During the Asian trading session on Friday, the dollar index hovered near 98.30, continuing its corrective phase following a drop of approximately 0.5% in the previous session. Despite recent robust US macroeconomic data, the primary pressure on the dollar stems from persistent geopolitical and trade uncertainties. On the economic data front, the US third-quarter GDP annualized growth rate was revised upward to 4.4%, slightly surpassing the market expectation of 4.3%, indicating a solid economic expansion momentum. Concurrently, initial jobless claims for the last week came in at 200,000, lower than the widely anticipated 212,000, reflecting a persistently tight labor market. Regarding inflation, the US November Personal Consumption Expenditures (PCE) price index rose 2.8% year-over-year, maintaining the pace from October's 2.7% reading. The core PCE also increased by 2.8% annually, aligning with market expectations and signaling that inflation remains moderate and controllable.
Despite the positive economic data, the dollar faces significant external pressure. US-Europe trade and geopolitical tensions have intensified recently. US President Donald Trump had threatened tariffs on European nations opposing his Greenland initiative but subsequently paused the action after reaching a potential framework agreement with NATO. Market speculation about the agreement's contents is rife, with uncertainties surrounding mineral rights and missile deployment issues. Furthermore, Europe might leverage its substantial holdings of US assets as a bargaining chip, heightening market concerns over the safety of dollar-denominated assets. In terms of policy expectations, the market widely anticipates the Federal Reserve will hold interest rates steady next week. According to the CME FedWatch Tool, investors have priced in a 95% probability of a rate cut in December, indicating growing expectations for future monetary policy easing. Overall, while the US economic fundamentals are strong, the dollar remains suppressed by external uncertainties. The index is likely to continue its narrow-range fluctuations in the short term, awaiting further guidance from economic data or policy signals. From a technical perspective, the dollar index is finding support near 98.30, showing clear short-term consolidation. Daily charts indicate the index has retreated from recent highs but has not broken below key moving average support zones, suggesting limited near-term downward momentum. In terms of indicators, the Relative Strength Index (RSI) is hovering in neutral territory without a clear directional bias, awaiting confirmation from economic or policy signals. The moving average system shows the index remains above the 50-day moving average, indicating effective support. A break below 98.00 could lead to a test of the 97.70 area in the short term; conversely, stabilizing and breaking above 98.50 could pave the way for a challenge of the recent high near 99.00.
Editor's View: The short-term pressure on the dollar index primarily originates from geopolitical and trade uncertainties, rather than weak US economic data. The market maintains a watchful stance, balancing robust macro conditions against external risks, resulting in a relative equilibrium between bullish and bearish forces. Attention should be paid to today's US S&P Global PMI flash reading and future Federal Reserve policy statements, as these will determine whether the dollar can break out of its current consolidation range and guide its near-to-medium-term trajectory.
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