USD Index outlook: Dollar rises further on more hawkish Fed policy outlook

Slobodan Drvenica Windsor Brokers

US Dollar Index

The dollar rallies for the second straight day and hits the highest levels in almost one month on Wednesday morning.

Hotter than expected US inflation in October added to existing expectations for Fed rate hike in December and lifted bets to 50 basis points increase, against initial expectations for 25 basis points hike, providing strong support to the greenback.

Daily studies turned to full bullish configuration following break above 10/20DMAs (which also formed bull-cross) and bear-channel upper boundary that lifted the price above Fibo 76.4% retracement of 102.72/101.03, marking nearly full retracement of corrective phase.

Last week’s double bear-trap at 101.99 Fibo level (38.2% of 96.44/102.72) also underpins the action.

The dollar looks set for further gains in current fundamental conditions, with key barrier at 102.72 (2026 peak, posted on Oct 14 / near 50% retracement of 110.00/95.35, Jan 2025/Jan 2026 downtrend), violation of which to signal bullish continuation and unmask targets at 104.15/40 (28 Mar 2025 high / Fibo 61.8%).

Meanwhile bulls may take a breather and position for fresh push higher with 102 zone (broken bear-channel upper trendline / broken Fibo 61.8%) expected to contain dips.

Res: 102.40; 102.72; 103.00; 103.37.
Sup: 102.07; 101.90; 101.68; 101.30.

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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