US Dollar Index Price Forecast: 100-day SMA remains a key barrier

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.14%	-0.04%	-0.41%	-0.09%	-0.45%	-0.49%	-0.31%
EUR	0.14%		0.07%	-0.19%	0.04%	-0.31%	-0.30%	-0.17%
GBP	0.04%	-0.07%		-0.38%	-0.05%	-0.39%	-0.39%	-0.25%
JPY	0.41%	0.19%	0.38%		0.25%	-0.07%	-0.23%	0.13%
CAD	0.09%	-0.04%	0.05%	-0.25%		-0.27%	-0.34%	-0.22%
AUD	0.45%	0.31%	0.39%	0.07%	0.27%		0.00%	0.14%
NZD	0.49%	0.30%	0.39%	0.23%	0.34%	-0.01%		0.14%
CHF	0.31%	0.17%	0.25%	-0.13%	0.22%	-0.14%	-0.14%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

According to the CME FedWatch tool, traders see a 10% chance that the Fed will reduce interest rates by 50 bps to 3.75%-4.00%, while the rest points to a regular 25 bps interest rate reductions. Before the US NFP data release, traders had fully priced in a quarter-to-a-point reduction in borrowing rates in September.

The US NFP report showed signs of cracks in job market as the employers added mere 22K fresh workers, the lowest reading seen since January 2021. The Unemployment Rate accelerated to 4.3%, as expected, from the prior reading of 4.2%.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for August, which will be released on Thursday. Investors will pay close attention to the US inflation data to get cues about whether US President Donald Trump’s tariffs are prompting price pressures.

The DXY struggles to hold the Friday’s low of 97.45 on Monday. The outlook of the asset is bearish as the 100-day Simple Moving Average (SMA) near 98.67 remains a key barrier for the DXY.

The 14-day Relative Strength Index (RSI) wobbles inside the 40.00-60.00 range, suggesting indecisiveness among market participants.

Going forward, the USD Index could slide to near its three-year low of 96.38, if it breaks below the September 5 low of 97.45. More downside by the asset towards the October 2021’s low of 93.28 would become inevitable, if it breaks below 97.45.

In an alternate scenario, a recovery move by the USD Index above the September 3 high of 98.45 would allow it to extend upside towards the July 23 high of 99.42, followed by the psychological level of 100.00.

US Dollar Index daily chart

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.