US Dollar Forecast: DXY Gains as Powell Speech at Jackson Hole Draws Focus

Dollar Index Clears 98.65 as Bulls Regain Control Ahead of Powell Speech

The U.S. Dollar Index (DXY) extended its rally on Thursday, rising 0.46% to 98.673 and closing above its 50-day simple moving average (98.100) for a second straight session. The move confirms recent technical strength and positions the index within striking distance of a key resistance zone between 99.177 and 99.320. Traders are now looking to Federal Reserve Chair Jerome Powell’s Friday speech at Jackson Hole for signals on the central bank’s next rate move.

Support is now clearly defined at 98.317 to 97.859, with a key swing low at 97.626 marking downside risk. The daily chart shows room for additional upside, particularly if Powell avoids pushing back on growing rate cut expectations.

Treasury Yields Climb, Market Focus Turns to Fed Messaging

Bond markets were active Thursday as Treasury yields pushed higher. The 10-year yield climbed to 4.339%, while the 2-year yield rose to 3.798%. Yields were bid up as traders braced for potential hawkish tones from Powell after FOMC minutes released Wednesday highlighted concerns about inflation persistence and labor market fragility.

The minutes revealed the first double dissent on the rate decision since 1993, with Fed Governors Waller and Bowman opposing the decision to hold rates steady. That suggests internal debate is heating up, even as futures markets price in a 77% chance of a September cut, according to CME FedWatch.

DXY Supported by Manufacturing Upside Despite Mixed Labor Signals

Economic data released Thursday added complexity to the Fed outlook. Initial jobless claims rose by the most in three months, underscoring potential labor market softness. However, the dollar regained ground after S&P Global data showed U.S. business activity improving in August, led by the strongest manufacturing orders in 18 months.

The data mix reflects the Fed’s Jackson Hole theme this year—“Labor Markets in Transition”—and underscores the stakes of Powell’s speech. Traders are increasingly betting on easing, but strong segments of the economy could constrain the Fed’s ability to follow through.

Will Powell Push Back on Market Cuts? DXY Faces Key Test at 99.320

The DXY’s rally has cleared resistance at 98.317 and reclaimed the 50-day SMA, turning that level into firm support. Next resistance sits at 98.950, followed by the primary target zone at 99.177 to 99.320. Above that, a breakout toward 99.838 becomes possible.

Whether the dollar maintains momentum depends largely on Powell’s tone. A dovish tilt could drive the DXY through 99.320, but any pushback against market expectations for near-term cuts may trigger a consolidation back toward the 98.317 support zone. Traders should stay nimble ahead of Friday’s event risk.

More Information in our Economic Calendar.