United States Dollar Index holds gains ahead of US PCE inflation data

• US Dollar Index remains stronger after the Fed maintained rates at 3.75%–4.00% as widely anticipated.
• Fed paused rate hikes to gather data on elevated price pressures despite steady job and economic growth.
• Fed decision saw two dissents, with officials favoring an immediate hike, while Chair Warsh reaffirmed the 2% inflation target.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding ground after posting modest losses the previous day and trading near 102.30 during European hours on Thursday.

The Greenback moved sideways after the Federal Reserve (Fed) kept interest rates unchanged as widely expected, while providing limited clarity on its next policy move. Traders are now awaiting the upcoming US Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation metric, for clearer signals on the future trajectory of monetary policy.

The Fed held rates steady at 3.75%–4.00% and noted that economic activity continues to expand. In its official statement, the central bank highlighted resilient domestic spending, robust capital investment, and strong productivity growth. Regarding its labor market mandate, the Fed observed that job gains have kept pace with workforce growth while the unemployment rate has shown little change.

The Fed acknowledged that price pressures remain elevated, but it chose to pause further rate hikes to gather additional data and assess the appropriate monetary policy stance going forward. The decision was not unanimous: Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, voting instead in favor of an immediate rate increase.

Fed Chair Kevin Warsh reaffirmed the Federal Open Market Committee's commitment to delivering price stability and achieving its 2% inflation target, emphasizing that the underlying economy remains strong. He also outlined the central bank's upcoming schedule, noting that the Fed will hold eight meetings next year—including one without a formal vote—and that he anticipates six policy-setting meetings in 2028.

Technical Analysis:

In the daily chart, Dollar Index Spot trades at 102.30. The near-term bias is bullish as price holds above both the nine- and 50-day Exponential Moving Averages (EMAs), suggesting a constructive underlying trend. The 14-day Relative Strength Index (RSI) at 60.01 stays comfortably above the neutral 50 line, hinting that upward momentum remains in place even after the latest consolidation.

On the downside, immediate support is located at the nine-day EMA around 102.06, with a deeper technical floor at the 50-day EMA near 101.20. On the topside, resistance is referenced by the FXS Fed Sentiment Index at 141.89, though the wide gap implies that, in the near term, the Dollar Index could continue to grind higher while the short-term EMAs act as a dynamic base.

Fed holds steady as FOMC signals December hike still in play

Analysts at Rabobank observe that the Fed opted to leave US monetary policy unchanged at its latest meeting, with the decision coming in “slightly less hawkish” than they had anticipated. They highlight that “just two FOMC members dissented to vote for a hike,” underscoring a modestly softer tilt in the committee’s stance. Nonetheless, Rabobank notes that “FOMC Chair Warsh did prepare markets for another hike in December,” keeping the prospect of further tightening firmly on the table despite the pause.

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