US Dollar falls flat, possible sixth straight trading day with gains

• The US Dollar sprinted higher in early trading on Friday for a sixth consecutive trading session. 
• The Greenback is favored after the European Central Bank rate cut on Thursday, China’s promise of monetary easing and hot US producer inflation data. 
• The US Dollar Index (DXY) trades above 107.00 for the first time since November 26. 

The US Dollar (USD) extends its winning streak on Friday, with the DXY Index trading above 107.00 for the first time in more than two weeks, driven by signs of lingering inflation pressures in the US and prospects of further monetary policy easing in two of the US main trading partners: China and the Eurozone.

The USD got a boost on Thursday after Producer Price Index (PPI) data for November came well above expectations. While the data failed to change the broader view that the US Federal Reserve (Fed) will cut interest rates by 25 basis points next week, it did pare some bets of further cuts in 2025. 

The Greenback was also supported by expectations of further stimulus elsewhere. In Europe, the European Central Bank (ECB) President Christine Lagarde admitted that a 50 basis point rate cut scenario was on the table. However, the Governing Council agreed that a 25 basis point rate cut was more appropriate. 

In China, recent news also signaled bolder economic support in 2025. The Politburo, led by President Xi Jinping, vowed to embrace a “moderately loose” monetary policy in 2025 and a “more proactive” fiscal policy. In response, bond prices have soared and China’s 10-year bond yields fell to a record low of 1.77%, Bloomberg reports.   

The US economic calendar is light on Friday, with only the Import and Export Price Index at hand. Traders will likely  keep their powder dry and look ahead to the US Federal Reserve meeting next week. 

Daily digest market movers: Outside help

• China's top leaders and policymakers are considering allowing the yuan to weaken in 2025, Reuters reports. Several analysts are seeing the risk that China is heading towards a Japan scenario, where bond yields could fall further, Bloomberg reports. 
• At 13:30 GMT, the Import-Export Price Index for November is due. The monthly Export Index is expected to contract by 0.2% after expanding in October by 0.8%. The Import Index is expected to shrink by 0.2% against the 0.3% increase in October. 
• Equities are very geographically divided this Friday. In Asia, all major Chinese and Japanese indices are in red territory. Meanwhile, in Europe and in the US, the major indices are seeing green numbers. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 96.4%. 
• The US 10-year benchmark rate trades at 4.32%, a fresh high for this week.

US Dollar Index Technical Analysis: There go yields

The US Dollar Index (DXY) is being fueled for another rally thanks to the move in bond markets this week. After the ECB already widened the rate differential gap between the US and Europe, prospects of further easing in China add to that gapthis Friday China is adding to that gap. WiIth the plunge in Chinese yields, the gap between the US and China is getting wider, fueling which fuels a stronger US Dollar. 

The 107.00 got broken this Friday, but and needs to see a daily close above it, to actbe acting as support from; now on. Very close, by there is the 107.35 (October 3, 2023, high) level that might act as a brief resistance. Further up,  the high of November 22 at 108.7 emerges. 

Looking down, 106.52 is now the new first supportive level to look for in case ofif any profit taking should occur. Next in line is the pivotal level at 105.53 (April 11 high) that comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the 200-day Simple Moving Average at 104.17 should catch any falling knife formation. 

US Dollar Index: Daily Chart