Ahead of US PCE inflation data, United States Dollar Index remains higher

• US Dollar Index retains its gains following the widely anticipated Fed decision to hold rates at 3.75%–4.00%.
• Despite steady employment and economic growth, the Fed put further rate increases on hold to collect more data on persistent price pressures.
• Two officials dissented in favour of an immediate rate increase, while Fed Chair Warsh reiterated the commitment to the 2% inflation target.

Holding its ground near 102.30 in Thursday’s European session, the US Dollar Index (DXY) is stabilising after modest losses a day earlier. The index tracks the US Dollar (USD) against a basket of six major currencies.

The Greenback traded in a narrow range following the Federal Reserve’s (Fed) widely expected decision to leave interest rates unchanged, with little guidance on the next policy step. For a clearer indication of the monetary policy outlook, traders are looking to the forthcoming US Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation.

Alongside its decision to retain rates at 3.75%–4.00%, the Fed said economic activity was continuing to grow. Resilient domestic expenditure, strong capital investment and robust productivity gains featured in the central bank’s official statement. On the employment side of its mandate, the Fed noted that job creation had matched growth in the workforce, with the unemployment rate largely unchanged.

Although it recognised that price pressures were still elevated, the Fed paused further rate increases to collect more data and evaluate the appropriate policy stance ahead. Not all officials supported the decision. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack cast dissenting votes, preferring an immediate increase in rates.

Stressing the continued strength of the underlying economy, Fed Chair Kevin Warsh reiterated the Federal Open Market Committee’s commitment to price stability and its 2% inflation objective. He also set out the central bank’s forthcoming meeting schedule: eight meetings next year, including one without a formal vote. For 2028, he anticipates six policy-setting meetings.

Technical Analysis: Can the Bullish Bias Hold?

A bullish near-term outlook remains in place on the daily chart, where Dollar Index Spot stands at 102.30, above both its nine- and 50-day Exponential Moving Averages (EMAs). This positioning points to a positive underlying trend. At 60.01, the 14-day Relative Strength Index (RSI) is well above the neutral 50 mark, suggesting that upward momentum persists despite the recent consolidation.

The nine-day EMA, around 102.06, provides the first downside support, followed by a lower technical floor at the 50-day EMA near 101.20. For resistance, the FXS Fed Sentiment Index is cited at 141.89. Given that substantial gap, the Dollar Index could edge higher in the near term, supported dynamically by the short-term EMAs.

Does the Fed’s pause leave a December FOMC hike on the table?

Rabobank analysts describe the Fed’s latest decision to keep US monetary policy unchanged as “slightly less hawkish” than they had expected. In their assessment, the fact that “just two FOMC members dissented to vote for a hike,” points to a marginally softer committee stance. Even so, the pause does not rule out additional tightening: Rabobank observes that “FOMC Chair Warsh did prepare markets for another hike in December,” leaving that possibility firmly open.

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