Last Updated on 27/08/2026
- DXY remains supported above the 99.00 level, though upside momentum is constrained by the 200-day EMA around 99.75.
- Market-implied odds of a September Fed rate hike have fallen to 40.14%, down from roughly 50% on August 10.
- The Dollar Index’s recent three-month low was driven by an expanded Treasury buyback program rather than a shift in Federal Reserve policy.
The US Dollar Index (DXY) trades slightly above 99.00, up around 0.25%, after climbing to just below 99.25 following stronger-than-expected US PCE inflation data. However, the move does not necessarily signal renewed expectations for a September Federal Reserve rate hike, as markets have actually reduced their rate expectations throughout August.
Fed Rate Expectations Shift Lower
Markets now price a 40.14% probability of a September 16 rate hike, versus 59.86% for a hold. Expectations for additional tightening have also weakened significantly, with the probability of rates reaching 4.00%-4.25% by December falling to 8.13% from 24.13% on August 10.
The 2027 outlook points in the same direction, with the probability of two rate increases by June falling to 74.50% from 86.71% two weeks earlier. This suggests traders are increasingly debating when the next hike could arrive rather than how far the Fed will ultimately raise rates.
Dollar Rebound Follows Fiscal Developments
The Dollar Index’s recent recovery began from around 98.50, its lowest level in more than three months. That decline followed the US Treasury’s expansion of its long-term debt buyback program, which was aimed at containing borrowing costs.
The fiscal backdrop remains a concern for the dollar. Treasury purchases of longer-dated bonds while issuing more debt at the short end effectively reduce the average maturity of government borrowing, a development that can weigh on the currency when investors interpret it as an attempt to suppress long-term yields.
Technically, DXY remains below the 200-day EMA near 99.75 and the 50-day moving average just below 100.00, leaving significant resistance overhead.
Key Levels to Watch
- Resistance: 99.25, 99.75, 100.00, then 101.75
- Support: 99.00, 98.50, followed by levels below 98.00
- Bias: Bearish while DXY remains below the 200-day EMA near 99.75
- Bullish invalidation: A daily close above 99.75 could shift attention toward 100.00
Despite the latest inflation-driven bounce, the broader technical setup remains fragile. A sustained break above 99.75 would be needed to suggest that the Dollar Index is transitioning from a short-term rebound into a more durable recovery.
Leave a Reply