Last Updated on 22/10/2026
The US Dollar Index struggles to gain significant buying interest as falling Treasury yields limit its upside potential. However, rising expectations of a Federal Reserve rate hike and ongoing geopolitical tensions provide support for the safe-haven US dollar. Meanwhile, traders remain cautious about taking fresh positions ahead of next week’s FOMC meeting.
Fundamental Analysis
The US Dollar Index (DXY), which measures the Greenback against a basket of major currencies, remains largely subdued on Thursday, trading near 101.70 during the Asian session. However, the index continues to hold above Tuesday’s nearly three-week low as opposing market forces shape its performance.
The recent decline in US Treasury yields from multi-year highs, combined with growing expectations that the Federal Reserve (Fed) will leave interest rates unchanged at next week’s meeting, continues to weigh on the US Dollar. Nevertheless, markets are still pricing in approximately a 90% probability of a rate hike in December, driven by persistent inflation concerns linked to volatile oil prices. Ongoing geopolitical uncertainty also supports demand for the safe-haven currency, helping limit further losses in the DXY.
Developments in the Middle East remain a key source of market uncertainty. Iranian Foreign Minister Abbas Araghchi stated that Tehran is willing to resume diplomatic efforts if Washington demonstrates a genuine commitment to reaching a resolution. Meanwhile, The New York Times reported that the US and Israel have prepared plans for potential new strikes against Iran following the US midterm elections. These developments warrant caution among bearish traders and could prevent the DXY from extending its recent retreat from an 18-month high.
Investors may remain on the sidelines ahead of next week’s key monetary policy decision, following the two-day Federal Open Market Committee (FOMC) meeting scheduled to conclude on October 28. Market participants will also closely monitor the US Personal Consumption Expenditures (PCE) Price Index and preliminary third-quarter GDP figures, both due next Thursday, for further clues about the Fed’s policy outlook. These releases could provide fresh momentum for the DXY and help determine its next directional move.
Technical Analysis
The short-term outlook for the US Dollar Index remains mildly bullish, as the DXY continues to trade above the 200-period Simple Moving Average (SMA) on the four-hour chart. However, resistance at the 23.6% Fibonacci retracement level of 101.92 may limit the ongoing recovery. A decisive break above this barrier would strengthen the bullish outlook and potentially pave the way for further gains toward higher Fibonacci retracement levels.
On the downside, initial support is located around the 38.2% Fibonacci retracement level at 101.28, followed by the 200-period SMA near 101.00, which serves as an additional support zone. A sustained break below this moving average would undermine the emerging bullish momentum and increase the risk of a deeper correction.
Leave a Reply