- Fed’s 25bp rate cut boosts market confidence, but signals no new easing cycle yet.
- US dollar strengthens on resilient US economy; PCE inflation and tariff risks remain key.
- Technical levels show DXY support at 97.5–97.6, resistance near 98.5–100 range.
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Global markets started the week with a fairly steady mood. In the US, all major stock indices hit new highs after the Federal Reserve by 25 basis points—the first cut since December. The move was widely expected. While the rate cut raised hopes of two more before the end of the year, Fed Chairman Jerome made it clear that this was not the start of a new easing cycle. It was a careful, measured step aimed at managing risk.
After the Fed’s announcement, the US dollar strengthened noticeably. Since September 17, the has climbed from 96.2 to 97.8. This rise happened because the Fed’s stance was less dovish than expected and the US economy remains relatively strong.
Powell acknowledged some weakness in the but avoided hinting at multiple rate cuts. He pointed out persistent inflation and risks from tariffs, sending the message that the Fed will cut rates if needed. The Fed’s stance affected different markets in different ways.
US stocks kept rising, the US dollar strengthened, and US bond yields continued to climb. Even though the Fed did not outline a clear path for future rate cuts, the market is pricing in the possibility of a total 50 basis point cut by the end of the year. The many speeches by Fed officials this week, especially Powell’s at the Greater Providence Chamber of Commerce, will be important in shaping these expectations.
PCE Data, Geopolitical Developments Pressure US Dollar
Looking at the data, the , the Fed’s key measure of inflation, is in focus. Headline inflation is expected to rise slightly from 2.6% to 2.7%, while core inflation should stay at 2.9%. If the numbers come in higher than expected, it could reduce expectations of Fed easing and push the US dollar higher.
Other reports, including and , , and the , could also influence the US dollar’s direction.
On global risk appetite, things look fairly balanced. Markets followed President Trump’s long phone call with Chinese President Xi closely, noting progress on trade, fentanyl, and TikTok. However, as the legal status of tariffs remains uncertain, any cancellation or new measures could trigger sharp moves in the US dollar. This makes the DXY more sensitive to short-term technical levels.
US Dollar’s Technical Outlook
For the US dollar index, the 97.50–97.60 range is an important support level. If it falls below this, selling pressure could increase and push the index down toward 96.55, which aligns with the lower channel boundary.
On the upside, 98.5 is the first key resistance, roughly at the middle of the channel. If the US dollar moves above this, the 99.7–100 range could be the next important barrier for strength. Technical indicators like the Stochastic RSI suggest the US dollar has upward momentum, and as long as it stays above short-term EMA levels, demand should remain.
Overall, the technical outlook points to a possible continued rise, but surprises in economic data or more dovish signals from Fed officials could slow or reverse the gains.
Right now, the US dollar index is looking for a stable level. The Fed’s rate cut helped keep market confidence up while also supporting the dollar. This mix could make the US dollar attractive as a safe-haven currency worldwide. However, how long this lasts will depend on the Fed’s next moves and how strong the US economy remains. In short, the US dollar’s key level will be set by how Fed comments and economic data line up in the coming weeks.
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