Is the Dollar Index Heading for New Lows in 2026?

The US Dollar Index (DXY) continues its upward trend, trading around 100.30 during Asian hours on Thursday. This follows the Federal Reserve's decision to raise the federal funds rate by 25 basis points to a range of 3.75% to 4.00%, marking the first increase in three years. Fed Chair Kevin Warsh highlighted that the rate hike was necessary due to inflation remaining persistently high and for too long, describing it as a "sober and responsible decision."

Further rate hikes are still being considered to tackle persistent price pressures. In the aftermath of the announcement, markets priced in a 49.8% probability of another Fed rate hike at the October meeting. Warsh's remarks were notably hawkish, emphasizing the need for price stability and further action to combat inflation trends.

The US Dollar Index's technical analysis indicates a bullish near-term bias as it holds above both the 50- and nine-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) is approaching overbought territory at 63.58, suggesting that bullish momentum may face some resistance if the index continues its upward trajectory.

However, initial support can be found at the 50-day EMA at 99.69, followed closely by the nine-day EMA at 99.64. As long as the DXY remains above these moving averages, the technical structure suggests further upside potential, with the psychological 100.00 level now acting as an intermediate support rather than a ceiling.