The US dollar struggled to gain momentum on Wednesday, failing to break above the 106.50 level, as traders weighed shifting Federal Reserve policy expectations and broader market sentiment. Despite a recent rebound, the greenback remains stuck below the 100-period EMA, signaling potential exhaustion in its rally.
The dollar’s hesitation comes as investors reassess the Fed’s interest rate trajectory. While policymakers have maintained a cautious stance, recent economic data has kept markets uncertain about the timing of rate cuts. The latest US PMI data and inflation reports will be critical in determining whether the greenback can regain upward momentum or face renewed selling pressure.
Meanwhile, US Treasury yields have also played a role in capping the dollar’s upside. A recent pullback in yields has reduced demand for the greenback, allowing other major currencies to recover some lost ground. If yields remain subdued, the dollar may struggle to break above key resistance levels.
US Dollar 1-D Chart as of February 26, 2025 (Source: TradingView)
On the technical side, 106.50 has emerged as a critical barrier, with multiple failed attempts to push higher reinforcing the importance of this level. The 100-period EMA is acting as a ceiling, preventing further advances. A decisive break above this threshold could open the door for a stronger rally, while continued failure may lead to a deeper pullback.
Broader risk sentiment is also influencing dollar movements. With global markets eyeing central bank decisions and geopolitical developments, traders remain cautious about making aggressive bets. If risk appetite improves, the dollar could weaken further as investors shift toward higher-yielding assets.
For now, the US dollar remains in a consolidation phase, with traders closely monitoring upcoming economic data and Fed commentary for direction. A clear catalyst will be needed to push USD past 106.50, but failure to do so could see further downside pressure in the sessions ahead.
