DXY testing trend resistance after Powell comments

The dollar clawed back some ground after Jerome Powell’s latest remarks, but I’m not convinced this bounce has legs. With the Fed now leaning dovish, the bias still favours more downside unless we see consistent cracks in the jobs market to justify the two cuts priced in for 2025.

Powell reiterated on Tuesday that inflation risks are skewed higher while employment risks are tilted lower, adding: “Two-sided risks mean there is no risk-free path.” Translation: he’s keeping his options open ahead of the October meeting. Fed chatter will remain front and centre, with Mary Daly up later today, jobless claims tomorrow, and the key PCE inflation reading on Friday.

The dollar index is now testing resistance around 97.60–97.80 area — a confluence of the 21-day EMA, broken support, and a trendline. Until this area breaks, it’s hard to get bullish. The broader picture of lower highs and lows still screams corrective.

By Fawad Razaqzada, market analyst with FOREX.com