12 Feb 2025

As of February 12, 2025, the U.S. Dollar Index (DXY) is trading near 108.00, having experienced a significant rally of approximately 7% since October 2024.

Factors Influencing the Dollar's Strength:

1. Economic Growth: The U.S. economy is projected to grow by 2.7% in 2024, outpacing the 1.7% growth forecast for other developed markets. This robust growth is driven by superior productivity, higher business investment, and fewer labor supply issues.

   
   

2. Federal Reserve Policy: Despite two rate cuts in 2024, the Federal Reserve has maintained a cautious approach to further easing, especially with inflation remaining above its 2% target. This stance has supported the dollar's value.

   
   

3. Trade Policies: The implementation of new tariffs has strengthened the dollar by reducing import demand and creating inflationary pressures that keep interest rates higher for longer.

   
   

Analyst Projections:

• Short-Term Outlook: Analysts forecast that the DXY may attempt a breakout above 108.97 in the first quarter of 2025, driven by tariff effects, strong U.S. economic performance, and positive carry trades.

  
  

• Long-Term Forecast: According to LongForecast, the DXY is expected to fluctuate between 108.20 and 116.36 throughout 2025, with an average around 114.91.

  
  

Technical Analysis:

The DXY is currently consolidating above its nine-day Exponential Moving Average (EMA) near 108.00. A break below this level could lead to a decline towards the eight-week low of 106.97. Conversely, resistance is observed around the descending channel’s upper boundary at 109.70.

Conclusion:

The U.S. Dollar Index is anticipated to maintain its strength into 2025, supported by robust economic growth, cautious Federal Reserve policies, and the impact of trade tariffs. However, market dynamics can change, and it's essential to monitor economic indicators and policy decisions for updated insights.