- DXY extends hot US inflation data-inspired rally amid firming Fed rate hike expectations.
- The US-Iran standoff keeps the geopolitical risk premium in play and supports the USD.
- The fundamental backdrop suggests that the path of least resistance remains to the upside.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, hits a fresh high since April 2025 during the Asian session on Thursday, with bulls looking to build on the momentum beyond the 103.00 mark.
Following hotter-than-expected US consumer inflation data for October, several Federal Reserve (Fed) officials adopted a more hawkish tone and reaffirmed market bets for further policy tightening. Moreover, traders have also started pricing in the possibility of a jumbo 50-basis-point (bps) Fed rate hike in December, pushing the yield on the benchmark 10-year US government bond back above the 5% threshold on Wednesday. This, in turn, is seen as a key factor supporting the DXY.
Waller’s hawkish tilt boosts Fed tightening expectations and supports the Dollar
Fed’s Waller delivered a notably more hawkish message, with a 9/10 FXS Speechtracker score standing well above the 7.3/10 historical average, underscoring a clear bias toward further tightening. The conditional openness to a half-point rate hike in December if core CPI prints 0.3% or higher, alongside support for at least a quarter-point move even on better data, signals a strong reaction function to persistent inflation and broad-based price pressures. Emphasis that policy has not been as restrictive as previously thought, and that real rates must rise to maintain tightness, reinforces upside risks for US yields and the Dollar.
The FXS Fed Sentiment Index rose by 3.17 points to 145.50, deepening hawkish positioning well above the neutral 100 threshold and aligning with the elevated FXS Speechtracker score. This combination of a stronger hawkish index reading and an above-baseline speech tone suggests markets should price in a higher probability of additional Fed rate hikes, with potential support for the Dollar against the Euro and Yen.
Meanwhile, the geopolitical risk premium remains in play amid the US-Iran standoff over the Strait of Hormuz and fresh US strikes on Iran’s Qeshm Island. Adding to this, Iran has attacked ship navigation systems on the Omani island of Didamar, located at the entrance of the Persian Gulf. Furthermore, Iranian Armed Forces Deputy Chief of Staff Brigadier General Kioumars Heidari said that the strategic waterway will not open except by the order of the leader of the revolution.
The latest developments temper expectations for a diplomatic resolution to end the US-Iran conflict and turn out to be another factor benefiting the safe-haven US Dollar (USD), suggesting that the path of least resistance for the DXY remains to the upside. Traders now look forward to the release of the Weekly Initial Jobless Claims data, which, along with speeches from influential FOMC members and the incoming geopolitical headlines, should provide some meaningful impetus to the index.
DXY 4-hour chart
Technical Analysis
The DXY retains a bullish near-term bias following the previous day's break above the 102.40-102.50 horizontal resistance. Moreover, spot prices hold well above the 200-period Exponential Moving Average (EMA) on the 4-hour chart, reinforcing a constructive tone. Meanwhile, any meaningful corrective slide could find initial support at the 200-period EMA around 101.55, where buyers would be expected to defend the broader uptrend if a pullback unfolds.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.