US Dollar Index Price Forecast: DXY bulls appear hesitant near 101.75, below 23.6% Fibo.

• Buying interest lifts DXY on Wednesday, but bullish conviction remains weak.
• The safe-haven USD finds support from geopolitical risks and expectations of a Fed rate hike.
• Aggressive bullish positioning calls for caution given the technical picture.

Modest gains in the US Dollar Index (DXY) on Wednesday lack bullish conviction, even as the recovery extends from the near three-week low reached the previous day. Measuring the Greenback against a basket of currencies, the index holds near the 101.75-101.80 region with small intraday gains during the early European session.

Safe-haven demand supports the US Dollar (USD) as conflicting signals on US-Iran peace talks sustain the geopolitical risk premium. An unconfirmed report on Tuesday suggested that Qatar and Pakistan had proposed a compromise plan to the US and Iran that satisfied both sides' demands. Subsequently, however, Bloomberg reported that a diplomat involved in US-Iran negotiations had challenged reports suggesting an agreement was imminent.

Elevated oil prices also continue to draw support from the US-Iran standoff over the Strait of Hormuz, adding to inflation risks and strengthening expectations of a hawkish Federal Reserve (Fed). Traders assign around a 90% probability to another increase in borrowing costs by the US central bank in December, according to the CME Group's FedWatch Tool. These expectations provide an additional source of support for the DXY, favouring bullish traders.

Holding above the 200-period Exponential Moving Average (EMA) on the 4-hour chart leaves the index with a neutral to mildly positive near-term technical bias. However, consolidation remains the broader signal: the Moving Average Convergence Divergence (MACD) sits near the zero line with flat histogram readings, and the Relative Strength Index (RSI), at 44.57, suggests little directional conviction.

Confirmation that the recent correction from the highest level since April 2025 has ended would therefore require a sustained recovery above the 23.6% Fibonacci retracement at 101.90. Such a move would set the stage for further upside, with the DXY potentially advancing towards the more substantial barrier at the cycle high anchor near 102.92.

Should the index weaken, the first support lies at 101.25, where the 38.2% retracement converges with the 200-period EMA. Further down, the 50.0% retracement at 100.76 and the 61.8% retracement at 100.25 precede the 78.6% level at 99.52, followed by the earlier swing low near 98.59.

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

DXY: Technical outlook on the 4-hour chart