US Dollar Forecast: Friday Bounce Fails to Offset Weekly Loss from Trade and Fed Concerns

Dollar Index Edges Higher but Faces Weekly Decline on Trade, Bank, and Data Concerns

The U.S. Dollar Index (DXY) closed at 98.540 on Friday, gaining 0.20% on the day after rebounding from a session low of 98.036. The move reaffirmed the influence of the 50-day moving average at 98.030, which held as firm support.

However, despite the late-day recovery, the DXY booked a 0.32% weekly loss, pressured by renewed concerns over U.S. regional banks, trade tensions with China, and the prolonged federal government shutdown.

Short-term resistance remains intact at 98.714 and 98.797. A breakout above 98.797 would shift attention to the October 9 high at 99.563. On the downside, failure to hold the 50-day average opens the door to deeper losses toward 97.462–97.412.

Trade Frictions and Bank Risks Weigh on Sentiment

The dollar struggled throughout the week as investors sought shelter in the Swiss franc and Japanese yen following President Trump’s renewed threats of a 100% tariff on Chinese goods. Although the president acknowledged such tariffs were unsustainable and signaled plans to meet with President Xi Jinping in South Korea, the standoff over China’s control of rare earth exports continues to erode market confidence.

Simultaneously, stress in the U.S. regional banking sector added pressure. Zions Bancorporation reported a $50 million loss on commercial loans, while Western Alliance flagged potential fraud-related losses. Although earnings from Fifth Third Bancorp showed resilience, growing concerns about broader credit risks drove safe-haven demand outside the dollar.

Limited Data and Fed Policy Outlook Cloud Dollar Prospects

The ongoing federal shutdown is exacerbating uncertainty by delaying the release of key economic data, leaving investors without essential guidance on labor and inflation trends. This data vacuum complicates the Federal Reserve’s policy path. Fed Governor Christopher Waller backed another rate cut in the upcoming FOMC meeting, citing uneven labor market indicators—a dovish signal that has likely capped upside momentum for the greenback.

Meanwhile, geopolitical developments, including an unexpected round of U.S.-Russia-Ukraine diplomacy, are adding to global event risk and investor caution.

Market Forecast: Bearish Bias Holds Below Key Resistance

The U.S. Dollar Index remains fundamentally pressured despite Friday’s bounce. The unresolved trade tensions with China, rising credit risk in the regional banking sector, and the suspension of economic data releases due to the government shutdown are weighing on investor confidence.

While the index found support at 98.036 — just above the 50-day moving average at 98.030 — the failure to build sustained momentum suggests the MA is acting as a short-term pivot rather than a launchpad.

Dovish commentary from Fed Governor Waller, who signaled support for another rate cut, adds further headwinds for the dollar. Meanwhile, demand for safe-haven alternatives such as the Swiss franc and gold continues to divert capital away from the greenback.

Unless the DXY clears resistance at 98.797 with conviction, the prevailing bias remains bearish. A break below the 50-day MA would expose downside targets at 97.462 to 97.412.

More Information in our Economic Calendar.