The U.S. Dollar Index (DXY), which reflects the value of the dollar relative to a basket of major world currencies, continued its decline for a second consecutive day, falling below the key 99.00 level. This suggests a possible preparation for further losses in the near term.
The weakening of the dollar is primarily due to growing expectations that the Federal Reserve will cut interest rates at least twice this year — once in October and again in December. An additional factor putting pressure on the currency is the concern that an extended government shutdown may have a negative impact on the broader U.S. economy. On Tuesday, the stopgap funding bill proposed by Republicans, aimed at ending the shutdown, failed to gain sufficient support in the Senate.
This means the shutdown will enter a full third week starting October 1, with no clear signs of resolution in sight. Rising trade tensions between the United States and China further exacerbate the dollar's bearish outlook. On Tuesday, President Donald Trump threatened to halt trade with China on several goods, including vegetable oil, in response to China's decision to stop purchasing American soybeans. In return, China introduced new port tariffs for U.S. vessels calling at Chinese ports.
Additionally, the People's Bank of China (PBOC) continues to set a tightly managed reference rate for USD/CNY, which is leading to intraday dollar selling against the yuan.
From a technical standpoint, however, oscillators on the daily chart remain positive. Prices are trading above the 9-day EMA, and the 9-day EMA itself is positioned above the 14-day EMA. This alignment confirms that the DXY is not yet ready for a larger, sustained downtrend.
If prices manage to reclaim and stay above the 99.00 resistance level, the next barrier lies at 99.25. Conversely, if prices fall below 98.70, it would mark a shift in sentiment, giving bears the upper hand over bulls.
