During Thursday's Asian trading session, the dollar index edged modestly lower, extending the pullback seen a day earlier from levels near its highest point since April 2025, though it continues to trade above the 102 mark.

The greenback's near-term upward momentum has cooled somewhat, but no clear signal of a trend reversal has emerged. Expectations surrounding Federal Reserve policy, the relative resilience of the U.S. economy, shifts in energy prices, and geopolitical risks all continue to provide important support for the dollar, leaving the market cautious about whether the current pullback can be sustained.

The minutes from the Federal Reserve's September 15-16 policy meeting have become a key recent factor influencing dollar movements. The minutes showed that policymakers unanimously supported raising the target range for the federal funds rate, with most officials believing that another rate hike may still be necessary before year-end to address persistent inflationary pressures.

According to the CME FedWatch tool, the market currently prices in roughly an 80% probability of a Fed rate hike in December. This expectation indicates that investors remain highly alert to the risk of further monetary tightening in the United States, thereby underpinning the dollar's short-term interest rate advantage.

Fluctuations in energy prices have further reinforced this policy logic. International crude oil prices are being shaped by a combination of Middle East supply risks, transportation uncertainties, and expectations for global supply recovery, and changes in energy costs may continue to feed through to overall inflation.

If oil prices remain elevated for an extended period, transportation, production, and consumption costs could rise accordingly, making the disinflation process more complicated. For the Federal Reserve, this means that even if economic growth slows to some degree, monetary policy may not be able to pivot toward easing quickly.

The market therefore needs to reassess how long rates will stay elevated and the possibility of further hikes. The relative resilience of the U.S. economy compared with other major economies also provides additional support for the dollar.

Market institution Brown Brothers Harriman noted that persistently high energy prices could push up inflation, policy rates, and benchmark bond yields, while also benefiting the currencies of energy-exporting nations and the dollar. Relatively strong U.S. economic growth, combined with continued high demand from overseas investors for U.S. securities assets, also helps maintain the dollar's advantage in attracting capital inflows.

This factor means that dollar movements no longer depend entirely on a single Fed policy decision. Even if the market temporarily lowers rate hike expectations, as long as the U.S. economy continues to outperform other major economies and U.S. Treasury yields remain relatively high, the dollar may continue to receive support from asset allocation demand.

Conversely, only if U.S. employment and consumption data continue to weaken and the market begins to lower its growth expectations for the U.S. economy would the dollar's relative advantage potentially face more pronounced erosion. The Middle East situation provides another layer of support for the dollar.

Ongoing regional conflicts are increasing risks to global energy supply and transportation, and market concerns about further escalation have not fully subsided. When uncertainty rises, investors typically increase allocations to highly liquid assets such as the dollar, thereby driving safe-haven capital inflows.

However, the geopolitical risk impact on the dollar is not one-directional. If the situation eases and energy supplies gradually recover, safe-haven demand could decline, and the dollar could also face profit-taking pressure.

The key question currently facing the dollar index is whether the short-term pullback represents a normal consolidation after a strong rally or a signal that the trend is beginning to weaken. Based on existing fundamentals, the Fed's hawkish stance, the relative resilience of the U.S. economy, and energy inflation risks still support the dollar in maintaining relative strength.

If no sustained selling emerges during the index's decline while U.S. Treasury yields remain elevated, funds may re-enter the market to buy dollars at lower levels. Next, weekly U.S. initial jobless claims and Fed officials' speeches will become important catalysts for the market.

If the labor market performs steadily and officials continue to emphasize inflation risks, the market may further consolidate expectations for a year-end rate hike, and the dollar index could retest recent highs. Conversely, if employment data comes in noticeably weaker than expected, or if Fed officials signal a more accommodative policy stance, the dollar may continue to adjust.

Additionally, energy prices and the Middle East situation remain external variables that cannot be ignored. Rising crude oil could push Treasury yields higher through inflation expectations, but if energy price increases begin to significantly weigh on consumer demand and economic growth, the market could instead shift to worrying about the U.S. economic outlook.

The dollar's subsequent trajectory therefore depends on the combined impact of energy prices on inflation and growth, not merely on whether oil prices rise or fall. From a daily chart structure, the dollar index overall still maintains a bullish bias, with the index positioned above the 101.75 to 101.65 zone, which previously served as an important resistance breakout area and may now act as short-term support.

The Relative Strength Index (RSI) stands at approximately 70.67, placing it in overbought territory, indicating that prior upward momentum was strong, though short-term profit-taking and technical pullback potential also exist. An overbought condition itself does not mean the trend will reverse immediately.

If the index can hold the 101.65 to 101.75 zone, the overall bullish structure may still continue; if it effectively breaks below this area, then the market should watch for a potential widening of the pullback and observe whether the index can form new support at lower levels. On the 4-hour chart, the dollar index has pulled back modestly after reaching a阶段性 high, with short-term momentum cooling somewhat, but there is still a lack of a clear signal of a sustained bearish turn.

If the index finds support near the 102 mark and breaks back above recent short-term highs, it could further confirm that bulls are regaining the initiative; if the rebound lacks strength and the price continues to fall below the 101.65 to 101.75 zone, further technical selling could be triggered.

Since the RSI is already at elevated levels, short-term attention should focus more on changes in trading momentum and price structure during the pullback. If a higher low forms after the decline, it would indicate that bulls still control the trend; if key support is broken consecutively, the market would need to reassess whether the upward structure has changed.

The dollar index is currently in a short-term consolidation phase within a strong trend. The Fed meeting minutes' hawkish tone, the market's elevated expectations for a year-end rate hike, the relative resilience of the U.S. economy, and Middle East geopolitical risks together provide support for the dollar.

Although technical indicators have entered overbought territory and short-term pullback risk has increased somewhat, this is not yet sufficient to confirm that the dollar's trend has reversed. In the near term, the 102 mark is an important level for gauging market sentiment, while the 101.65 to 101.75 zone is the key support for judging whether the dollar's strong structure can continue.

If U.S. employment data remains solid and Treasury yields stay elevated, the dollar may retest recent highs; if data weakens and rate expectations cool, the dollar may pull back further. The medium-term trajectory will still depend on the balance between U.S. inflation and economic growth, as well as whether the Federal Reserve actually proceeds with further rate hikes.

Investors should focus on U.S. employment data, Fed officials' speeches, Treasury yields, and changes in energy prices, avoiding the conclusion that the dollar has peaked based solely on a short-term pullback. As long as key support has not been effectively breached, the dollar should overall still be viewed through the lens of a relatively strong consolidation.