US Dollar Forecast: DXY Hits Resistance as Risk-On Sentiment Returns

Dollar Holds Near Two-Week Highs as Safe-Haven Bid Returns

The U.S. Dollar Index pulled back Friday after hitting 97.973, just shy of Fibonacci resistance at 97.987. It’s drifting toward the 50% level at 97.522 — the line in the sand today. Break below that and the dollar could retrace into the 96.762 to 96.476 zone.

At 19:29 GMT, DXY is trading 97.065, down 0.296 or -0.30%.

Push above 97.987 and the 50-day moving average at 98.355 comes into play, followed by the 200-day at 98.585. Right now this looks like short-covering, but reclaiming the 200-day would turn the dollar bullish. Watch for strength over 97.987 and weakness under 97.522.

Safe-Haven Flows Drive the Bid

The dollar’s up 0.7% for the week, near its highest since late January. Stocks, crypto, and metals got crushed this week as investors unwound crowded positions. AI spending concerns triggered the selloff, and the usual safe havens — gold, bitcoin, the yen, the franc — aren’t getting bids. The dollar’s the best option left.

“For FX traders, areas of safe haven seem to be a little bit in short supply,” said Fiona Cincotta at City Index. “So the dollar is sort of the best bet.”

Trump’s nomination of Kevin Warsh as Fed Chair added fuel. Warsh isn’t seen as a rate-cut advocate, which keeps the dollar supported.

Three Shocks Hitting at Once

According to Saxo’s Charu Chanana, the market’s pricing Big Tech capex scrutiny, AI disruption risk in software, and a liquidity flush from silver-driven margin calls. This looks like a positioning flush where crowded exposures are being de-risked across assets.

Next week’s payrolls report is the next catalyst. Labor data this week suggests the economy’s losing momentum. Traders are pricing higher odds of rate cuts in the first half of the year. Major downward revisions to payrolls would add pressure on the Fed to resume cuts.

Yen Wobbles Ahead of Japan’s Election

The yen steadied at 157 per dollar but is headed for its worst weekly performance since October. Sunday’s election has investors on edge. A big win for Prime Minister Sanae Takaichi could worsen fiscal concerns and weigh on Japanese bonds and the yen.

The euro gained 0.1% to $1.179 after the ECB held rates. Sterling rose 0.46% to $1.3588 after the Bank of England also held.

Bitcoin bounced back above $65,000 after hitting $60,017 — its lowest since October 2024. It’s still down 13% for the week, the steepest drop since November 2022.

Technical Setup Favors the Bulls — If Buyers Show Up

The dollar’s rally has stalled just below key resistance at 97.987, but the fundamental backdrop supports a push higher. Safe-haven demand is real, and with Warsh’s Fed nomination dampening rate-cut expectations, a break above 97.987 could fuel momentum into the 50-day at 98.355 and the 200-day at 98.585. That would confirm a bullish shift.

But if payrolls disappoint next week and soften the Fed’s stance, the 50% retracement at 97.522 becomes critical. A break there opens the door to deeper selling into the 96.762 to 96.476 zone — especially if safe-haven flows reverse on dovish Fed signals.

Right now, the technicals and fundamentals are aligned for dollar strength. The question is whether risk-off flows hold, or if weak data shifts the narrative back toward rate cuts.

More Information in our Economic Calendar.