Fundamental Forces Driving the Dollar’s Rebound
Treasury yields firmed slightly, with the 10-year at 4.176% and the 2-year at 3.604%. Rising yields tend to offer support to the dollar because they raise the relative return on U.S. assets. Short-end yields also ticked higher, suggesting investors are calibrating expectations for employment data and the Fed’s near-term policy stance.
Consensus estimates place October JOLTS openings at 7.15 million. A stronger reading would typically reinforce the dollar by reducing the urgency for near-term rate cuts. Conversely, weaker labor demand could feed expectations for faster easing and pressure the index.
Markets widely expect the Federal Reserve to cut rates at the upcoming meeting. Eastspring Investments argued that a December cut would support credit markets, while a steadier Fed stance—signaling comfort with holding policy for several meetings—would help maintain dollar stability. Analysts also warned that a more dovish message, such as leaving the door open for a January cut, could weaken the dollar and steepen the Treasury curve.
FX Markets Hold Steady as Traders Await the Fed’s Next Move
Cross-currency flows were restrained on Tuesday as traders refrained from heavy positioning before the Fed announcement. Commerzbank noted that participants are avoiding large FX adjustments, which leaves the DXY driven primarily by U.S. rates and expectations rather than broad foreign-currency pressure.
Steady Treasury Yields Keep Dollar Support Intact
Risk appetite remained controlled, with U.S. yields holding in a tight range. Incremental gains in benchmark maturities helped the dollar recover intraday, reinforcing the index’s push toward longer-term averages. If yields remain steady while the Fed confirms a measured pace of easing, the DXY is likely to stay supported.
Technical Picture Points to a Potential Breakout for the Dollar
The DXY now trades between the 50-day MA at 99.197 and the 200-day MA at 99.439, with the narrowing spread signaling that a larger move may be developing. Traders identify 99.580 as the immediate pivot; failure to clear this level would stall the rally. A break above the 200-day MA would signal constructive momentum toward 100.000–100.395. If the index falls back under the 50-day MA, a test of the swing bottom at 98.765 becomes likely, opening risk toward 98.307–97.814.
