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The yield on US Treasury has climbed, why is the US dollar still "waiting in place"?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: U.S. Treasury yields have climbed, why is the US dollar still "waiting in place"?" Hope it will be helpful to you! The original content is as follows:
On Wednesday (September 10), the foreign exchange market is in a highly sensitive period, the US dollar index fluctuates near key technology positions, and the market focus is on the upcoming August Producer Price Index (PPI) and the Consumer Price Index (CPI) data for the next day. The recent performance of the US dollar has been supported by rising U.S. Treasury yields, with the 10-year U.S. Treasury yields slightly rising to 4.09% during the day, and the 30-year yields climbing to 4.745%.
At the same time, the market's expectations for the Fed's interest rate cut in September's interest rate meeting continue to ferment. Coupled with the risk aversion caused by tariff remarks, the US dollar trend is in a www.xmhouses.complex situation. The weakness in employment data further aggravates market speculation about the Fed's policy, while technical indicators show that the U.S. dollar index faces directional choices near key moving averages. The following will conduct in-depth analysis of the current trend logic and future trend of the US dollar from the two dimensions of fundamentals and technical aspects.
Fundamental analysis: Inflation, employment and policy expectations are intertwined
The short-term performance of the US dollar is closely related to the fluctuations in US Treasury yields. On September 10, the market observed that the US Treasury yield curve showed a bear market flattening characteristics, with the 10-year and 30-year U.S. Treasury yields rose by 2 and 3 basis points respectively, reflecting investors' cautious attitude towards the upcoming PPI data and the 10-year U.S. Treasury auction (size 39 billion US dollars). A well-known organization analyzed that the market expects that the year-on-year PPI growth rate in August will remain at 3.3%, and the core PPI (excluding food and energy) is expected to fall slightly from 3.7% to 3.5%, up 0.3% month-on-month. Although this data cooled down from the 0.9% increase in July, it still showed that inflation pressure existsInflation stickiness in the service industry, especially may become a key variable. If the core PPI or tomorrow's CPI shows that the service industry's inflation rises, the market may reprice US Treasury yields, pushing the US dollar to further strengthen.
The weakness in employment data adds uncertainty to the US dollar trend. Preliminary data released by the U.S. Bureau of Labor Statistics (BLS) on Tuesday showed that the revised non-farm employment number was reduced by 911,000 as of March 2025, meaning an average monthly decrease of about 76,000 jobs. The sharp correction confirms Fed official Christopher Waller's previous warning about a slowdown in the labor market. Waller said in July that private sector recruitment was "close to stall" and was further verified after the August employment report was released. The market generally expects the Fed to cut interest rates at next week's FOMC meeting, with the probability of 25 basis points and 50 basis points both within the discussion range, and the probability of 50 basis points rises due to weak employment data. If the PPI and CPI data do not show a significant deterioration in inflation, the Fed may tend to cut interest rates gradually, which will limit the rise of the US dollar, but if the inflation data exceeds expectations, the US dollar may gain support due to the rising expectations of interest rate hikes.
In addition, the impact of tariff remarks on market sentiment cannot be ignored. The Supreme Court (SCOTUS) has accepted the White House request to speed up the trial of the legality of the relevant tariff policies and is expected to hold oral debate in November. The incident may extend risk aversion from October to November, pushing up U.S. Treasury yields and indirectly support the US dollar. Well-known institutions believe that the manifestation of the tariff effect may be concentrated in the second half of 2025, mainly reflected in the PPI and CPI data through www.xmhouses.commodity inflation. However, the stickiness of inflation in the service industry will be the focus of the Federal Reserve. If the data shows that inflation pressure continues, market expectations for Fed policy may shift from loose to wait-and-see, and the US dollar index may fluctuate at a high level.
