DXY Rebounds From Key Support as Bulls Target 101.50

Summary:

The Dollar remains firm ahead of an expected 25bp Fed hike, supported by 5.00% Treasury yields and oil above $100. Warsh’s guidance on further tightening will be the key catalyst.

Buy USDX

End Time

CLOSED

99.400

ENTRY

101.500

TGT

98.000

99.870 -0.120 -0.12%

300

Points

Profit

98.000

99.700

CLOSING

99.400

ENTRY

101.500

TGT

The US Dollar remains supported ahead of the Federal Reserve’s monetary policy decision, with rising Treasury yields, elevated energy prices and expectations of further tightening strengthening demand for the Greenback.

US yields have climbed sharply, with the 10-year Treasury yield reaching 5.00% and the 2-year rising to 4.66%. Markets are pricing more than a 90% probability of a 25-basis-point Fed hike, which would lift the policy rate to 4.00%, while expectations increasingly point to another increase before year-end.

Energy prices are adding to the Fed’s inflation challenge. Brent crude remains above $100 per barrel amid continued Middle East supply concerns, increasing the risk that higher fuel and transportation costs keep inflation elevated. MUFG sees the surge in Treasury yields as reflecting these persistent inflation concerns, although higher rates also increase government debt-servicing costs and place additional strain on interest-sensitive sectors such as housing.

This leaves the Fed facing a difficult balance between controlling inflation and avoiding excessive tightening as borrowing costs rise across the economy.

For the Dollar, however, the immediate backdrop remains constructive. ING expects the Fed to maintain a relatively hawkish stance, particularly with oil threatening to extend toward $110 per barrel. With the rate hike itself largely priced in, attention will focus on Fed Chair Kevin Warsh’s guidance and whether policymakers keep the door open to additional tightening.

A hawkish message could keep Treasury yields elevated and extend Dollar strength, while a surprise hold or softer guidance could trigger a correction. For now, the combination of 5.00% Treasury yields, oil above $100 and expectations of further Fed tightening continues to favor the Greenback.

Technical Analysis

The US Dollar Index is attempting to rebuild bullish momentum after its recent correction from the 101.50 region, with price now recovering around 99.37. The broader daily structure remains constructive, as DXY continues to trade within the larger rising formation while buyers have repeatedly defended the lower boundary of that structure.

The most important development is the reaction from the 98.60–98.75 demand zone. This area sits close to the rising trendline and has now attracted buyers on multiple tests, creating a solid technical base. The latest rebound has pushed DXY back above the 0.618 Fibonacci retracement near 99.05, strengthening the case that the recent decline may have been corrective rather than the beginning of a larger bearish reversal.

Immediate attention now turns to the 99.45–99.55 region, which coincides with the 0.50 Fibonacci level and a previous horizontal pivot. A sustained daily move above this area would improve the bullish structure and expose the 0.382 retracement around 99.98, followed by the 0.236 level near 100.60.

Beyond those intermediate barriers, the major upside objective remains the 101.40–101.55 resistance zone. This area rejected price during the June and July advances, making it the key level bulls must eventually overcome. The projected structure on the chart suggests DXY could experience another brief pullback or consolidation before building momentum through 100.00 and eventually challenging 101.50.

The bullish scenario remains valid while 98.60–98.75 holds. A decisive break beneath that demand zone and the rising trendline would weaken the recovery and expose the 0.786 Fibonacci region around 98.30.

Overall, DXY appears to be transitioning from correction into recovery. A confirmed break above 99.50 would provide stronger evidence that buyers are regaining control, with 100.00, 100.60 and ultimately 101.50 forming the next upside objectives.

TRADE RECOMMENDATION

BUY DXY

ENTRY PRICE: 99.40

STOP LOSS: 98.00

TAKE PROFIT: 101.50

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

3006

Win Rate

63.66%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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