United States Dollar Index trades firmly above 100.00 while approaching to weekend

The US Dollar (USD) consolidates in a tight range during the Asian trading session on Friday, but is close to its highest level seen in the last six weeks. At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near 100.27.

The US Dollar outperformed this week as the Federal Reserve (Fed) raised interest rates by 25 basis points (bps) to the 3.75%-4.00% range and traders have repriced interest rate expectations.

According to the CME FedWatch tool, the odds of the Fed delivering at least one more interest rate hike have increased to 88% from 66.3% seen a week ago.

Hawkish Fed bets have accelerated as the Fed’s dot plot showed that 16 of 18 Federal Open Market Committee (FOMC) members see at least one interest rate hike in the remaining year. Also, upside inflation risks communicated by Fed Chairman Kevin Warsh at the press conference have supported interest rate hike expectations. “Inflation is too high and has been for too long,” Warsh said.

Next week, investors will focus on the preliminary United States (US) S&P Global Purchasing Managers’ Index (PMI) data for September, which will be published on Wednesday.

US Dollar Index Technical Analysis

In the daily chart, Dollar Index Spot trades at 100.26. The index has pushed back above the 20-day exponential moving average (EMA) at 99.56, tilting the near-term bias bullish as price consolidates over reclaimed trend support. Momentum is constructive, with the 14-period Relative Strength Index (RSI) hovering near 62, suggesting sustained buying pressure without yet entering overbought territory.

On the downside, initial support is seen at the 20-day EMA around 99.56, which underpins the latest advance and would be the first line of defense on any pullback. A daily close above 100.26 would reinforce the bullish bias, keeping the focus on further gains as long as the index holds above the short-term average.