United States Dollar Index Steadies Above 99.00 Before Fed Chair Warsh Speech

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining minor support after registering minor losses in the previous day and trading around 99.20 during the Asian hours on Friday.

The Greenback holds ground as investors adopt a cautious stance ahead of Federal Reserve (Fed) Chair Kevin Warsh’s upcoming speech at the annual Jackson Hole symposium, where markets hope to gain clarity on the future direction of US interest rates.

Additionally, the US Dollar receives support from stronger-than-expected US inflation data released earlier this week. The higher inflation figures have reinforced market expectations of another interest rate hike before the end of the year, with the CME FedWatch Tool currently pointing to a 74% probability of a rate increase in December. Conversely, traders anticipate the central bank will stand pat at its immediate September meeting, pricing in a 65% chance that rates will stay put for now.

Concerns surrounding a potential US debt crisis and long-term weakness in the US Dollar continue to grow, fueled in part by the US Treasury’s recent expansion of its debt buyback program.

DXY rebound seen as corrective with focus on mid-99 retest

Strategists at Scotiabank maintain that the latest Dollar strength remains countertrend, stressing that “we still rather view DXY gains as a correction against a still deeply entrenched downtrend on the charts.” However, they note that “after a firm rise Wednesday, near-term focus reverts to the index retesting the mid-99 area,” keeping attention on the potential for a further short-term extension of the move even within a broader bearish backdrop.

Hammack leans more hawkish as inflation persistence drives call to act

Fed’s Hammack delivered a distinctly hawkish message, with an 8/10 FXS Speechtracker score modestly above the established baseline of 7.5/10, underscoring heightened concern about persistent inflation. The emphasis that “now is the time to act” and that current policy is not providing restriction, alongside a belief that the neutral rate is on the higher side, points to support for tighter policy than currently priced. Worries about an emerging “inflationary mindset” and potential loss of public confidence in a return to 2% reinforce upside risks for the Dollar as markets reassess the path of rates.

Technical Analysis:

In the daily chart, Dollar Index Spot trades at 99.20. The near-term bias remains bearish as price holds beneath the medium-term 50-day Exponential Moving Average (EMA), while clinging to the short-term nine-day EMA pivot after a sustained pullback. The 14-day Relative Strength Index (RSI) at 39.49 sits below the midline, hinting at lingering downside pressure but without oversold extremes, as the FXS Fed Sentiment Index softens toward 129.11, suggesting a less supportive policy backdrop for the dollar.

On the topside, initial resistance is defined by the 50-day EMA at 99.88, and a sustained recovery above this barrier would be needed to alleviate the current bearish tone and open room for a broader rebound. While immediate horizontal support is not evident in the indicators, a daily close decisively below the nine-day EMA pivot at 99.18 would reinforce downside momentum and keep the index vulnerable to further declines in the short term.

US Dollar Index: Daily Chart