Central Banks in Europe Make Policy Decisions
It’s a packed session for central banks in Europe, with the ECB and Bank of England both delivering policy decisions, alongside rate calls from the Riksbank and Norges Bank. On top of that, the US calendar brings and weekly jobless claims just ahead of the ECB press conference — timing that naturally puts the US dollar firmly in the spotlight.
Risk sentiment was slightly brighter this morning. US index futures were higher, and European equities were following suit, a day after tech stocks dragged Wall Street lower. The mood shift was partially due to an upbeat outlook from Micron Technologies, the largest US memory-chip maker, which, for now, has helped to pause a tech-led selloff.
Focus Turns to CPI
Attention for US traders now turns to today’s US inflation print, with traders looking for clues on the Fed’s next move. That said, this release comes with a health warning. Government shutdown disruptions mean the data may be less reliable than usual. The US Consumer Price Index (CPI) for November is expected at 3.1% year-on-year, up from 3.0% in September. If expectations are correct, then this will feed into the ongoing “sticky inflation” narrative.
Inflation Data Unlikely to Be Game-Changer
Even so, it’s unlikely to force a meaningful rethink of the Fed’s stance. The report only provides a partial picture, with missing monthly changes across several categories after data collection issues in October and delays again in November. So far this week, US events have barely shifted the needle for FX markets. That includes yesterday’s comments from Fed Governor Chris Waller, who struck a broadly dovish tone, pointing to labour market softness and suggesting rates are still 50–100bp above neutral.
US Dollar Index Technical Analysis and Levels to Watch
Ahead of the abovementioned macro events, the US dollar index was up for the second day, though it has been trending lower over the past few weeks, posting a sequence of lower highs and lower lows after failing to break above key resistance around the 100.00 to 100.40 resistance area in November. These former support levels have now become important short-term resistance levels to watch. As long as they hold, the technical path of least resistance on the US dollar will remain to the downside, despite its slight recovery so far this week.
Key Support and Resistance Levels
On the downside, initial support comes in around the 98.00 level. This area has held in the past and also aligns closely with the 61.8% Fibonacci retracement at 97.81. Below this zone, there isn’t much in the way of clear support until around 97.00. Beyond that, the next key area to watch would be the range lows from July and September, between roughly 96.20 and 96.40. Overall, the US dollar index remains within a broader consolidation range, but near-term momentum continues to point lower.
Conclusion
For that reason, a bearish bias on the US dollar index will be maintained unless and until the charts tell us otherwise, and/or we see a sudden shift in the macro environment in favour of the US dollar. With several central banks making policy decisions, the focus will be on how these decisions impact the US dollar and the overall market sentiment. Unless we see a surprise spike in weekly jobless claims, it’s hard to see today’s US data moving the dollar in a meaningful way. Perhaps rate decisions and rate signals about 2026 from the likes of the ECB and BoE will be far more important for the trajectory of the US dollar than the US events today.
