Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTArslan Ali ButtThu, September 17, 2026 at 10:17 AM GMT+2 5 min readDollar Index Outlook: Hawkish Fed Lifts Dollar as EUR and GBP Face Diverging Rate PathsThe U.S. dollar is currently benefiting from various bullish fundamentals following Wednesday's Fed Meeting. The Fed raised the target range for the fed funds rate by 25 basis points to the 3.75% – 4.00% range, the first increase since February 2022. The presentation by the FOMC signaled that more increases could be forthcoming, possibly as soon as the end of the year.Current expectations in the markets suggest that the Fed Funds rate will likely end the year above 4.50% to 5.00%, which will help strengthen the U.S. dollar.The euro is expected to face some headwinds in the short term. Recently released data showed that labor costs in the eurozone rose by 3.1% in the second quarter, from 3.3% in the first quarter. However, the ECB's wage index also showed that average wage increases were expected to be less than 2%.With high energy prices and inflation, there is an upside risk for inflation, which argues for an aggressive rate hiking policy by the ECB.Sterling is also set to take center stage on Thursday, with the Bank of England (BoE) expected to keep interest rates on hold at 3.75%, but likely providing hints on where rates could be headed in November. While UK inflation increased to 3.1% in August from 2.2% in July, core inflation remained unchanged at 2.6%. The recent increase in energy prices has not resulted in broader increases in other prices.Markets have an 80% probability of a November rate hike by the BoE. However, most economists believe there is not enough justification to increase rates at this time. The recent deterioration in the UK labor market, in addition to increasing interest rates, argues against further rate increases.The direction of the U.S. Fed is likely to set the tone for G10 currencies for the rest of the week. I see the DXY continuing higher, the GBP lower, with the EUR likely mixed. The BoE and the Federal Reserve are likely to further extend their policy divergence.U.S. Dollar Index Technical Analysis: DXY Holds 100.08 Support as 100.37 Breakout Comes Into FocusDollar Index Price Chart – Source: TradingviewDXY is currently at 100.19 on the 1-hour chart. I think it is important to note the price has been able to trade above the rising trendline and both the 100 SMA and 200 SMA, after the recent bullish move. The recent corrective move from 100.37 has tested the 100.08-100.19 area, and as long as it trades above this area, the trend remains bullish.I think the next major resistance is located at 100.37, above which, the next target is set at 100.53 and a further move above this level targets the 100.68 level. The 100.08 level is the major support level and above this level, the 99.99 and 99.90 levels become significant.Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info