US Dollar Forecast: DXY Holds Above 50‑Day MA as Shutdown, Fed Minutes Loom

Dollar Index Edges Higher on Broad Currency Weakness

The U.S. Dollar Index (DXY) gained 0.5% to 98.16 heading into mid-session Monday, supported by risk-off flows and fiscal instability in Japan and France that weakened the yen and euro.

At 15:51 GMT, DXY is trading 98.143, up 0.432 or +0.44%.

Yen Tumbles as Japan Reaffirms Abenomics Policy Path

USD/JPY surged over 2% intraday to 150.47—its highest level since August 1—before paring gains to 149.86, up 1.64%. The move followed Japan’s ruling party selecting Sanae Takaichi, a staunch proponent of Abenomics, as its leader. Her appointment sharply reduced expectations for a near-term Bank of Japan rate hike, reinforcing Japan’s commitment to ultra-loose policy and widening yield differentials with the U.S.

This policy divergence sparked heavy demand for the greenback. “The market expects a little more fiscal stimulus now,” said CIBC’s Sarah Ying, noting that Takaichi’s leadership increases the likelihood of back-end curve steepening in JGBs—further dampening yen appeal.

Euro Slips as French Government Collapses

Political instability in France pressured the euro, with EUR/USD dropping 0.35% to $1.1699 after earlier hitting $1.1649, its lowest since September 25. The abrupt resignation of Prime Minister Sebastien Lecornu and his cabinet just hours after being appointed marked the shortest-lived government in modern French history. While not seen as an immediate existential threat, the episode intensified scrutiny over France’s fiscal credibility, especially with budget talks looming. EUR/GBP also declined, touching its lowest since September 18.

Dollar Index Stalls Below Key Resistance

Despite its early spike to 98.499—driven by momentum through the 50-day moving average (98.037)—the DXY failed to sustain gains beyond resistance inside the retracement zone between 98.238 and 98.714. Sellers emerged before the September 25 high at 98.605, signaling caution. The index now trades just above its 50-day average; a break back below this level would mark a shift in tone, potentially exposing last week’s low and the pivot at 97.412.

Treasury Yields Rise as Government Shutdown Grinds On

Yields climbed across the curve as the U.S. government shutdown dragged into its second week. The 10-year yield rose 3.9 basis points to 4.158%, while the 30-year hit 4.755%. The ongoing data blackout—highlighted by the delay of the September jobs report—adds to investor uncertainty ahead of key Fed speeches this week and Wednesday’s FOMC minutes. Markets still price in a 25-basis point rate cut at the October 28-29 meeting, with 82% odds of another in December, per CME FedWatch.

Market Forecast: 50-Day Average in Focus as Dollar Faces Mixed Signals

Dollar bulls will be watching the 98.037 level closely. A sustained move above this mark could reignite upside toward 98.605 and 98.714, but failure to hold would reinforce resistance near the September high. With fiscal uncertainty in Japan and Europe supporting the dollar, and U.S. data visibility compromised, price action near the 50-day average will likely set the tone into the week’s close.

More Information in our Economic Calendar.