The U.S. dollar index traded in a narrow range around 97.50 on Thursday, February 19. The previous day's release of the Federal Reserve's meeting minutes revealed internal policy disagreements, while markets awaited PMI data from both the U.S. and Europe and assessed the impact of Middle East tensions on safe-haven capital flows. Technically, after a sharp V-shaped reversal in late January, the dollar is now moving within a clear upward channel but faces resistance near a key level, with narrowing volatility suggesting an imminent directional move.

On the fundamental side, the Fed's January meeting minutes, released early Thursday Beijing time, set the tone for this week's trading. The minutes indicated that policymakers are in no hurry to cut interest rates; on the contrary, due to persistent inflation, "a few" members were even open to considering further rate hikes. This mix of hawkish and dovish views has effectively reduced market expectations for near-term monetary easing. Analysis from well-known institutions suggests that the minutes imply little urgency for rate cuts before the current chair's term ends in May. Additionally, while "most" participants believed the disinflation process could be slow and uneven, "a few" emphasized that productivity gains might help curb prices, highlighting internal divisions that could complicate the next chair's approach to interest rate policy.

Economic data also provided some support for the dollar. Figures released on Wednesday showed U.S. factory output in January posted its largest increase in 11 months, with capital goods and housing starts also performing well. This sets a positive tone for upcoming global PMI and U.S. GDP data due on Friday; stronger numbers would reinforce the Fed's patient stance.

In contrast, political rumors in the Eurozone caused only brief volatility in the euro without sustaining a trend. Earlier reports suggesting that European Central Bank President Christine Lagarde might step down early triggered a sharp drop in the euro, but markets quickly reassessed the situation. Macro strategy analysts noted that the transition of leadership at the Fed holds greater significance for global monetary policy than potential personnel changes at the ECB. Given that potential successors at the ECB include both dovish and hawkish candidates, and decision-making involves balancing interests across member states, the impact of individual personnel rumors remains limited. The euro stabilized against the dollar near 1.18, indicating that markets had largely discounted the noise.

Among other currencies, the Japanese yen weakened this week, with the USD/JPY pair briefly touching 154.96. This followed Japan's announcement of initial investment projects in the U.S., prompting market speculation about capital flows. Research institutions pointed out that Japanese direct investment in the U.S. is a key variable for forex markets this year, but its impact is complex: whether it directly boosts dollar demand or involves using foreign reserves to back dollar loans—thereby avoiding yen depreciation—Tokyo appears to prefer the latter, adding uncertainty to the yen's trajectory. Commodity currencies showed mixed performance; the Australian dollar held steady around 0.7050, supported by employment data (with unemployment remaining at a low 4.1%), while the New Zealand dollar rebounded slightly after recording its largest one-day drop in nearly a year, following the central bank's cautious stance on future rate hikes.

From a technical perspective, the U.S. dollar index is at a critical juncture. A 240-minute chart clearly shows that after hitting a high of 99.4979 in mid-January, the index underwent a sharp, deep inverted V-shaped correction, finding support at 95.5625 in late January. Since then, it has entered an orderly rebound phase, with progressively higher lows (95.5625 → 96.4911 → 97.3500) and higher highs (97.7789 → 98.0312), forming a standard upward channel. As of Asian and European trading on February 19, the price hovered around 97.5930, moving within this channel.

Key support and resistance levels: Reference: U.S. Dollar Index (spot) Support range: 97.3500 - 96.4911. The first line of defense is the recently tested lower boundary of the medium-term oscillation range at 97.3500. A break below this level would damage the short-term upward structure, potentially testing support at the previous correction low of 96.4911, which aligns with the lower Bollinger Band. Resistance range: 98.0312 - 99.2210. The immediate target is the rebound high from early February at 98.0312, near the channel's upper boundary. A decisive break above this level could allow bulls to challenge the next resistance platform around 99.2210. Intraday focus: The interaction between price and the MA10 (97.5930). Currently, the MA10 is nearly level with the spot price; maintaining above it would support the rebound, while a break below could trigger a pullback toward 97.3500.

Technical indicators also signal a "waiting" phase. In the moving average system, the MA10, MA30, and MA60 are converging within a narrow range of 97.59-97.65, indicating aligned medium-term持仓 costs—often a precursor to a trend change. The Bollinger Bands (26,2) are contracting, with the middle band providing support at 97.1930 and the upper band offering resistance at 97.2660. Although the price remains above the middle band, the narrow spread between the upper and lower bands (about 60 basis points) reflects extremely low volatility. Historically, such tight Bollinger Bands often precede a new trend expansion. Meanwhile, the MACD (26,12,9) shows relatively positive signals, with the DIFF and DEA lines forming a golden cross above the zero line and continuing to diverge upward, while the red momentum bars are gradually expanding, indicating slow accumulation of bullish momentum amid the consolidation.

In summary, the forex market is nearing the end of a convergence between macro narratives and technical patterns. Fundamentally, the Fed's policy path remains data-dependent, while Eurozone political noise has temporarily subsided. Market attention will focus on upcoming U.S. and European PMI data and U.S. GDP figures for clues on economic resilience and inflation pressures. Technically, the dollar index's upward channel remains intact, with indicators suggesting short-term upward momentum. However, the tightly contracted Bollinger Bands and converging moving averages indicate that the consolidation phase is nearing its end.

Looking ahead, the market is likely to continue testing higher within a震荡偏多 framework, relying on channel support near 97.35 to challenge resistance at 98.03. However, a decisive breakout will depend on new macro catalysts—such as stronger-than-expected economic data or geopolitical developments—to boost volatility and propel prices beyond the Bollinger Bands. If upward momentum falters, a retest of the channel's lower boundary or even the lower Bollinger Band remains a risk.