US Dollar firms as markets digest Fed outlook and economic data

• The US Dollar Index climbs on Thursday, holding within 103.00-104.00.
• Traders expect the Fed to stay on track with 2025 rate cuts.
• Geopolitical uncertainty drives safe-haven demand for US assets.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of currencies, is trading stronger against major peers on Thursday, avoiding further downside pressure. Traders remain focused on the Federal Reserve's (Fed) latest policy stance, which reinforced expectations for two rate cuts in 2025. Despite stronger economic data, the index remains confined within the 103.00-104.00 range.

Daily digest market movers: US Dollar rises as Fed keeps rates steady and geopolitical risks intensify

• The Federal Reserve left interest rates unchanged, reaffirming projections for two rate cuts in 2025.
• Fed Chair Jerome Powell downplayed the inflationary impact of tariffs, calling it a temporary effect, but acknowledged the difficulty in assessing its broader implications.
• Recession risks have edged higher, though Powell indicated they remain relatively low for now.
• US jobless claims came in lower than expected, pushing the US Dollar higher above 104.00.
• Geopolitical uncertainty remains elevated, with no clear path to a ceasefire in Ukraine and tensions rising in Turkey and Gaza.
• US bond yields are falling as investors seek safety in Treasuries amid economic and geopolitical uncertainty.
• Expectations of lower yields once the Fed begins cutting rates are reinforcing demand for US bonds.
• European markets show mixed sentiment, while US stocks trade cautiously following the Fed's policy decision.

Technical analysis: US Dollar Index stabilizes but remains below key resistance

The US Dollar Index continues to show signs of recovery, but upside momentum remains limited. The Relative Strength Index (RSI) is gradually moving higher, while the Moving Average Convergence Divergence (MACD) histogram remains in negative territory, though bearish pressure is easing.

Immediate resistance stands at 104.20, with further hurdles at 104.80 and 105.20. On the downside, 103.40 serves as the initial support, with a break lower exposing 102.90. Additionally, a bearish crossover between the 20-day and 100-day simple moving averages (SMAs) around 105.00 suggests a potential downside risk, which may act as a sell signal if sustained.