US Dollar Index (DXY) stays above 102.00: Are bulls holding back ahead of key US data?

Dip-buying lends support to DXY in Asian trading, but further gains remain elusive.
The USD finds support as oil-led inflation worries sustain expectations of a Fed rate hike.
Ahead of key US data, geopolitical uncertainty adds to the safe-haven dollar's appeal.

Buying interest keeps the US Dollar Index (DXY) above the psychological 102.00 mark on Thursday, although its modest rise during the Asian session has struggled to gather momentum. The index, which measures the Greenback against a basket of currencies, is still trading near Wednesday's two-week high. Traders are now awaiting key US macroeconomic releases for a fresh directional trigger.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

With markets pricing in the possibility of a December rate hike, close attention will turn to the Advance US ADP report and the Personal Consumption Expenditures (PCE) Price Index, both scheduled for release later today. The figures will offer further clues to the Federal Reserve's (Fed) policy outlook. Stronger readings would therefore bolster those market expectations and lift the DXY. Any initial response to disappointing figures, however, is likely to be contained following the Fed's hawkish pause on Wednesday.

A 10-2 vote at the close of the October policy meeting left US interest rates unchanged, as widely anticipated. Governor Lisa Cook and Cleveland Fed President Beth Hammack favoured a quarter-point increase. At the subsequent press conference, Fed Chair Kevin Warsh indicated that the central bank remains alert to persistent inflation and geopolitical risks. Coupled with continuing geopolitical uncertainty, that stance should lend support to the Greenback and the DXY.

Efforts to revive peace talks form the latest development in the Middle East crisis, with US Vice President JD Vance reportedly writing to Mohsen Rezaei, secretary of Iran's Supreme National Security Council. The reported letter comes as US President Donald Trump threatens renewed military action in the coming weeks. Several Middle East countries and regional allies have been told by US officials to prepare for a possible short, intense military campaign against Iran after the November 3 midterm elections.

To avert a renewed war, regional mediators led by Qatar are seeking to bring the US and Iran back to the negotiating table. The geopolitical risk premium nevertheless persists, implying that corrective declines in the DXY are more likely to attract buyers and remain contained. Before positioning for a resumption of the advance from the September low, however, bulls may seek a sustained break above the horizontal resistance at 102.55, with a test of the October swing high then in focus.

What does the DXY 1-hour chart show?

Which Technical Levels Could Shape the Next Move?

During the overnight correction, the index displayed resilience below the confluence near 102.10 formed by the 100-period Exponential Moving Average (EMA) and the 38.2% Fibonacci retracement. Just below this lies the 38.2% retracement at 102.09. Additional buying interest is seen at the 50.0% and 61.8% retracements, at 101.97 and 101.85 respectively, followed by the 78.6% level at 101.67. For an advance, the first hurdle is the 23.6% retracement near 102.25, followed by the cycle high anchor around 102.49. A break above that level would pave the way for a more decisive bullish extension.

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

Inflation: Key Questions Answered

How is inflation measured and understood?

A rise in the prices of a representative basket of goods and services is measured as inflation. The headline measure is generally reported as a percentage change month-on-month (MoM) and year-on-year (YoY). By removing more volatile components, including food and fuel, core inflation excludes items whose prices can shift with geopolitical developments and seasonal conditions. Economists concentrate on this core reading, which is also the measure targeted by central banks. Their mandate is to maintain inflation at a manageable rate, typically around 2%.

What does the Consumer Price Index (CPI) measure?

Changes in the prices of a basket of goods and services over time are tracked by the Consumer Price Index (CPI). The readings are generally presented as percentage changes month-on-month (MoM) and year-on-year (YoY). Central banks target Core CPI because it strips out volatile food and fuel components. A Core CPI reading above 2% usually leads to higher interest rates, while a fall below 2% typically has the reverse effect. As higher interest rates support a currency, rising inflation generally strengthens it; falling inflation tends to have the opposite impact.

How does inflation affect foreign exchange markets?

A country's currency tends to strengthen when inflation is high and weaken when inflation is lower, even though this may appear counter-intuitive. The explanation lies in the central bank's usual response: raising interest rates to curb elevated inflation. Those higher rates draw more international capital from investors seeking an attractive return on their funds.

What does inflation mean for Gold prices?

Investors traditionally sought Gold during periods of high inflation for its ability to retain value. They still frequently buy it as a safe haven during severe market turmoil, but this pattern does not hold in most circumstances. High inflation generally prompts central banks to raise interest rates to bring it under control. Those higher rates weigh on Gold by increasing the opportunity cost of holding it rather than an interest-bearing asset or keeping funds in a cash deposit account. Conversely, lower inflation generally supports Gold because it leads to lower interest rates, making the precious metal a more attractive investment alternative.