Source: Golden Ten Data

Some key market indicators are beginning to suggest that the dollar rally inspired by Trump may have stabilized as the bullish sentiment triggered by the US election wanes.

Bloomberg's dollar exchange rate index fell for the third day in a row on Tuesday after rising to a two-year high last week. Momentum indicators suggest that there may be limited room for further upside in the short term.

According to traders, investors' capital flows are no longer one-sided, and their views on the direction of the US dollar are beginning to become more cautious.

Antony Foster (Antony Foster), head of G10 currency spot trading at Nomura International Plc (Nomura International Plc) in London, said, “The strong dollar trend after the US election has undoubtedly entered more choppy waters.”

The dollar has been rebounding since late September, partly due to US President-elect Trump's plan to raise tariffs and concerns that his agenda will stimulate inflation and prevent the Federal Reserve from cutting interest rates. The Bloomberg Dollar Spot Index is up 5.3% this year.

inTechnical sideAbove, the dollar's slow stochastic indicator (a momentum indicator) shows that the currency has reached the so-called overbought region. Niraj Athavle (Niraj Athavle), head of sales and marketing at J.P. Morgan Chase in Singapore, said that the bank's emerging market foreign exchange risk appetite index triggered a signal to short the US dollar when it closed on November 15.

Investors' views on the fundamentals of other major currencies are also a factor. After three months of decline against the US dollar, from 1.05Support levelBounce back. Its other technical support level is at the 2023 low of 1.0448.

Nomura's Foster said, “The market's sentiment about the euro is very mixed. Some people talk about an affordable or lower price, while others think now is the time to buy. We've seen quite a few accounts end up profitable on euro bears, but this is by no means the case for all accounts.”

Although Bank of Japan Governor Kazuo Ueda did not explicitly hint that interest rates would be raised at the December central bank meeting on Tuesday, it was also difficult for the dollar to break through 155 against the yen. Foster said, “The flow of yen goes both ways in most cases.”

Even leveraged funds, which initially bet that the US dollar will rebound against currencies such as the euro, offshore renminbi, and yen after the US election, seem to be reducing their bets on the continued rise of the US dollar.

J.P. Morgan's Asafler said, “Over the past week, there has been an overall net sales flow of the US dollar worldwide. Asset managers are small buyers of the dollar against the euro and the pound, but this was offset by the sell-off of the dollar against the euro by macro funds.”

Of course, many on Wall Street are still advocating a stronger US currency. Hedge funds, asset managers, and other speculators have been preparing for further appreciation of the dollar.

According to the productFutures tradingAccording to the latest data from the Commission (CFTC) for the week ending November 12, they hold approximately $17.7 billion in contracts, which will benefit from a stronger dollar.

Goldman Sachs Group strategists abandoned their long-held view of the depreciation of the dollar this month because they think there is a reason for the dollar to stay strong “longer.” They said that Trump's protectionist policies may reignite inflation and cause the Federal Reserve to slow down the pace of interest rate cuts, which will push the trade-weighted dollar index to rise by about 3% over the next year.

Although Morgan Stanley's team believes that the dollar will remain range-bound more in 2025, they expect the dollar to continue to rise this year.

“The new administration's domestic policies may keep the economy quite hot, and trade policies will also put some upward pressure on the dollar,” Monex'sForeign exchange transactionsStaff member Helen Given said. “If these policies are not enacted or don't work, the dollar still has some room to decline, but the risks faced by the dollar still tend to rise.”

Editor/jayden