Published: 25 December 2025,02:21
Daily Market Analysis New
Key Takeaways:
*Christmas-thinned markets have muted dollar moves; limited participation reduces immediate volatility and directional conviction.
*Last week’s weaker inflation and easing labor market pressures reinforce expectations of Fed easing rather than tightening.
*Lower yields and declining real rates erode the dollar’s carry advantage, supporting relative weakness vs. other developed-market currencies.
Market Summary:
The U.S. Dollar Index remained subdued through Christmas Day as global markets operated under severely thinned liquidity conditions, with most major financial centres either closed or running shortened sessions. In the absence of fresh U.S. data, recent macro developments continued to anchor sentiment, particularly last week’s softer inflation outcomes and signs of easing labour market tightness, which have strengthened expectations that the Federal Reserve’s next major policy shift will ultimately be toward easing rather than renewed tightening.
Treasury yields have drifted lower in recent sessions, reflecting persistent demand for duration as investors price in a more benign inflation outlook and reduced policy risk. This has gradually eroded the dollar’s yield advantage, especially against developed-market peers, encouraging mild diversification flows even as participation remains light. The decline in real yields has been particularly notable, reinforcing pressure on the greenback in relative terms.
Beyond cyclical data, longer-term structural concerns continue to simmer beneath the surface. Renewed scrutiny of the U.S. fiscal trajectory amid elevated issuance needs and rising refinancing costs—has re-entered investor discussions, with a softer dollar amplifying concerns around the cost of servicing foreign-held debt. While not an immediate catalyst, these issues contribute to a more cautious medium-term outlook.
From a flow perspective, year-end rebalancing, corporate hedging, and reduced safe-haven demand linked to resilient equity markets have all limited upside traction for the dollar. With Christmas keeping liquidity exceptionally thin, near-term price action is likely to remain muted, but the broader bias continues to lean lower into year-end unless U.S. yields stage a decisive rebound once markets reopen.
Technical Analysis
The US Dollar Index has undergone a clear deterioration in its medium-term technical structure on the chart, following a decisive breakdown from its prior ascending trendline. This trendline, which had guided price action higher since late October, was cleanly breached in early December, marking a shift from trend-supported advances into a corrective-to-bearish phase.
After peaking near the 100.25 resistance zone, DXY failed to sustain higher highs and began forming a sequence of lower highs and lower lows. Structurally, the index is now trading beneath both its former trendline and short-term moving averages, signaling a loss of bullish control.
Momentum indicators reinforce the bearish bias. The RSI is holding near 38, remaining firmly below the neutral 50 threshold, which reflects persistent downside pressure and weak recovery attempts. Meanwhile, the MACD remains below the zero line with a negative histogram, indicating that bearish momentum remains dominant despite some short-term deceleration. The absence of a bullish crossover suggests that downside risks are not yet neutralized.
Resistance Levels: 98.10, 98.55
Support Levels: 97.55, 97.00
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