**US Dollar Weekly Forecast: Prospects of a Deep, Sustained Sell-Off Look Uncertain**
*Based on analysis by Matías Salord, FXStreet, with supplementary insights from other reputable sources.*
**Introduction**
The US dollar has experienced volatility in recent weeks, with traders and investors closely monitoring key economic data, Federal Reserve policy signals, and broader global financial conditions. While many have questioned whether a deep and sustained sell-off in the greenback is on the way, the current landscape suggests a more nuanced and less predictable path ahead.
This article analyzes the underlying dynamics behind the US dollar’s movements, assesses the outlook for the coming week and beyond, and integrates additional insights to provide a holistic view for currency market participants.
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**Summary of Recent Dollar Performance**
– The US dollar index (DXY) has shown resilience despite intermittent drops, oscillating within a range rather than embarking on a clear downward trend.
– Last week, local and global data had a mixed impact on the dollar. US economic indicators presented a somewhat cooling but still positive picture.
– Market positioning indicates a reluctance to decisively bet against the dollar, hinting at ongoing uncertainty about the timing and extent of any future USD weakness.
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**Key Drivers Impacting the US Dollar**
1. **US Economic Data**
– Recent releases on inflation (CPI, PPI) and employment (nonfarm payrolls, unemployment rate) point to a gradual easing of cost pressures and a labor market still on solid ground.
– Consumer spending remains relatively robust, though some signs of moderation are emerging, particularly in sectors sensitive to interest rates.
– Manufacturing and services PMIs highlight ongoing divergence, with services holding up better than manufacturing.
2. **Federal Reserve Policy Outlook**
– The Federal Reserve maintained current rates in its latest meeting, with Chair Jerome Powell reiterating a data-dependent approach.
– Fed officials are cautious about signaling the start of rate cuts due to lingering inflationary pressures.
– Market expectations for rate reductions have been pushed back, with the first anticipated late in the year if at all.
3. **Global Central Bank Dynamics**
– The European Central Bank (ECB) and Bank of England (BoE) have adopted more dovish tones as economic activity in Europe slows.
– Divergences between the Fed and other major central banks continue to play a critical role in currency markets, supporting the US dollar on rate differentials.
4. **Geopolitical Risks and Safe-Haven Demand**
– Ongoing conflict in Ukraine and heightened Middle East tensions have periodically triggered flight-to-safety moves, supporting the dollar.
– The US dollar’s status as the world’s primary reserve currency remains unchallenged amid global uncertainty.
5. **Technical Factors**
– The DXY has strong support in the 103-104 range, and significant resistance at 106. A break above or below these ranges could trigger more directional moves.
– Momentum indicators suggest the market is
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