• The US dollar is stable on Friday in very still holiday trading.
• Monthly industrial production in Japan fell 2.3%, less than the expected 3.5%, while immense Chinese manufacturers also reported falling profits.
• The US Dollar Index (DXY) briefly fell below 108.00, remaining near a two-year high.

The US Dollar (USD) is trading slightly weaker on Friday, with the DXY unable to hold above 108.00 as markets remain cautious and trading desks are understaffed due to the Christmas holidays. The dollar failed to respond to more action in Asian markets, with data signaling further declines in Japanese industrial production and Chinese industrial companies reporting lower profits.

The US economic calendar will be very brilliant on Friday, with preliminary data on the balance of goods trade and wholesale inventories. Big moves are not expected for these data points. Therefore, a rather stable trading session is expected.

Daily summary of market movements: stocks falling

• Both US data points for next Friday will be released:
  • The November goods trade balance recorded a widening deficit of $102.9 billion, compared with the previous deficit of $98.7 billion and exceeding estimates of $100.8 billion.
  • November Wholesale Inventories fell 0.2% from the previous 0.2% and consensus estimates.
• Stock markets were mixed on Friday, with all U.S. stock futures falling and the Nasdaq losing more than 1%.
• The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 predicts an 89.3% chance of stable interest rates compared with a slim 10.7% chance of a 25 basis point rate cut.
• The US benchmark 10-year bond rate is 4.59%, not far from this week’s high of 4.64%.

US Dollar Index Technical Analysis: Nothing to see here for now

The US Dollar Index (DXY) is not expected to attack any company levels this Friday, given low liquidity and only a handful of market participants present over the Christmas to New Year period. No major moves are expected unless there is an external event on the geopolitical front. DXY looks set to enter New Year’s Eve trading just above 108.00.

On the other hand, the trendline starting December 28, 2023 acts as a moving upper boundary. The next powerful resistance comes at 109.29, which was the July 14, 2022 high and has a good history as a key level. Once this level is exceeded, the round level of 110.00 comes into play.

The first downward barrier appears at 107.35, which has now changed from resistance to support. The second level that could stop the selling pressure is 106.52. From here, as high as 105.53 could be considered, while the 55-day straightforward moving average (SMA) at 105.83 is heading higher towards this level.

US Dollar Index: Daily Chart