The dollar is heading into a pivotal trading week near 101.80, well off a 15-month high, with the Fed’s July 29 meeting an obvious pivot point. Markets are currently pricing in about a 65% chance of holding, although renewed escalation in the Middle East has kept interest rate hikes on the table later this year. Energy remains the deciding factor: The collapse of the ceasefire with Iran and the blockade affecting shipping lanes in the Persian Gulf have sent oil prices soaring, igniting inflation fears that could complicate the Fed’s messaging.
Adding to the uncertainty, private sector hiring slowed for a fourth straight week according to ADP data, even as unemployment claims fell to a two-month low, painting a truly mixed labor picture. Fed Chairman Kevin Warsh’s testimony to Congress provided little clarity on direction, reaffirming a commitment to price stability without tipping the balance in the committee’s favor.
With the ECB’s decision now backed off by markets and the preliminary PMI data already digested, all eyes are on the Fed’s decision on Wednesday as the real catalyst of the week, one that can resolve – or extend – the dollar’s recent hesitation.
Technical analysis of DXY
Next week holds real technical heft, with the DXY sitting in a hotly contested area between 100.00 and 102.00. The Fed’s interest rate decision, and the volatility it brings, could determine the dollar’s path in the near to medium term.
Bullish scenario
After a rocky start to 2026, the dollar index rebounded sharply from the 96-97 support level in January, rising nearly 6% since then. After the price recently broke out and settled above the 100.00 psychological level, it now lies supported by both the uptrend line and the 50-period moving average. A confirmed break above 102.00 will open the way towards 103-104, and eventually 106-107.
Bearish scenario
The index is currently struggling at the 102.00 resistance level. A rejection here, a break of the uptrend line while respecting the long-term downtrend line from the 2025 highs, would take the price back to retest the critical 100.00 area – and perhaps, in the event of a deeper breakout, back to the 96-97 support level.
With the Fed’s decision now just days away, the dollar finds itself standing exactly where it needs to be: on the edge of a decision. Whether the DXY rockets toward new highs or slides back into its previous struggles, this week’s results will not only move the dollar, but will set the tone for all assets priced against it as fall approaches.
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