US Dollar Index Price Forecast: DXY eyes 99.80 confluence hurdle as focus remains on Fed

The US Dollar Index (DXY) remained on a positive trend for the fourth consecutive day on Tuesday, inching closer to a nearly two-week high. Trading around the 99.65 region during the early European session, the index experienced an increase of over 0.15% for the day. Investors closely monitor the upcoming Federal Open Market Committee (FOMC) policy meeting, scheduled to begin later that day, as they anticipate a possible rate hike by the US Federal Reserve (Fed).

In addition to the Fed's potential rate increase, oil-driven inflation concerns and geopolitical tensions between the US and Iran further bolster the safe-haven appeal of the US Dollar (USD). Danske Bank analysts project that US yields will continue to rise, with the 10-year yield trading above the 5% threshold, signaling a more hawkish stance from the Fed.

On the technical side, the DXY is approaching the 99.80 confluence, which includes the 38.2% Fibonacci retracement level of the July-August decline and the 100-day Simple Moving Average (SMA). A decisive move above this level could open the door for further gains, potentially pushing the index to the 50.0% Fibonacci level near 100.14 and the 61.8% retracement at 100.50.

Conversely, any support could be found at the 23.6% Fibonacci retracement near 99.33, with a deeper floor near 98.60.