USDX Holds Near 18-Month High as FOMC Minutes Support Dollar

Key Points

• Minutes from the September 15–16 FOMC meeting showed that policymakers agreed to raise interest rates by 25 basis points, bringing the target range to 3.75%–4.00%.
• Policymakers remain concerned about persistent inflation and the possibility of further interest rate increases.
• Traders are monitoring movements in other major currencies, particularly the euro and Japanese yen, which have a major influence on the dollar.
• USDX retreats to 101.986, signalling weakening intraday momentum.
• The 102.000 zone becomes crucial, traders are watching whether USDX can reclaim this psychological level or extend losses towards 101.980.

Market Move

The US Dollar Index remained close to its 18-month high on Thursday, supported by expectations that the Federal Reserve could maintain restrictive monetary policy for longer.

The dollar index rose approximately 0.3% on Wednesday to around 102.23 after the release of the Federal Open Market Committee (FOMC) minutes. The minutes showed that policymakers remained concerned about inflation and considered an additional rate hike potentially necessary.

USDX initially moved between 102.010 and 102.025 before falling towards 101.990. Buyers subsequently pushed the index higher, with a local peak near 102.038. That recovery proved temporary as USDX lost momentum and fell below its 9-period moving average. A second attempt to recover towards 102.030 also failed, followed by another decline towards 101.986.

Why Traders Are Watching

The US dollar remains a key focus as investors assess whether the Federal Reserve will deliver another interest rate increase before the year end. Minutes from the September 15–16 FOMC meeting showed that policymakers unanimously agreed to raise interest rates by 25 basis points, bringing the target range to 3.75%–4.00%. Officials continued to view inflation as its main concern, with some suggesting that existing interest rates might not be enough to slow economic activity.

However, markets are not expecting an immediate increase. Futures pricing indicates approximately a 19% probability of another hike at the Fed’s October meeting, suggesting traders currently favour a pause before any potential tightening in December. Traders are also monitoring movements in other major currencies, particularly the euro and Japanese yen, which have a major influence on the dollar. A recovery in either currency could place more downward pressure on the index.

Key Trading Levels

The challenge for USDX is reclaiming 102.000, which now acts as resistance after the latest breakdown. A sustained move above this level could allow buyers to retest 102.020–102.030, where previous recovery attempts encountered selling pressure.

On the downside, 101.990 is the first area to monitor, although the latest price has already slipped marginally below it. A sustained break beneath 101.980–101.981 would confirm further weakness below the displayed intraday range.

Bullish and Bearish Setups

The bullish scenario depends on USDX regaining 102.000 and moving back above its 9-period moving average. A successful recovery, particularly with improving buying volume, could suggest that the latest decline is temporary rather than the beginning of a deeper correction.

The bearish scenario develops if USDX breaks below 101.980 and remains beneath that level. Continued trading below the declining moving average, combined with further lower highs and stronger selling volume, would reinforce the possibility of an extended intraday decline.

Disclaimer

The price levels and market scenarios above reflect the author’s assessment at the time of writing. They do not represent financial advice or an official recommendation from VT Markets. Traders should conduct their own analysis and manage risk carefully.

USDX Prediction: What’s Next

USDX could experience increasing selling pressure if upcoming US economic data suggest that inflation is easing or that economic growth is slowing quicker than expected. Softer inflation readings and weaker employment numbers could reduce expectations for another Fed rate hike, weakening the dollar’s interest rate advantage. A stronger euro or Japanese yen could also weigh on the index.

On the other hand, USDX could recover if incoming inflation data reinforces the Federal Reserve’s concerns about price pressures. Higher energy costs, strong consumer spending and elevated Treasury yields could strengthen expectations that US interest rates will remain higher for longer. Additional hawkish comments from Fed policymakers could also provide support, especially if markets begin pricing in a greater chance of another rate hike in December.

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