Dollar Index Edges Higher Amid Hawkish Fed Stance, Trade Optimism

Key Takeaways:

*Dollar supported by Fed-BoE policy divergence

*Risk sentiment improves on trade progress

Market Summary:

The Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, extended its rebound on Thursday, buoyed by a hawkish Federal Reserve and easing global trade tensions. The index gained after breaking above key resistance at 100.25, reflecting continued investor preference for the U.S. dollar amid a widening yield differential.

The Federal Reserve’s decision to hold interest rates steady — diverging from the Bank of England’s recent 25 basis point rate cut — reinforced the dollar’s relative appeal. Traders are increasingly positioning for a “higher-for-longer” scenario in U.S. monetary policy, further underpinned by resilient U.S. economic data.

Meanwhile, risk sentiment improved globally as U.S. President Donald Trump announced a limited trade agreement with the UK and hinted at potential progress in upcoming U.S.-China trade talks, scheduled in Switzerland over the weekend. The developments eased geopolitical tension, though traders remain cautious ahead of concrete outcomes.

Technical Outlook (Dollar_Index):

DOLLAR_INDX, H1

The Dollar Index is trading higher following a successful breakout above the previous resistance level of 100.25. The price remains well-supported above the Short MA (yellow), suggesting continued bullish bias. 

However, technical indicators present a mixed picture — MACD is showing signs of diminishing bullish momentum, while RSI is hovering around 76, entering overbought territory. 

A sustained move above 100.25 may open the door for further gains toward the next resistance at 101.35. On the flip side, any failure to maintain above this level may trigger a pullback toward the MA zone.

Resistance levels: 101.35, 102.65

Support levels: 100.25, 99.70