool shows an 85% probability of a 25-basis-point rate cut in December, the primary driver behind the dollar's decline.
Additionally, speculation about potential leadership changes at the Fed is also influencing the dollar's performance. Market surveys suggest that White House National Economic Council Director Hassett has emerged as a potential new Fed chair candidate, perceived as favoring lower interest rates.
Against a backdrop of looser policy expectations, the dollar's appeal continues to weaken, prompting investors to sell on rallies. The Dollar Index has now posted losses for two consecutive weeks, with structural pressures mounting. In the absence of strong positive catalysts, any technical rebound may face selling pressure.
From a daily chart perspective, the Dollar Index exhibits a clear bearish structure: it remains below both the 100-day and 200-day moving averages, signaling a medium-term downtrend. The MACD momentum bars persist below the zero line, indicating continued bearish dominance.
Repeated failures to break above the 100.80–101.20 resistance zone highlight the dollar's weak rebound momentum. Immediate support lies at the 98.60–98.80 range; a breakdown could open further downside toward the 98.00 psychological level.
Conversely, if the PCE data surprises to the upside, triggering a dollar rebound, resistance levels remain at 99.80 and 100.30. Overall, the Dollar Index maintains a clear bearish daily structure with no reversal signals.
In a market dominated by policy expectations, technical and fundamental factors align to support continued weak fluctuations in the dollar.
The current dollar weakness is not short-term sentiment-driven but reflects a repricing of interest rate differentials. With Fed rate cut probabilities rising to 85%, the dollar's pricing dominance in global assets has weakened. Even strong employment data struggles to reverse market pricing of an easing cycle. In the near term, PCE data will dictate the dollar's direction—further inflation declines could push the currency to new lows. While the Dollar Index is likely to continue its downward oscillation, traders should watch for potential short-term rebounds triggered by PCE data.
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