US Dollar Forecast: Bearish Momentum Builds Below 50‑Day MA Amid Political Uncertainty

Dollar Index Struggles Below 98.05; Key Levels Define Bearish Risk

The U.S. Dollar Index (DXY) slipped 0.1% to 97.74 at Friday’s mid-session, pointing to a weekly loss—the worst since July. Price action shows the index struggling to reclaim the 50-day moving average at 98.046, a key technical level traders have been defending all week.

Momentum remains soft below this level, keeping downside pressure in focus. If DXY fails to break above nearby resistance at 98.238 and 98.605, the 61.8% retracement level at 98.714 remains a critical ceiling.

On the downside, a break below 97.412 could trigger a sharper sell-off toward the 96.377–96.218 support zone.

Government Shutdown Fuels Uncertainty, Data Blackout

Traders face rising uncertainty as the U.S. government shutdown enters its third day, creating a blackout in key economic releases. With September’s nonfarm payrolls now unavailable, traders lack key labor market inputs ahead of the Federal Reserve’s October policy meeting.

“We’re not getting any of the data releases we would usually get,” said Pepperstone strategist Michael Brown. This lack of clarity has kept price action subdued and limited the market’s ability to reassess Fed policy expectations.

Soft Labor and Services Data Raise Rate Cut Bets

Despite a stable jobless rate estimate of 4.3% from the Chicago Fed, recent labor data continues to point toward softness. The ADP report showed a 32,000 drop in private payrolls, supporting market bets for further Fed easing.

Traders now price in a near-certainty of a 25-basis-point cut in October and an 89% chance of another cut in December, per the CME FedWatch Tool. Dallas Fed President Lorie Logan pushed back modestly, stating the job market is cooling gradually, and additional cuts should not be rushed.

Treasury Yields Climb Even as ISM Services Disappoints

Despite weaker-than-expected ISM Services PMI data (50.0 vs. 52.0 expected), Treasury yields edged higher. The 10-year rose to 4.117%, and the 2-year hit 3.57%, reflecting cautious optimism or positioning adjustments rather than a full reprice of Fed risk. Continued political impasse could pressure GDP growth, with Treasury Secretary Scott Bessent warning of broader economic consequences if the shutdown persists.

Market Forecast: DXY Outlook Tilted Bearish Below 98.05

As long as the U.S. Dollar Index remains below its 50-day moving average, downside pressure is likely to persist. Political uncertainty, lack of fresh economic data, and rising expectations for rate cuts are undermining support.

A break below 97.412 could accelerate bearish momentum, while any bounce is expected to be capped below the 98.714 Fibonacci resistance unless broader macro clarity returns. Traders should monitor rate commentary and Fed officials closely in the coming sessions.

More Information in our Economic Calendar.