US dollar index hits 4-week lows near 96.25 on potential US yield-curve inversion

• US growth concerns, US yield-curve inversion risks weigh heavily on the US dollar.
• Technical setup suggests further downside still likely, as markets reposition heading into the New Year.

The US dollar index, the greenback when measured against a basket of six major currencies, came under heavy selling pressure in Europe and reached the lowest levels in four weeks near 96.20 region after the Fed’s less dovish forward guidance aggravated the risks of the US economic slowdown.

This was also illustrated by the flattening US yield-curve, which is nearing the 11-year low reached earlier this month. Markets still believe that the Fed will slow down its pace of policy tightening next year, despite the Fed’s ‘dot plots’ still signaling two rate hikes for the next year.

Therefore, the US yield-curve inversion still remains a serious risk that would signal a US economic recession and weigh negatively on the greenback across its main competitors. Moreover, markets resort to repositioning and closing out the USD longs heading into the New Year, eventually adding to the weight on the buck.

US dollar index Technical Levels