US Dollar Forecast: DXY Gains as Traders Await Powell’s Rate Signal

Dollar Edges Higher as Traders Brace for Powell’s Speech

The US Dollar Index (DXY) is modestly higher heading into Tuesday’s mid-session, with traders squarely focused on a key speech by Federal Reserve Chair Jerome Powell. Market participation remains light, and price action is contained, as uncertainty over the Fed’s forward guidance keeps both the dollar and Treasury yields in check.

At 14:39 GMT, the DXY is trading 97.394, up 0.094 or +0.10%.

Federal Reserve Cautious Despite Rate Cut

The Fed’s recent decision to cut rates by 25 basis points has left traders debating whether more easing is likely before year-end. While some officials like Governor Michelle Bowman and newly appointed Steven Miran have hinted at deeper cuts to shield the labor market, others remain focused on the inflation fight. Chicago Fed President Austan Goolsbee firmly denied any shift in the 2% inflation target, calling such speculation “dangerous talk.” Meanwhile, Atlanta Fed President Raphael Bostic reiterated that inflation vigilance must continue.

Powell is expected to strike a familiar tone, in line with last week’s post-meeting press conference, especially as there have been no major macro developments since then. Market-based expectations, reflected in the CME FedWatch tool, are pricing in a 90% chance of a 25 bp cut in October and a 75% probability of a second cut in December.

Treasury Market Signals Indecision

Yields across the Treasury curve are little changed, reflecting investor indecision ahead of Powell’s remarks. The 10-year yield is hovering near 4.145%, with the 2-year at 3.605% and the 30-year just above 4.76%. The muted yield movement suggests the bond market is in a holding pattern, awaiting clarity on whether the Fed will continue easing or pause.

Analysts at ING highlighted that recent Fed commentary — particularly from Musalem, Bostic, and Hammack — shows the hawkish bloc remains intact. While not outright opposing further cuts, their tone indicates resistance to a sustained easing cycle without clear economic deterioration.

Tight Dollar Range Leaves Traders Watching Key Levels

The US Dollar Index is trading within a narrow range of 96.218 to 97.823. If Powell’s tone leans dovish, the DXY could pull back toward its pivot at 97.021. Conversely, a hawkish stance could fuel a move above 97.823, with potential upside targets at the 50-day moving average of 98.042 and intermediate resistance at 98.238. However, any move beyond 98.238 will require conviction to be viewed as a breakout.

DXY Outlook: All Eyes on Powell for Confirmation

With a near-term ceiling at 98.238 and traders heavily skewed toward another rate cut in October, Powell’s tone today is likely to either solidify or challenge that bias. If he signals patience or reaffirms inflation concerns, the DXY could climb toward the 98 handle. But a dovish tilt—especially if tied to labor market risks—could pressure the dollar back toward the 97.021 pivot. Until then, range trading will likely dominate.

More Information in our Economic Calendar.