US Dollar Index Price Forecast: Rally Towards 104.00 Looks Likely to Continue

• The prospect of a 50 bps Fed rate rise supports the US Dollar as traders weigh the possibility.
• October’s US PPI figures, due on Friday, are the next focus for investors.
• The prevailing uptrend supports scope for further gains towards 104.00.

Elevated inflationary pressures are fuelling concerns that the Federal Reserve (Fed) could step up its current monetary tightening cycle. Against that backdrop, the US Dollar (USD) outpaces its major currency counterparts on Thursday, with the exception of the Japanese Yen (JPY).

A new 18-month peak of 103.08 is reached during the day by the US Dollar Index (DXY), which tracks the Greenback against six major currencies.

Although the prospect of a larger Fed interest rate rise at December’s meeting remains remote, it has nevertheless provided substantial support for the United States (US) currency.

Waller remarks bring 50bp Fed rise back into focus

Rather than the inflation figures themselves, Fed Governor Christopher Waller’s comments before the release have prompted the latest market reassessment, according to analysts at MUFG/BTMU. They describe the shift by noting that “on this occasion the market rethink is to consider the prospect of a 50bp hike,” with that possibility “only now being considered because of Waller’s comments prior to the CPI report rather than the CPI report itself.” In their assessment, his suggestion that “a stronger CPI print may warrant a 50bp hike” has “sparked a debate over whether Waller had knowledge of the CPI print.”

Rates markets have been quick to reflect the reassessment, MUFG/BTMU say, noting that “the OIS market now partially pricing the risk of a 50bp hike on 9th December.” The analysts also highlight that Waller “makes the point that the sticky inflation and energy risks warrant the reversal of the 75bps of cuts and hence why wait two meetings to do that,” lending weight to the argument for a quicker policy adjustment.

Nevertheless, the analysts at MUFG/BTMU maintain that “we remain sceptical of the need to hike by 50bps at this stage and suspect the majority will see the better risk-reward in going by 25bps.” Ahead of the FOMC meeting, they note there is “still another payrolls report (but no further CPI prints, although it’s the day after) before the FOMC meeting,” while warning that “a strong print plus a rebound in crude oil after the recent sharp drop would be one scenario of a possible more aggressive hike.”

Friday’s release of October’s US Producer Price Index (PPI) figures will be the next focus for financial markets.

US Dollar Index Extends Bullish Breakout

At 103.02 on the weekly chart, Dollar Index Spot continues its bullish breakout from the Cup and Holder formation. With the pair comfortably above both the 10-week Exponential Moving Average (EMA) at 101.69 and the former channel ceiling around 102.07, the technical structure suggests solid support below the current price.

A reading of 66.36 on the RSI (14) indicates robust positive momentum as the indicator nears overbought territory. The advance therefore remains constructive, although gains could lose pace if buying pressure becomes overstretched.

The former channel ceiling near 102.07 offers the first downside support, ahead of the 10-week EMA at 101.69 and the earlier consolidation zone around 101.64. Should the pullback deepen, the channel’s lower boundary near 100.84 would likely come into focus, with buyers potentially seeking to regain control there and maintain the broader bullish bias. Further gains could take the index towards the high of 7 April 2025 at 103.54, before 104.00.

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