US Dollar Index Price Forecast: Likely revisit yearly high at around 101.80

The US Dollar (USD) outperforms its peers amid firm expectations that the Federal Reserve (Fed) will deliver more interest rate hikes this year. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 101.25. The DXY is close to its two-month high of 101.40 posted last week.

According to the CME FedWatch tool, there is an almost 70% chance that the Fed will hike interest rates in the October meeting. The tool also shows a 60% probability of the Fed delivering a quarter-to-a-percent interest rate hike in both policy meetings remaining this year.

According to TD Securities, “an October hike is looking more likely,” with economists arguing that the Fed will be “unlikely to regain its confidence in inflation progress before the October meeting.” With “most participants expecting further tightening,” they contend “it does not make sense to wait until December to hike again.”

TD Securities therefore “expect the Fed to hike two more times (October and January),” noting that “inflation remains above target while risks are growing.” At the same time, they judge that “the labor market has stabilized, with some signs of strengthening, and activity data has been robust.” In their view, “the economy can handle more restriction, and the Fed is now providing it,” while “the evolution of inflation data will determine the extent and pace of hikes later in the cycle.”

On the economic data front, investors keenly await the US JOLTS Job Openings data for August, which will be published at 14:00 GMT. The Job Openings report will likely show that US employers posted 7.23 million fresh jobs, marginally lower than 7.271 million in July.

US Dollar Index Technical Analysis

In the daily chart, Dollar Index Spot trades at 101.26, keeping a bullish near-term bias as price holds above the 20-day Exponential Moving Average (EMA) at 100.30. The location of spot over this key trend gauge suggests underlying demand remains in place, although the Relative Strength Index (RSI) at 70.14 signals overbought conditions that could limit immediate upside and encourage consolidation or a corrective pause.

On the downside, initial support is located at the 20-day EMA around 100.30, followed by the psychological level of 100.00. On the upside, the yearly high at 101.80 is the key hurdle.