US Dollar Outlook: Treasury Yields Boost DXY, Bitcoin Defends 50-Day Average

U.S. Dollar Gains as Fed Holds Firm – What’s Driving the Rally?

The U.S. Dollar Index (DXY) pushed higher on Thursday, reflecting the Federal Reserve’s measured approach to interest rate cuts. As global central banks prepare for more aggressive easing, the Fed’s restraint has widened the interest rate gap, boosting dollar demand. Since late September, the dollar has surged over 7%, underscoring its dominance in forex markets​.

At 20:25 GMT, the U.S. Dollar Index is trading 108.195, up 0.114 or +0.11%.

Treasury Yields Hit Seven-Month High – Is This a Warning Sign?

Bond yields mirrored the dollar’s strength, with the 10-year Treasury yield climbing to 4.629% before easing slightly to 4.594%. This marks the highest level since May, reinforcing expectations that the Fed’s outlook will keep upward pressure on yields into early 2025​. The shorter-term 2-year yield remained steady at 4.341%, reflecting a flatter curve as rate cut expectations pull back.

Is the Holiday Season Cooling Forex Markets?

With Christmas approaching and trading volumes thinning, forex markets may drift in the coming days. However, analysts suggest the dollar’s momentum will likely persist into the new year. The key driver remains the interest rate differential between the U.S. and other major economies.

Will the Yen’s Weakness Prompt Intervention?

The dollar extended gains against the Japanese yen, keeping the yen near intervention levels. Japanese authorities have signaled their readiness to step in if necessary. Despite hints of future rate hikes from the Bank of Japan, policymakers remain cautious amid global uncertainty, tempering any significant yen rebound​.

Bitcoin Takes a Hit – Are Whales to Blame?

Bitcoin dropped 15.01% last week before settling 8.96% lower, with large investors reshuffling portfolios after the Fed’s hawkish signals. Whale activity spiked, pushing average transaction sizes to $306,100 – the highest since November 2022​. This wave of selling coincided with Bitcoin’s test of its 50-day moving average, a critical level for gauging near-term direction.

Can Bitcoin Bounce Back Before Year-End?

The 50-day moving average will be a key battleground for Bitcoin traders. If prices stabilize and demand rises, Bitcoin could avoid further declines. However, persistent whale sell-offs without fresh buying interest could extend the bearish trend into early January​.

What’s Next for the Dollar and Bitcoin?

As markets head into the final week of 2024, traders should brace for quieter sessions and lighter liquidity. The next major catalyst for the dollar could be the U.S. employment report on January 10. Until then, rate differentials will likely keep the dollar in favor.

Bitcoin’s fate rests on whether buyers step in to counter selling pressure. Without renewed demand, the world’s largest cryptocurrency could see further downside heading into 2025.

More Information in our Economic Calendar.