Technical analysis: The game between key moving averages and MACD signals
From the technical point of view, the performance of the US dollar index on the 4-hour chart is worth paying attention to. The latest quote shows that the US dollar index fluctuates slightly during the day, and is currently above the 50-period simple moving average (50SMA) 97.8922, close to the 100-period simple moving average (100SMA) 98.0463, but is still lower than the 200-period simple moving average (200SMA) 98.2784. This moving average ranking list shows that the US dollar index is in the consolidation stage in the short term and lacks a clear direction. The proximity of 50SMA and 100SMA forms a potential support area, while the 200SMA forms a strong upward resistance. If the US dollar index can break through 200SMA, it may open up further upward space and the target will point to the 99.00 integer mark; on the contrary, if it falls below 50SMA, it may fall short-term support around 97.50.
MACD indicator (26,12,9) further reveals the momentum status of the US dollar index. The current DIFF value is -0.0604, DEAIt is -0.1055 and the MACD bar has a positive value of 0.0878, indicating that the fast line (DIFF) has crossed the slow line (DEA), forming a golden cross signal, implying that the short-term momentum is bullish. However, the absolute values of DIFF and DEA are small, and the MACD bar amplitude is limited, indicating that the bullish momentum has not been fully released, and the market may still be in a wait-and-see state. www.xmhouses.combining the moving average and MACD signals, the US dollar index may fluctuate in the range of 97.89 to 98.27 in the short term, and the breakthrough direction needs to wait for further guidance from PPI and CPI data.
From a broader perspective, the positive correlation between the trend of the US dollar index and US Treasury yields is still obvious. The 10-year U.S. Treasury yield stabilizes around 4.09%. If the PPI data or subsequent CPI data pushes the yield to exceed 4.12%, the US dollar index may be boosted and test the resistance of 200SMA; on the contrary, if the yield falls back to 4.07% or less, the US dollar may face pullback pressure. In addition, some traders pointed out that the fluctuations in the US dollar index may be affected by safe-haven currencies such as the Japanese yen, especially the recent remarks of interest rate hikes by Bank of Japan may push up the yen, indirectly suppressing the US dollar/JPY exchange rate, thereby affecting the performance of the US dollar index.
Future Trend Outlook
Looking forward in the www.xmhouses.coming week, the trend of the US dollar index will depend to a large extent on the PPI data on September 10 and the CPI data on September 11. If both PPI and core CPI data meet expectations (PPI 3.3% year-on-year, core PPI 3.5% year-on-year, CPI data is moderate), the market may continue to digest the Fed's 25 basis points rate cut expectations, and the US dollar index may fluctuate narrowly in the range of 97.89 to 98.27, and it will be difficult to break through the 200SMA resistance in the short term. However, if the core CPI shows that the service industry's inflation exceeds expectations, or PPI data suggests that inflation pressure will rise further, the market may re-evaluate the Fed's rate cut pace, and the US dollar index is expected to break through 98.27 and test the 99.00 mark. On the contrary, if the data is significantly lower than expected, coupled with the weakening of the job market, expectations of a 50 basis point interest rate cut may heat up, and the US dollar index may fall to the 97.50 support level.
From a technical perspective, the MACD golden cross signal provides short-term support for the US dollar, but the momentum is not enough to promote a strong breakthrough. Traders need to pay close attention to whether the US dollar index can stand firm at 100SMA (98.0463), and whether the U.S. Treasury yields break through 4.12% or fall back to 4.07%. In addition, the risk aversion sentiment caused by tariff remarks may further ferment in November. www.xmhouses.combined with the Supreme Court's trial process, the US dollar may remain resilient under the driving force of safe aversion demand. Some viewpoints believe that the uncertainty of the Federal Reserve's policy may cause the US dollar to remain at a high level in the short term, but the long-term trend still depends on the balance of inflation and employment data.
The current US dollar index shows an unknown direction under the interweaving of fundamentals and technical aspects. PPI and CPI data will become key drivers of short-term trends, while US Treasury yields fluctuate and USThe evolution of Fed's expectation of interest rate cuts will continue to affect market sentiment. Traders need to remain highly vigilant, closely track data release and market reactions, and pay attention to changes in key moving averages and MACD signals on the technical side to capture the potential breakthrough direction of the US dollar index.
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