US Dollar Forecast: Greenback Pressured by U.S.-China Tensions and Data Blackout

Support Levels Come Into Focus Following Recent Pullback

The U.S. Dollar Index (DXY) edged lower on Thursday, slipping below the key 98.714 level which now acts as resistance. The next significant support sits at 98.238, followed by the 50-day moving average at 98.033, a critical threshold that may trigger increased volatility if breached.

The index has steadily retreated since reaching a multi-month high of 99.563 on October 9, with the current sell-off maintaining an orderly pace. However, the approach toward long-term trend indicators signals potential for sharper moves ahead.

At 15:45 GMT, DXY is trading 98.484, down 0.181 or -0.18%.

Weaker Regional Data and Fed Silence Stir Uncertainty

Thursday’s pullback in the DXY coincided with a weaker-than-expected Philadelphia Federal Reserve survey, which showed regional business conditions plunging 36 points to -12.8, missing the 9.5 consensus estimate.

While Treasury yields were little changed following the release, the broader market mood was cautious. The ongoing U.S. government shutdown has triggered a blackout on official economic data, delaying key indicators such as the consumer price index and limiting visibility into labor market conditions.

Fed Officials Set to Speak, Market Eyes Rate Path Clues

With FOMC members divided over the timing and scale of future rate cuts, traders are closely watching Thursday’s scheduled remarks from Fed Governors Waller, Barr, Bowman, and Miran.

Fed minutes from September revealed a split on how soon easing might begin, while futures markets are currently pricing in a 25 basis point cut at the October 28–29 meeting, which would lower the fed funds rate to a 3.75%–4.00% range.

Global Tensions, Rare Earth Moves Pressuring Dollar

The greenback was on track for a third straight loss against the euro, which traded at a one-week high of $1.1656. U.S.-China tensions escalated as Beijing expanded export controls on rare earths, drawing sharp criticism from U.S. officials.

Investors are weighing whether the move is a negotiation tactic or the beginning of more disruptive trade policies. Meanwhile, the yen firmed slightly but remains pressured by domestic political uncertainty and ongoing intervention risk.

Market Forecast: Bearish DXY Outlook as Key Support Levels Tested

With declining regional data, growing policy uncertainty, and reduced economic visibility from the federal data blackout, downside risks for the U.S. Dollar Index are increasing.

Unless Fed officials deliver hawkish commentary in upcoming speeches, sentiment is likely to remain bearish in the short term. Should the index fall through the 50-day moving average at 98.033, a deeper correction toward lower support levels may unfold.

More Information in our Economic Calendar.