The US Dollar (USD) is under pressure this Friday as traders reduce their positions in the Greenback during the US trading session. With the weekend approaching, profit-taking is taking place after the Dollar saw inflows driven by a weaker Euro and a weakening Chinese Yuan. The release of the Import and Export Price Index for November failed to generate much movement in the markets, with both indices remaining relatively flat.
Earlier in the week, the USD received a boost following stronger-than-expected Producer Price Index (PPI) data for November. While this data did not shift the broader outlook that the US Federal Reserve (Fed) will likely cut interest rates by 25 basis points next week, it did temper some market expectations of further rate cuts in 2025.
The Greenback was also supported by expectations of further stimulus measures from other global central banks. European Central Bank (ECB) President Christine Lagarde hinted that a 50-basis point rate cut was under consideration. However, the ECB’s Governing Council ultimately decided that a 25-basis point rate cut was more appropriate. Meanwhile, in China, policymakers, led by President Xi Jinping, have signaled stronger economic support in 2025, with a focus on a “moderately loose” monetary policy and a “more proactive” fiscal approach. This has led to a surge in bond prices and a drop in China’s 10-year bond yields to a record low of 1.77%, according to Bloomberg.
Despite these developments, the US economy continues to show signs of resilience, as evidenced by the flat Import and Export Price Index data for November. The Export Index remained unchanged at 0%, following a 1% increase in October, while the Import Index stayed at 0.1%.
Looking ahead, the US Dollar Index (DXY) remains primed for another rally. The widening rate differential between the US and Europe, combined with potential easing measures in China, is providing upward momentum for the Greenback. The DXY broke through the 107.00 mark on Friday, with the next level of resistance expected at 107.35, a level last seen in October. Should profit-taking occur, the first support level to watch is 106.52, followed by 105.53. If the DXY falls further, the 200-day Simple Moving Average at 104.17 could provide crucial support.
Also Read: US Dollar Index Holds Steady at 106 as Markets Eye CPI Data Amid December Rate Cut Speculation
As markets continue to adjust to global developments, traders will be closely watching the Fed’s next move and the evolving economic policies in Europe and China.
