US Dollar Index Hits Multi-Month High as Rate Hike Expectations Intensify

The US Dollar Index (DXY), which measures the Greenback’s strength against a basket of six major currencies, continued its upward trajectory on Tuesday, reaching its highest level since May 2025. The index is currently trading around 100.40, marking a 0.4% gain for the session.

The rally accelerated after the index decisively broke above the 100.00 threshold, ending a prolonged phase of sideways movement. This bullish momentum is driven by traders increasingly anticipating a Federal Reserve interest rate hike later this year. This sentiment follows a recent monetary policy meeting where Chair Kevin Warsh reaffirmed the central bank’s steadfast commitment to returning inflation to its 2% target.

Furthermore, robust US economic indicators have reinforced the belief that the Fed has sufficient room to increase borrowing costs. Economic expansion remains steady and the labor market shows signs of stabilization. Specifically, the preliminary S&P Global Services PMI rose to 51.3 from 50.7, and the Manufacturing PMI climbed to 55.7 from 55.1, with both figures surpassing market expectations. Additionally, the four-week average for ADP Employment Change increased to 30.75K from 26.5K.

According to the CME FedWatch Tool, markets are now pricing in a 70% probability of a rate hike during the September meeting. Investors are now looking toward Thursday’s release of the Personal Consumption Expenditures (PCE) inflation report and the final first-quarter Gross Domestic Product (GDP) estimate for further guidance on the Fed’s policy trajectory.

Geopolitical tensions also remain a focal point, particularly regarding US-Iran negotiations following a 60-day Memorandum of Understanding (MoU) signed last week. While discussions are ongoing, the situation remains volatile, especially concerning Iran’s nuclear program. This persistent uncertainty continues to drive safe-haven demand for the US Dollar.

Technical Analysis:

On the daily chart, the Dollar maintains a bullish near-term bias, trading well above the 50-, 100-, and 200-day Simple Moving Averages (SMAs). The alignment of these averages suggests a reinforced underlying uptrend.

Momentum indicators support this positive outlook; the Relative Strength Index (RSI) stands at 73.4, moving further into overbought territory, while the Average Directional Index (ADX) near 36 confirms a strengthening trend.

Looking ahead, immediate resistance is seen at 102.00, with a secondary ceiling situated near 103.50. Conversely, the psychological 100.00 level serves as the first line of support. A denser demand zone is formed by the 50-day SMA (99.10), 100-day SMA (98.90), and 200-day SMA (98.77). A deeper structural floor is located at 97.50, which may be tested should a significant correction occur due to overbought conditions.

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