The Federal Reserve will announce its interest rate decision today at 21:00 Moscow time. Consequently, the primary catalysts will be the Fed’s specific language regarding inflation and future policy.
As of 08:58 Moscow time on October 28, the US Dollar Index (DXY) is trading at approximately 102.44 (+0.12%), near its 52-week high of 102.94. Over the past week, the index has gained 0.65%, and it is up 1.23% for the month. The market is almost unanimously expecting a pause following the September hike to a range of 3.75%–4.00%, while futures data indicates an over 80% probability of a rate hike in December.
Hawkish signal. If the Fed emphasizes persistent inflation and does not rule out further tightening, bond yields could rise, providing fuel for the dollar:
* A breakout above 102.49 would open the path toward 102.65.
* Consolidating above 102.65 would increase the likelihood of testing the 102.90–102.95 range, where the 52-week high is located.
The technical picture supports this scenario: the daily RSI stands at 62.49, the ADX is at 35.52, and the price remains above the 20-day SMA (102.06), 50-day SMA (100.77), and 200-day SMA (99.66). This indicates a strong trend without reaching extreme overbought territory.
Dovish surprise. If the Federal Reserve shifts its focus toward an economic slowdown, or if the market begins to price in fewer interest rate hikes, the dollar could quickly shed its "expectation premium":
* A drop below 102.07 (the 20-period SMA) would signal a weakening of the short-term structure.
* Below 101.82, the next level to watch is 101.65.
* A sustained move below 101.65 could push the index back toward the 100.77–101.20 range, where the 50-period SMA is located.
This, in itself, would not constitute a full-scale reversal; since October 15, the index has largely traded within a 101.45–102.45 range. Remaining within this range preserves the bullish structure, while a breakdown below it would increase the risk of a correction.
Key risks:
* Market positioning: The dollar is currently near its annual high, meaning even a moderately hawkish decision could trigger profit-taking.
* U.S. yields: Rising yields would support the index, while a decline would exert downward pressure.
* Inflation: Recent data came in higher than expected, with consumer prices rising 3.7% year-on-year in September. This limits the scope for a dovish pivot by the Fed.
* Momentum: The daily MACD remains in positive territory, but the histogram has turned negative—indicating that upward momentum has faded, even though the trend remains intact.
* False breakouts: The initial reaction to an announcement can be sharp, but the daily closing price is more significant than the immediate move.
As long as the price remains above 102.07, the advantage stays with the buyers. A daily close above 102.49 would be the most constructive signal, while a close below 101.82 would be the most concerning development for the bulls. The first confirms continued growth, while the second turns consolidation into a correction.