The Dollar Index has pushed above its June peak and is trading near 102.10, the highest since April 2025, despite futures marking down the probability of an October Federal Reserve hike from about 70% on Monday to under 40% after the core PCE report. The Fed lifted its policy rate to 3.75–4.00% on 16 September, while softer job openings and consumer confidence, plus a 0.2% August rise in core PCE, have shifted pricing towards delay rather than cancellation: markets still imply another hike this year and close to four by end-2027. Treasury yields have added support, with the 10-year above 5.30% and the 30-year at 5.65%, and pipeline inflation remains evident as the ISM prices index jumped to 77.9.
The euro has slid below 1.1300 for the first time since May 2025, extending to a fourth straight loss, and its 57.6% weight is amplifying the index’s move as dearer crude rebalances terms of trade. The EU imports 96.6% of its crude oil and fuel, with the US supplying 16% in 2024, while Japan’s 13.6% index share also faces higher energy costs; together, economies representing 71.2% of the basket share that exposure. The US is a net exporter, hitting a record 5.8m barrels per day net in April. Focus turns to Friday’s US jobs data: NFP is forecast at 94K versus 162K, unemployment at 4.1%, and earnings at 0.3%, after ADP printed 90K and layoffs ran near 43K, down 18% month on month. Technical markers cited include resistance just above 102.20, then 102.50 and 103.00, with support at 102.00, 101.80 and 101.50, alongside a Stoch RSI near 96.
US Dollar Index Strategy and Energy Imbalances
We recommend that derivative traders maintain a long bias on the US Dollar Index (DXY) above the 101.80 level, targeting initial objectives at 102.50 and 103.00. Although the daily Stoch RSI is near 96, suggesting a brief cooling dip toward 102.00 is possible, the overall upward momentum remains firmly intact. A daily close back under 101.50 should serve as the signal to exit this trade and reassess.
We must focus on the energy flow, where the US’s position as a net exporter of crude oil and fuel shields its economy while draining its major trading partners. Recent energy data confirms the US continues to export record amounts of petroleum products, averaging over 4 million barrels per day in net exports. Meanwhile, the European Union still relies on foreign imports for over 90% of its crude oil, with the US remaining its largest single supplier at roughly 16% of total imports.
This energy imbalance directly pressures the Euro and the Yen, which together make up over 71% of the Dollar Index basket. With the Euro falling below 1.1300 and Japan facing escalating import bills due to its near-total reliance on foreign energy, selling these currencies against the greenback is a highly viable strategy. Furthermore, political uncertainty and rising government debt yields in major eurozone economies like France continue to weigh heavily on the shared currency.
Capital Flows, Yields, and Outlook
We also see foreign capital flooding into US assets to capture some of the most attractive yields in decades. The 10-year US Treasury yield recently reached a staggering 24-year high above 5.30%, offering a massive premium over European and Japanese sovereign debt. Even if the Federal Reserve delays its next rate hike, these elevated yields ensure that global demand for the greenback will remain robust in the medium term.
Looking ahead to upcoming economic releases, we advise traders to prepare for heightened volatility around the September Nonfarm Payrolls (NFP) report. While a strong payroll figure will put immediate rate hikes back on the table, even a softer reading is unlikely to derail the Dollar’s broader multi-month climb. For derivative traders, any temporary weakness in the Dollar following a soft jobs report should be viewed as a strategic buying opportunity.
