Dollar index holds steady ahead of Powell’s remarks

The dollar index advanced to a three-week high on Friday, extending recent strength as shifting expectations around Federal Reserve policy continued to support the US currency.

Earlier signals of deeper policy easing—sparked by weaker July labor data and sharp downward revisions to prior months—were overshadowed by the latest inflation figures, which highlighted rising price risks. This tempered expectations for aggressive rate cuts, leading to a steep drop in market bets for a September move.

Attention now turns to Fed Chair Jerome Powell’s speech at the Jackson Hole symposium. Investors are awaiting clarity on the central bank’s outlook, though Powell is expected to strike a careful balance. Market consensus suggests he may emphasize inflation risks over labor market weakness, leaning hawkish in tone, while avoiding firm commitments ahead of another jobs report due before the September meeting.

Such caution would likely see Powell repeat his standard guidance: that policy easing remains on the table, but decisions will be guided by incoming data.

On the technical front, the dollar index is on track for a strong weekly gain, erasing most of its two-week losses and forming a bullish engulfing pattern on the weekly chart. This strengthens the near-term outlook but leaves hurdles in place.

Resistance has emerged around 98.73, the 50% retracement of the 100.04–97.42 downswing, reinforced by the falling 100-day moving average and the upper edge of the daily Ichimoku cloud at 98.88. A decisive break above these barriers would open the way toward 99.42 and potentially the psychological 100 level, last touched on August 1.

Support rests at 98.42, bolstered by the 38.2% retracement and the daily Kijun-sen. A sustained hold above this level is needed to preserve the bullish structure, while a drop below 98.07, marked by the daily Tenkan-sen, would weaken the outlook and signal renewed pressure.

Res: 98.73; 98.88; 99.04; 99.42
Sup: 98.42; 98.30; 98.07; 97.61