Dollar Rebounds: Resilient or Just a Relief Rally?

• USD Index up 0.33% after last week’s sharp 1.41% drop on weak U.S. jobs data.
• Rate cut odds hit 90.8% for September, but the dollar shows resilience as a safe-haven.
• Focus shifts to ISM Services PMI for clues on economic strength and Fed policy direction.
• Technical bounce from 98.593 suggests a possible rising channel; resistance seen at 100.511 and 101.965.
• Break below 98.30 could trigger further downside toward 97.143 and 96.393.

The U.S. Dollar Index (USDInd) is staging a modest comeback, up 0.33% at the time of writing after tumbling 1.41% last Friday.

Today’s move has pushed the index above Monday’s high, hinting at some renewed buying interest.

The sharp selloff last week was triggered by a weaker-than-expected U.S. jobs report, which quickly ramped up market expectations for a Federal Reserve rate cut in September. Fed funds futures are now pricing in a 90.8% chance of that happening.

Still, the dollar isn’t rolling over completely. Despite shifting rate expectations, it continues to find support from its role as a global safe-haven.

Focus Turns to ISM Services PMI

Next up on traders’ radar is the ISM Non-Manufacturing PMI. As a key gauge of activity in the U.S. services sector, this report could help determine whether the dollar's bounce has legs or not.

A stronger-than-expected PMI would signal resilience in the U.S. economy, possibly cooling the urgency for a rate cut and giving the dollar room to push higher. On the flip side, a soft reading would likely reinforce fears of a slowdown and strengthen the case for easing, putting more pressure on the greenback.

Technical Picture: Channel Forming?

From a technical standpoint, the USDInd is bouncing off support near 98.593. With the recent high at 100.214, price action suggests the early stages of a rising channel may be forming.

If bullish momentum continues, traders will be eyeing resistance levels at 100.511 (a swing high from May 29) and 101.965 (the major high from May 12).

If support breaks instead, attention will turn to the 21-day and 50-day moving averages at 98.50 and 98.30, respectively. A move below those levels would likely signal growing bearish momentum, with the next potential downside targets being 97.143 (the low from July 24) and 96.393 (a key swing low and the lowest price projected for 2025).

Final Thoughts

The dollar’s bounce today shows it still has some fight left, but the direction from here likely hinges on incoming data. For now, traders are staying alert and letting the charts and fundamentals do the talking.