US dollar extends gains amid lack of downward pressures

The US dollar has not advanced this week on the back of war drums or geopolitical tensions. Instead, it continues to edge higher for more ordinary but equally persistent reasons: there simply hasn’t been enough “fuel” for the bears to justify short positions at the week’s opening levels. Traders hoping for a flow of weak US data to support dollar selling instead found an “empty plate,” and that absence alone has underpinned the greenback.

One-week G10 funding rates still grant the dollar a 4.14% annualized yield — hardly an incentive to stay short. (This explains why players have remained in narrower ranges over the past two weeks.) Adding to this, US housing data showed new home sales jumping back to early-2022 levels, forcing the market to acknowledge that slowdown is not yet the main narrative. Even Fed Funds pricing — which bottomed in mid-September — has ticked up by 5 basis points. A modest move, but enough to show that the “cut 50 bps now” camp is not in control.

Today’s data slate includes jobless claims and existing home sales. Jobless claims are expected to fall again to around 230,000, erasing the earlier spike to 264,000 (later revealed to have stemmed from fraud in Texas). A steady labor market is not the kind of feed bears can use against the dollar. Existing home sales may come in weaker — consensus at 3.95 million units annually — but that is unlikely to draw much attention after the “surge” in new homes.

Meanwhile, eight Fed speakers are lined up like actors on a crowded stage. Steven Miran is expected to reprise his familiar role as an “ultra-dovish hawk,” pushing for faster and deeper cuts. But the market knows his script well; his voice alone won’t move the dollar unless a broader “chorus” of Fed officials joins in.

The dollar index (DXY) hovers near 98, like a ship stuck in still waters. Without softer US data to provide the bears with wind, the dollar remains stagnant, frustrating those who bet on its decline.

As for the euro, its latest slide looked more like “local data disappointment” than genuine dollar strength. German Ifo readings burst the bubble of optimism, reminding markets that “fiscal stimulus” often resembles creative accounting more than fresh spending. Europe may find firmer ground later, but patience is required. With no ECB headlines today, EUR/USD stays at the mercy of US flows. A break below 1.1725 could open the way to 1.1675, though buyers remain “lurking in the shadows.”

The Japanese yen stays in the market’s crossfire. It managed a modest rebound after BoJ minutes reiterated willingness to raise rates “someday,” but that was hardly new. The spotlight instead fell on “Japanese political kabuki,” leaving the yen hostage to domestic developments. USD/JPY held its rebound, but its technical outlook remains bleak unless the US delivers a string of stronger-than-expected data.

For now, the US dollar retains the upper hand not because it has seized power with overwhelming force, but because the “opposition” is too weak and divided to mount a serious challenge. In markets, inertia can sometimes be the most powerful force of all.