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US Dollar Index Slips Below 102 as Fed Rate Hike Bets Support Dollar

Key Takeaways -The US Dollar Index remains near an 18-month high after gaining 0.3% on Wednesday, supported by hawkish Federal Reserve minutes. -Minutes from the September FOMC meeting showed that policymakers raised interest rates by 25 basis points to 3.75%–4.00%. -Persistent inflation concerns have kept expectations of further monetary tightening in focus. -USDX retreats towards 101.986 after failing to sustain a recovery above 102.030. -Traders are watching 102.000 as immediate resistance, while 101.980–101.981 remains an important downside support area. The index climbed to approximately 102.23 on Wednesday following the release of hawkish Federal Open Market Committee (FOMC) minutes. However, the latest intraday chart shows USDX losing momentum after repeated attempts to recover above 102.030. Price briefly reached 102.038 before reversing lower and slipping beneath its 9-period moving average. The index subsequently declined towards 101.986, suggesting that short-term selling pressure is emerging even as the broader monetary policy outlook continues to support the dollar. Why Traders Are Watching the US Dollar Index Attention remains focused on the Federal Reserve's next policy decision after minutes from the September 15–16 FOMC meeting highlighted policymakers' concerns about persistent inflation. Officials unanimously agreed to raise interest rates by 25 basis points, bringing the federal funds target range to 3.75%–4.00%. The minutes also suggested that further tightening could be necessary if inflation remains elevated. However, markets are not expecting an immediate increase. Futures pricing indicates approximately a 19% probability of another rate hike at the October meeting, suggesting that traders currently favour a pause before any potential tightening later in the year. The dollar's performance also depends on movements in other major currencies, particularly the euro and Japanese yen. A stronger euro or yen could weigh on USDX even if US interest rate expectations remain relatively supportive. Key factors influencing USDX include: -Federal Reserve policy: Expectations of further interest rate increases could support the dollar by keeping US yields elevated. -Inflation data: Persistent price pressures may reinforce the case for restrictive monetary policy, while softer readings could weaken rate hike expectations. -Treasury yields: Higher US bond yields could strengthen demand for dollar-denominated assets. -Major currency movements: Recoveries in the euro or Japanese yen could place additional downward pressure on the index. Key Trading Levels USDX is trading around 101.986 after failing to maintain its earlier recovery towards 102.038. The latest chart shows the index falling beneath its 9-period moving average, with sellers gaining control of short-term price action. The 102.000 level is the immediate resistance to watch. A sustained recovery above this psychological level could allow buyers to retest 102.020–102.030, where previous attempts to move higher encountered selling pressure. A stronger breakout could bring the 102.040–102.051 resistance area into focus, representing the upper boundary of the recent intraday trading range. On the downside, 101.990 represents an initial reference level that price has already slipped below. The more important support area lies at 101.980–101.981, near the displayed session low. A sustained break below 101.980 could reinforce bearish momentum and increase the possibility of further losses beyond the visible trading range. USDX Prediction: Can the Dollar Reclaim 102.000? The US Dollar Index's next move will depend on whether buyers can regain control above 102.000 while markets reassess the Federal Reserve's monetary policy outlook. A stronger-than-expected inflation reading, elevated Treasury yields or additional hawkish comments from Fed officials could reinforce expectations of further tightening. This may help USDX recover towards 102.020–102.030, followed by 102.040–102.051. However, weaker US employment data or signs of easing inflation could reduce expectations for another rate hike and weaken demand for the dollar. A recovery in the euro or Japanese yen could add to the downside pressure. For a deeper analysis of the US Dollar Index, Federal Reserve policy expectations and key technical levels, click the learn more button below.

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Publication date:

2026-10-08 08:03:54 (GMT)

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