US Dollar Forecast: Eyes on 50-Day Moving Average Test as Fed, BOJ Take Stage

Dollar Index Rebounds but Weekly Outlook Remains Cautious as Fed and BOJ Meetings Loom

The U.S. Dollar Index (DXY) edged higher for a second straight session on Friday, bouncing off support at 97.109, a level now seen as a potential secondary higher bottom.

The rebound, while technical in nature, contrasts with the broader narrative of dollar softness this week, as traders shift their focus to the upcoming Federal Reserve and Bank of Japan policy meetings.

At 14:36 GMT, DXY is trading 97.829, up 0.312 or +0.32%.

Is the Dollar Rally a Technical Blip or the Start of a Reversal?

Despite trading within a longer-term downtrend, the DXY’s move above the minor pivot at 97.664 has signaled a short-term momentum shift.

Technical buyers are eyeing the 50-day moving average at 98.400 as the next resistance. Initial selling pressure is expected at that level, but a decisive break could extend gains toward the July 17 high of 98.95.

Still, traders remain cautious, as a reversal below 97.109 would invalidate the bullish setup and target support at 96.377.

Fed Policy Uncertainty Weighs on Sentiment

The DXY is on track for a 0.75% weekly loss—its worst in a month—despite Friday’s modest 0.32% rebound. Markets are adjusting positions ahead of the Federal Reserve’s policy decision next week, where rates are expected to remain unchanged.

However, market-moving volatility may arise from Fed Chair Jerome Powell’s press conference, especially given renewed political pressure.

President Trump’s remarks on Thursday reinforced his push for rate cuts, though he stopped short of threatening Powell’s removal, which provided temporary relief to the dollar.

BOJ Faces Political Fallout as Yen Holds Firm

In Japan, a recently signed trade deal with the U.S. theoretically provides more leeway for future Bank of Japan rate actions.

Yet, domestic political uncertainty following a major electoral setback for Prime Minister Shigeru Ishiba’s coalition has introduced fresh complications for BOJ policy planning.

The yen’s resilience continues to weigh on the dollar, contributing to broader softness in the DXY.

Market Forecast: Dollar Faces Near-Term Resistance, Fed Rhetoric Key

While the DXY is staging a short-term technical recovery, the broader picture remains pressured by political risks and cautious central bank expectations.

The Fed’s upcoming commentary will be critical. If Powell signals prolonged rate stability or hints at cuts under political pressure, the dollar could struggle to hold recent gains.

A sustained break above 98.400 would challenge that view, but for now, rallies are expected to face resistance as traders await clarity from central bank leadership.

More Information in our Economic Calendar.