US Dollar Index Stays Below 99.00 as US 10-Year Yield Stabilizes

The US Dollar Index (DXY) remained weak during early European trading on Friday, currently trading around 98.72, failing to reclaim the 99.00 level. After posting a slight gain the previous day, the index came under pressure again, remaining near the lower end of its recent trading range. The temporary stabilization of US 10-year Treasury yields did not provide a significant boost to the dollar, as cooling expectations for Federal Reserve rate hikes continued to dominate dollar movement.

**Economic Data and Rate Expectations Weigh**

Recent US economic data has shown signs of cooling, combined with downward revisions to Fed rate hike expectations, serving as the primary drag on the dollar. According to market reports, the probability of a September rate hike has fallen to around 32.7%, pushing the dollar index to multi-month lows. However, safe-haven demand from geopolitical risks has provided some underlying support for the dollar, keeping the index in a weak range-bound pattern rather than a sustained one-way decline.

**Technically Oversold but Lacking Rebound Momentum**

From a technical standpoint, the dollar index's daily 14-day Relative Strength Index (RSI) has entered oversold territory, suggesting that near-term downside momentum may slow, with potential for a technical rebound. However, the 4-hour chart shows the index remains in a bearish state, with the 98.80 area being a key level to watch. If rebounds continue to be capped at the 99.00 level and further breaks below key support near 98.55, the bearish trend may persist. Resistance above sits near 99.72, and only a sustained reclaim of that level would significantly alleviate the current bearish structure.

**US Treasury Yield Correlation Worth Watching**

The correlation between the dollar index and US Treasury yields deserves attention. Market analysts note that the decline in the dollar index and USD/JPY since mid-July is highly correlated with the downtrend in US 10-year Treasury yields that began in mid-June. Currently, the 10-year Treasury yield is fluctuating within the 4.44%-4.52% range; if it fails to break through resistance and subsequently falls further, it could continue to weigh on the dollar.