Are falling US bond yields offsetting Fed rate hike bets as the US Dollar Index hovers near 101.70?

Buying interest in DXY remains subdued, with falling US bond yields restricting gains.
The safe-haven dollar draws support from strengthening Fed rate hike expectations and geopolitical risks.
With next week’s FOMC meeting approaching, traders appear reluctant to initiate fresh directional positions.

Buying momentum remains elusive for the US Dollar Index (DXY) on Thursday as competing influences leave it trading near 101.70 during the Asian session. The index, which measures the Greenback against a basket of currencies, nevertheless remains above Tuesday’s near three-week low.

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

US Dollar (USD) bulls remain cautious as US bond yields continue to retreat from multi-year highs and expectations grow that the Federal Reserve (Fed) will leave interest rates unchanged next week. Even so, markets still assign around a 90% probability to a December increase in borrowing costs, given the inflation risks posed by volatile oil prices. Together with continuing geopolitical uncertainty, those expectations lend support to the safe-haven dollar, helping to contain losses in the DXY.

On the Middle East crisis, Iranian Foreign Minister Abbas Araghchi said Tehran was ready to give diplomacy another chance, provided it saw strong evidence that the US sincerely wanted to reach a solution. In a separate report, The New York Times said the US and Israel had prepared plans for a possible further round of strikes on Iran following the US midterm elections. Against this backdrop, caution is warranted before initiating fresh bearish DXY positions in anticipation of a continuation of the recent retreat from an 18-month high.

With the outcome of a two-day FOMC meeting due on October 28, traders appear reluctant to commit and may prefer to stay on the sidelines ahead of next week’s key central bank event. Also on their radar are the US Personal Consumption Expenditures (PCE) Price Index and the Advance US Q3 GDP reading, both due next Thursday. These releases will offer further indications of the Fed’s future policy direction. That outlook will be crucial in giving the DXY a meaningful catalyst and shaping its next directional move.

What Does The DXY 4-Hour Chart Show?

Can DXY Sustain Its Bullish Technical Bias?

Holding above the 200-period Simple Moving Average (SMA) on the 4-hour chart gives the DXY a modestly bullish near-term bias. The recovery could, however, encounter resistance at the 23.6% Fibonacci retracement of 101.92, a level that must be regained for the uptrend to resume. A sustained move above it would create scope for additional gains towards higher retracement levels beyond the current structure.

Should the index decline, the first support lies near 101.28 at the 38.2% retracement, followed by an additional floor at the 200-period SMA of 101.00. A decisive fall below that moving average would undermine the emerging bullish bias and leave the index vulnerable to a deeper correction.

(An AI tool assisted in preparing this story’s technical analysis. Learn more.)

How Has The US Dollar Performed Over The Last 7 Days?

The US Dollar (USD) performed most strongly against the Japanese Yen over the last 7 days. Its percentage changes against the major currencies listed are set out in the table below.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.74%	-1.47%	-0.19%	-1.38%	-0.62%	-1.76%	-1.38%
EUR	0.74%		-0.78%	0.51%	-0.72%	0.12%	-1.03%	-0.69%
GBP	1.47%	0.78%		1.27%	0.09%	0.88%	-0.35%	0.12%
JPY	0.19%	-0.51%	-1.27%		-1.11%	-0.40%	-1.56%	-1.14%
CAD	1.38%	0.72%	-0.09%	1.11%		0.72%	-0.45%	0.05%
AUD	0.62%	-0.12%	-0.88%	0.40%	-0.72%		-1.15%	-0.73%
NZD	1.76%	1.03%	0.35%	1.56%	0.45%	1.15%		0.37%
CHF	1.38%	0.69%	-0.12%	1.14%	-0.05%	0.73%	-0.37%

Percentage movements between the major currencies are presented in the heat map. Select the base currency from the left-hand column and the quote currency from the top row. For instance, choosing the US Dollar on the left and following that row across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.