US Dollar Forecast: DXY Rises Toward 50-Day MA as Treasury Yields Surge

U.S. Dollar Index Jumps as Treasury Yields Surge Past Key Levels

The U.S. Dollar Index (DXY) advanced sharply on Thursday, building on Wednesday’s modest rebound, as rising Treasury yields drew renewed demand for the greenback. The DXY’s upward momentum has brought it within striking distance of the 50-day moving average at 98.088 and the key pivot at 98.238—levels closely watched by technical traders.

The move reflects a broader repricing across U.S. fixed income markets after economic data eased concerns about labor market softness, despite the Federal Reserve’s rate cut just a day earlier.

At 14:56 GMT, DXY is trading 97.429, up 0.414 or +0.43%.

Jobless Claims Reset Market Sentiment on Labor Market Health

Traders re-evaluated the risk outlook following a sharper-than-expected drop in weekly jobless claims. Initial unemployment filings fell to 231,000 for the week ending September 13, well below the consensus estimate of 240,000 and down 33,000 from the prior week’s revised reading.

Last week’s spike had stoked fears of emerging labor market strain, but Thursday’s data confirmed that the increase was an outlier—largely driven by temporary distortions in Texas. This reset in labor market sentiment helped reinforce the idea that the U.S. economy remains on stable footing, curbing expectations of an aggressive Fed easing cycle.

Treasury Yields Climb Despite Fed Rate Cut

In response to the jobless claims report, yields on U.S. government bonds surged across the curve. The 10-year Treasury yield climbed to 4.126%, gaining over 5 basis points on the session. The 2-year note followed, rising to 3.578%, while the long bond (30-year) moved up to 4.738%.

These gains came just one day after the Fed cut its benchmark overnight rate by 25 basis points to 4.00%-4.25%, a move widely expected by markets. However, the post-Fed reaction revealed that markets are not pricing in a prolonged rate-cut cycle. Fed Chair Jerome Powell called the decision a “risk management” step, reinforcing expectations for a gradual policy path ahead.

Fed Signals Gradualism, but Traders Are Watching Inflation Closely

The Fed’s tone—measured, not dovish—has tempered expectations for deeper easing in the near term. Officials signaled two more cuts by year-end, with limited action beyond that. This cautious forward guidance is keeping real yields elevated, a direct support for the dollar’s appeal.

Market commentary echoed this stance. “This isn’t a pivot, it’s a measured step,” noted Gina Bolvin of Bolvin Wealth Management Group, highlighting the balance the Fed is trying to strike between inflation control and labor market support.

Market Forecast: Dollar Rally Has Legs if Yields Hold

With the DXY pressing toward key resistance levels, the outlook remains constructive as long as Treasury yields continue to climb and labor data avoids further downside surprises. A sustained break above 98.238 could open the door to a stronger dollar leg, especially if the Fed maintains its cautious tone and inflation prints remain sticky. Short-term pullbacks remain possible, but traders will be watching yield levels and incoming data for confirmation of trend continuation.

More Information in our Economic Calendar.