US Dollar Index Price Forecast: Ahead of FOMC, DXY trades above 102.00 near two-week high

Modest intraday gains fail to gather momentum in DXY after Wednesday's climb to a near two-week high.
Ahead of the crucial two-day FOMC meeting's outcome, bulls trim positions and stay on the sidelines.
An encouraging technical backdrop indicates that an upward move remains the path of least resistance.

Caution among bulls ahead of the crucial FOMC decision has pulled the US Dollar Index (DXY) back from the nearly two-week high reached earlier this Wednesday. Measuring the Greenback against a basket of currencies, the index is now hovering around 102.35, almost flat on the day, with the retreat lacking follow-through.

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With the US Federal Reserve (Fed) widely expected to leave interest rates on hold at the conclusion of its two-day meeting, attention is likely to centre on the accompanying policy statement and Chairman Kevin Warsh's press conference. Further indications of the Fed's policy trajectory will be sought by investors, potentially giving the DXY fresh direction before Thursday's major US economic releases: the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index.

The technical outlook remains tilted towards gains after the index recently broke above both the 50-period Simple Moving Average (SMA) on the 4-hour chart and the mid-range Fibonacci retracement levels. However, sustained momentum above the 61.8% Fibo. retracement has been absent, calling for some caution before DXY bulls position for further advances. Oscillators on the same chart also point to bullish momentum that remains firm but is becoming increasingly stretched.

Should the pullback extend, the first support could emerge at 102.20, the 50% Fibo. retracement. Below that lie the 38.2% retracement at 102.02 and the 50-period SMA at 101.88. A steeper decline would bring the 23.6% level at 101.81 into view, followed by the structural floor around 101.45. Conversely, a renewed advance above 102.38, the 61.8% retracement, could meet immediate resistance around the 78.6% level at 102.63, while additional hurdles are grouped around the previous swing high near 102.95.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

What does the DXY 4-hour chart show?

Economic Indicator Overview

What Does the Fed Interest Rate Decision Signal?

At eight pre-scheduled meetings each year, the Federal Reserve (Fed) reviews monetary policy and decides on interest rates. Keeping inflation at 2% and maintaining full employment form its dual mandate. To pursue these objectives, its principal policy tool is the setting of interest rates, covering both lending to banks and lending between banks. A rate increase generally supports the US Dollar (USD) by drawing in more foreign capital. By contrast, a rate reduction tends to put pressure on the USD as capital moves to countries offering better returns. When rates remain on hold, the focus shifts to the Federal Open Market Committee (FOMC) statement's tone: hawkish language signals expectations of higher interest rates ahead, while a dovish tone indicates expectations of lower rates.

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Consensus estimate: 4%

Previous reading: 4%

Data source: Federal Reserve