Where we are: The DXY is currently trading at 99.01, up 0.07% on the day and holding near the top of its intraday range of 98.90-99.15. The index is attempting to build on yesterday’s gains, trading slightly above the prior NY close near 98.94. Immediate resistance is seen at the intraday high of 99.15, while support should emerge near the 98.90 level.
What’s driving it: The dominant driver remains the market’s assessment of the Fed’s reaction function, which is currently priced for a patient hold. Recent commentary from Fed officials, such as Schmid, reaffirms the Committee’s focus on inflation and data dependency. With the Fed funds target range at 4.25-4.50% and the dot plot suggesting only two cuts in 2026, the Dollar is benefiting from the perception of a higher-for-longer rate environment relative to other developed markets.
- US 10Y yields are edging higher, currently at 4.439%, providing modest support to the Greenback.
- The 2s10s spread remains inverted at 0.46%, a lingering recessionary signal that could cap further Dollar upside.
- CFTC data shows speculators are modestly short USD (-479 contracts), suggesting room for a short squeeze if the data continues to favour a hawkish Fed narrative.
NY session focus: All eyes will be on risk sentiment in the early part of the session. No major US data releases are scheduled today, meaning the focus will be on any further wire headlines or intraday shifts in US yields to determine Dollar direction. Watch for a break above 99.15 to open a path to 99.30, while a move below 98.90 could trigger a test of 98.70. The trade that is working is buying dips in the DXY, while the trade at risk is further shorting the Greenback without a clear catalyst. The pain trade would be a significant risk-on rally that undercuts the Dollar’s yield advantage.