U.S. Dollar Index forecast: DXY retreats from 5-day high as traders assess sentiment data
The US dollar has rebounded from a dip
The U.S. dollar has shown resilience this week, recovering from a midweek decline as stronger labor market data and improved Treasury yields provided support. After dipping to a five-month low of 102.90, the U.S. Dollar Index (DXY) rebounded, finding support at this level and climbing higher.
On Thursday, better-than-expected U.S. Initial Jobless Claims, which came in at 220,000 versus the forecasted 225,000, reinforced the dollar's strength. Continuing claims also dropped to 1.87 million, beating expectations of 1.90 million. Alongside this, the weaker-than-anticipated Producer Price Index (PPI) data suggested a moderation in inflation pressures, fueling speculation on the Federal Reserve's monetary stance. These factors drove the DXY to a five-day-high, reaching 103.70 during the European session before facing resistance.
DXY stuck between 103.70 and 102.90 as RSI signals bearish outlook
DXY price dynamics (Feb 2025 - March 2025). Source: TradingView.
However, as trading progressed into Friday’s North American session, the dollar lost some ground, retreating toward 103.20. Short-term technical indicators, particularly the hourly RSI, entered bearish territory, suggesting the potential for further downside. If the index fails to hold above 102.90, it could trigger additional declines in the short term.
Traders now shift their focus to the preliminary Michigan Consumer Sentiment Index for March, expected to provide further insights into economic conditions and potential policy shifts. Any surprises in consumer sentiment data could influence the dollar's next move, especially as market participants assess the broader economic outlook.
In the near term, the U.S. dollar remains at a critical juncture. A sustained move above 103.70 could reinforce bullish momentum, while a break below 102.90 may accelerate selling pressure. The coming sessions will be key in determining whether the dollar can maintain its recovery or face renewed weakness.
EUR/USD surged 4.6% in early March but faced resistance at $1.0885, stalling its advance. The pair then retraced 0.7%, finding support at 1.08 near the 50 EMA.
