Outlook for the US dollar: Under political uncertainty, the US dollar forms bearish momentum below its 50 day moving average

On Friday afternoon (October 3rd), the US dollar index fell 0.1% to 97.74, and is expected to record a weekly decline, which will be the largest weekly decline since July. From the price trend, the index has been struggling to recover from the 50 day moving average (98.046), which has been a key defensive focus for traders this week.

Below this price point, the momentum of the US dollar index continues to weaken, and downward pressure has become the focus of market attention. If the US dollar index fails to break through the nearby resistance levels of 98.238 and 98.605, the 61.8% retracement level (98.714) will become a key suppression level.

From the perspective of downward space, if the US dollar index falls below 97.412, it may trigger more intense selling and further explore the support range of 96.377-96.218.

Government shutdown exacerbates uncertainty, key data release interrupted

The US government shutdown has entered its third day, and the release of key economic data has been interrupted, causing increasing uncertainty for traders. The September non farm payroll data is no longer available, which has caused traders to lose a key basis for assessing the labor market before the Federal Reserve's October policy meeting.

We are unable to obtain any data that we usually have access toStoneMichael Brown, a strategist at Pepperstone, said. This situation of unclear information has led to a flattening of market price fluctuations and limited the market's ability to re evaluate the Federal Reserve's policy expectations.

Weak labor and service industry data push up expectations of interest rate cuts

Although the Chicago Federal Reserve estimates the unemployment rate to remain stable at 4.3%, labor data has remained weak in recent times. The ADP report shows that the number of private sector jobs in the United States decreased by 32000, which supports market expectations for further easing by the Federal Reserve.

According to the CME Federal Reserve Observation Tool, the market currently believes that the probability of the Fed cutting interest rates by 25 basis points in October is close to 100%, and the probability of another rate cut in December is also 89%. Dallas Fed President Lori Logan gently refuted this expectation, stating that the labor market is gradually cooling down and there should be no rush to further cut interest rates.

ISM service industry data is lower than expected, and treasury bond bond yield is still rising

Although the ISM service industry PMI data (50.0) was lower than expected (52.0), the yield of US treasury bond bonds still rose slightly. The yield of the 10-year treasury bond rose to 4.117%, and the yield of the two-year treasury bond hit 3.57%. This trend reflects the cautious optimism or position adjustment of the market, rather than the overall repricing of the policy risk of the Federal Reserve.

The current political stalemate may put pressure on GDP growth, with US Treasury Secretary Scott Besant warning that if the government shutdown continues, it could lead to broader economic consequences.

Market outlook: The US dollar index tends to be bearish below 98.05

(Daily chart of US dollar index source:Shield BoNetwork)

As long as the US dollar index remains below the 50 day moving average, downward pressure may continue. Political uncertainty, lack of fresh economic data, and rising expectations of interest rate cuts are all weakening the support of the US dollar.

If it falls below 97.412, the bearish momentum of the US dollar may accelerate; Unless the overall uncertainty at the macro level subsides, any rebound may encounter resistance below the Fibonacci resistance level of 98.714. In the coming trading sessions, traders should closely monitor interest rate related comments and statements from Federal Reserve officials.

At 00:28 Beijing time, the US dollar index closed at 97.7120/260, a decrease of 0.17%.