US Dollar Index Holds Firm Near 102.00 With FOMC Meeting in Focus

• After hitting a three-week low, DXY extends its rebound with a third consecutive day of gains.
• The safe-haven USD draws support from expectations of a Fed rate rise, a recovery in US bond yields and geopolitical risks.
• With the crucial two-day FOMC meeting approaching, traders appear reluctant to take sizeable bullish positions.

At around 102.00, the US Dollar Index (DXY) is struggling to build on a near two-week high reached during the Asian session as traders stand aside before the closely watched FOMC policy meeting. The index, which measures the Greenback against a basket of currencies, has nevertheless attracted buying interest for a third consecutive day, extending its rebound from the three-week low recorded last Thursday.

Wednesday brings the US Federal Reserve's (Fed) policy decision, with interest rates widely expected to remain unchanged. With no updated economic projections due, attention will centre on the accompanying policy statement and remarks from Fed Chair Kevin Warsh at the subsequent press conference. Thursday's key US economic releases, the Advance Q3 GDP estimate and Personal Consumption Expenditures (PCE) Price Index, will also be scrutinised for indications of the Fed's future policy course. That outlook will be instrumental in shaping the DXY's next directional move.

Ahead of the central bank decision and key data releases, recent comments from Fed officials have indicated that there is no pressing need to increase interest rates. Nevertheless, market pricing still implies around an 80% probability of another rise in US borrowing costs in December.  Concerns over inflation fuelled by high energy prices also support expectations of further Fed tightening. Meanwhile, US bond yields have edged higher following their recent fall to a three-week low. Together with continuing geopolitical uncertainty, this provides support for the safe-haven Greenback, suggesting that the DXY's path of least resistance remains upwards.

DXY: 4-hour price action

DXY Retains a Bullish Technical Bias

Trading above its 200-period Simple Moving Average (SMA) on the 4-hour chart, the DXY retains a positive technical bias. Its break above the 23.6% Fibonacci retracement at 101.92 adds weight to the near-term upward trend. However, the cycle anchor around 102.95 continues to limit the broader advance and marks the first resistance level.

Should the index slip back below the recently regained 23.6% Fibonacci retracement at 101.92, support could emerge from the closely grouped 38.2% retracement at 101.28 and 200-period SMA at 101.26. A more pronounced retreat would bring the 50.0% retracement at 100.77 and 61.8% level at 100.26 into view. If the current bullish structure breaks down, more distant downside targets lie at the 78.6% retracement at 99.52 and the 98.59 area.

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