US Dollar Index Price Forecast: Further gains towards 104.00 appear likely

• The US Dollar gains ground as traders weigh the prospect of a 50 bps rate increase by the Fed.
• Friday’s release of US PPI figures for October remains in focus for investors.
• The prevailing uptrend supports additional gains towards 104.00.

The US Dollar (USD) leads its major currency peers on Thursday, barring the Japanese Yen (JPY). Its strength reflects concerns that the Federal Reserve (Fed) may step up its ongoing monetary tightening cycle to curb persistently high inflationary pressures.

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

Although the prospect of a larger Fed interest rate increase at the December meeting remains remote, it has provided substantial support to the United States (US) currency.

Do Waller’s remarks put a 50bp Fed hike back in focus?

Fed Governor Christopher Waller’s comments before the inflation release, rather than the figures themselves, have prompted the latest shift in market thinking, according to analysts at MUFG/BTMU. As they put it, “on this occasion the market rethink is to consider the prospect of a 50bp hike,” with that option “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 this reassessment, MUFG/BTMU say, noting “the OIS market now partially pricing the risk of a 50bp hike on 9th December.” A quicker policy adjustment is supported by Waller’s argument, they add, as he “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,” strengthening the rationale for moving faster.

Despite this, 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.”

Attention in financial markets now turns to Friday’s publication of the US Producer Price Index (PPI) figures for October.

Can the US Dollar Index Extend Its Technical Advance?

Dollar Index Spot is quoted at 103.02 on the weekly chart as the bullish breakout from the Cup and Holder formation extends. With the pair comfortably above both the 10-week Exponential Moving Average (EMA) at 101.69 and the previous channel ceiling near 102.07, the underlying support structure appears firm.

Strong upward momentum is reflected in the RSI (14) reading of 66.36, though the indicator is nearing overbought territory. The advance therefore remains constructive, but further 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. If the pullback deepens, the channel’s lower edge near 100.84 would likely come into focus, where buyers could try to regain control and maintain the broader bullish bias. Further upside could take the index towards 103.54, the high recorded on 7 April 2025, before 104.00.

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