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Oversold Conditions Could Spark a Bullish Rebound
Central Bank
Economic
Summary:
Traders may watch for signs of waning bearish momentum, as fading selling pressure could attract dip buyers looking to position for a rebound.
Buy
TradingUSDX
EXP
96.630
Entry Price
97.860
TP
95.600
SL
96.890 +0.290 +0.30%
0
Point
Flat
95.600
SL
CLOSING
96.630
Entry Price
97.860
TP
The Federal Reserve acknowledged mounting downside risks to the labor market, noting that although unemployment remains relatively low, it has shown a slight uptick. The policy decision was not unanimous, as Governor Stephen Miran voted in favor of a deeper 50 basis-point rate cut, aligning with the expectations of some analysts who had anticipated a more aggressive move.
During the post-meeting press conference, Fed Chair Jerome Powell stated that labor demand has “softened,” while inflation remains “somewhat elevated.” He highlighted that the balance of risks has “shifted,” stressing that monetary policy is well-positioned to respond as needed, though he cautioned that the labor market is “not strong.”
Addressing speculation about a larger cut, Powell dismissed the notion, saying there was “no broad support for a 50 basis-point cut today,” and underlined that the Fed is not in a rush to ease policy.
The Fed’s statement reiterated its concerns about downside risks to employment, noting that while the jobless rate is still low, it has risen slightly. On inflation, the central bank remarked that price pressures have increased and remain “somewhat elevated.”
The Summary of Economic Projections (SEP) showed that most officials now expect the federal funds rate to end 2025 at 3.6%, with GDP growth at 1.6% and unemployment rising to 4.5%. Inflation is projected to end the year at 3%, with core PCE seen holding at 3.1%. Policymakers expect inflation to return to their 2% target by 2028.
U.S. Treasury yields fell after the Fed delivered its first rate cut since December last year, triggering a rally in risk assets. Investors grew more confident that lower borrowing costs will support the U.S. economy, particularly the lagging labor market, helping reduce Treasury yields across the curve.
On the economic data front, U.S. figures painted a mixed picture for August. Housing Starts plunged 8.5% month-over-month, erasing July’s 3.4% gain, falling to 1.307 million units from 1.429 million — the lowest since May. Building Permits also declined by 3.7%. In contrast, Retail Sales surprised to the upside, climbing 0.6% versus expectations for a 0.2% increase. The Control Group, which feeds directly into GDP calculations, rose 0.7% after a 0.5% gain the previous month.
Technical Analysis
The U.S. Dollar Index (USDX) found support as it approached the 95.95 level, which previously acted as a strong base on July 1. From that level, the index staged a rally that peaked near 100 on August 1. Since that local high, USDX has retraced back toward the 95.95 support zone, briefly dipping into it before bouncing higher again. If this level continues to hold in the upcoming sessions, it could serve as the launch point for another upward leg toward 97.86 — the next key resistance area.
This level is particularly notable because the 100- and 200-period moving averages on the 8-hour chart converge around 97.82 and 97.72 respectively, which could act as magnets for price during a potential corrective rally.
Meanwhile, the RSI has dropped to 25.66, firmly into oversold territory not seen in recent months. Traders may watch for signs of waning bearish momentum, as fading selling pressure could attract dip buyers looking to position for a rebound. If buyers manage to sustain the initial rejection from the support zone, bullish momentum could strengthen, paving the way for a potential recovery rally.
Trading Recommendations
Trading direction: Buy
Entry price: 96.60
Target price: 97.86
Stop loss: 95.60
Validity: Sep 26, 2025 15:00:00
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