The US dollar index stabilizes at 99, focusing on non-farm payrolls to set the direction

On March 6th, the US dollar index hovered around the 99.00 level, remaining high. After rising to a nearly 10-month high recently, it experienced a slight pullback, but the overall bullish trend remains unchanged. The US economy shows strong resilience, with inflation easing slowly. Coupled with heightened geopolitical tensions in the Middle East boosting safe-haven demand, the market continues to delay expectations of Fed rate cuts until the second half of the year. The prolonged period of high interest rates highlights the yield advantage of dollar assets, and the high yields on US Treasuries further support the index. Meanwhile, Europe’s economic recovery remains sluggish, and the European Central Bank’s easing expectations are rising. The Bank of Japan is still in a wait-and-see policy stance. Generally weaker non-US currencies indirectly boost the dollar’s strength.

From a fundamental perspective, the US economy demonstrates strong risk resistance, with a balanced employment market and steady service sector data, providing solid support for the dollar. Although inflation has retreated from previous highs, the pace of decline is slower than market expectations. Additionally, international oil prices have risen due to geopolitical conflicts, bringing new imported inflation pressures, making it difficult for the Fed to quickly shift to easing. Currently, CME interest rate futures show a 97.5% probability that the Fed will keep rates unchanged in March. The first rate cut has been pushed back to after June or July, and the full-year rate cut expectations have narrowed. The interest rate differentials between major currencies like USD/JPY and USD/EUR remain high, encouraging cross-border capital to increase holdings of dollar assets, forming ongoing bullish momentum for the dollar index.

The ongoing escalation of Middle Eastern geopolitical tensions has become a key catalyst for the dollar’s phase of strength. Regional conflicts increase global risk aversion, prompting capital to withdraw from risk assets and flow into safe-haven assets like the dollar and US Treasuries, providing additional buying support for the dollar index. Meanwhile, major economies around the world are diverging: the Eurozone’s recovery remains weak, with sluggish manufacturing and services data; the ECB’s rate cut expectations are advancing; the British pound is underperforming due to slowing economic growth; and the Japanese yen continues to weaken amid the Bank of Japan’s cautious policy stance and delayed rate hike expectations. Non-US currencies are collectively under pressure, further highlighting the dollar’s relative strength.

Technically, the dollar index remains in a clear bullish structure on the daily chart, with moving averages aligned upward. Short-term pullbacks are normal consolidations within an uptrend and have not broken the medium-term upward trend. The RSI indicator is in a neutral-strong zone without obvious overbought signals, indicating upward momentum is still intact. Key resistance is at the 99.60–100.00 level; a successful breakout could open further upside space. Support is at 98.70–99.00; as long as this zone holds, the consolidation with a bullish bias is unlikely to change.

Looking ahead, the dollar index will enter a data-sensitive period, with upcoming US non-farm payrolls being a key variable influencing short-term movements. If employment data remains strong and wage growth steady, it will reinforce expectations of prolonged high interest rates, supporting further dollar strength. Conversely, weaker-than-expected data could trigger profit-taking and a short-term correction. Additionally, developments in Middle Eastern tensions, speeches by Fed officials, changes in global inflation, and policy moves by other major economies will collectively influence the dollar’s volatility rhythm.

Overall, under the combined influence of high interest rates, safe-haven demand, and generally weaker non-US currencies, the dollar index is likely to rise in the medium term and fluctuate at high levels in the short term. Only when the Fed’s rate cut expectations clearly rebound, geopolitical risks significantly ease, or US economic data shows clear signs of slowdown, might the dollar’s strong trend see a genuine turning point.