Lower oil prices ease inflation pressure, keeping United States Dollar Index subdued

• The US Dollar Index came under pressure from lower oil prices after Trump judged further strikes against Iran unlikely as nuclear talks continued.
• 165,000 jobs were added to October Nonfarm Payrolls. The increase far exceeded forecasts, lending support to the Greenback.
• Over 78% is the probability of a 25-basis-point Fed rate rise indicated by CME FedWatch.

102.20 is the approximate level of the US Dollar Index (DXY) in Monday's Asian session. Following two consecutive days of advances, the index, which tracks the US Dollar (USD) against six major currencies, is retreating.

Lower crude oil prices are easing inflationary pressure, creating short-term headwinds for the Greenback. The energy market retreat followed comments from US President Donald Trump that additional military action against Iran was "highly unlikely," provided progress on Iran's nuclear programme continued and the Strait of Hormuz stayed open. Trump also recognised the unpopular Middle East conflict as a major factor in the Republicans' recent midterm election defeats. The conflict had previously pushed energy costs higher.

Strong labour market figures and rising expectations of monetary tightening could nevertheless help the US Dollar (USD) recover its footing despite the near-term pressure. The CME FedWatch tool now puts the probability of a 25-basis-point interest rate increase at the December Federal Open Market Committee (FOMC) meeting above 78%, following a sharp rise.

Solid US jobs data are reinforcing expectations of a hawkish Fed. Against a consensus forecast of 65,000, October Nonfarm Payrolls (NFP) increased by 165,000, following September's revised reading of 60,000. The Unemployment Rate also fell to 4.1%, below the 4.2% forecast. For clearer signals on the Federal Reserve's next policy steps, investors and other market participants are shifting attention to Tuesday's Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) release.

Technical Outlook:

At 102.20 on the daily chart, Dollar Index Spot retains a bullish near-term bias. Trading above both the nine- and 50-period Exponential Moving Averages (EMAs) points to a favourable trend. Momentum remains positive without appearing overextended, with the 14-day Relative Strength Index (RSI) near 57. Meanwhile, a reading of 143.10 on the FXS Fed Sentiment Index signals that expectations of policy tightening remain elevated, supporting demand for the dollar.

The nine-period EMA around 101.95 provides the first downside support. If the correction deepens, the 50-period EMA near 101.36 offers a lower technical floor. Holding above these moving averages would keep the balance of risk tilted upwards for Dollar Index Spot. Pullbacks would then likely be viewed as consolidation within the wider bullish trend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)