US Dollar Index Price Forecast: Waning hawkish Fed bets back more downside

The US Dollar (USD) remains under pressure as traders have repriced the Federal Reserve’s (Fed) interest rate hike expectations. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds onto Wednesday’s losses near 100.48.

The CME FedWatch tool shows that the odds of the Fed delivering an interest rate hike in the meeting later this month have dropped significantly to 10.2% from 31% recorded a week ago.

Market participants have scaled back hawkish Fed bets as the United States (US) Consumer Price Index (CPI) and the Producer Price Index (PPI) reports for June have shown that inflationary pressures have cooled down.

Meanwhile, investors await speeches from Fed officials regarding how the central bank will conduct monetary policy going forward amid signs of slowing price growth.

Going forward, investors will focus on the US Retail Sales data for June, which will be published at 12:30 GMT.

On the geopolitical front, elevated energy prices due to renewed Middle East hostilities could limit the downside in the US Dollar.

US Dollar Index technical analysis

The Dollar Index Spot trades lower at around 100.46, staying under the 20-day Exponential Moving Average (EMA) at 100.78, which now acts as immediate overhead resistance and hints at a near-term bearish bias.

The Relative Strength Index (RSI) at 46.37 is drifting below the neutral 50 line, suggesting fading bullish momentum rather than outright oversold conditions as the index consolidates below the short-term trend gauge.

On the topside, initial resistance is located at the 20-day EMA near 100.78, and a sustained break above this barrier would be needed for further upside towards the June 24 high at 101.80. On the downside, the first meaningful support sits at the psychological level of 100.00, followed by the broken-but-still-relevant rising trend-line area around 99.19.