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USD index rebounds after Fed hold as Middle East risk feeds inflation

The dollar recouped part of Wednesday’s 0.6% post-Fed drop, which had driven the index to its lowest since July 20.

Reported · Written up by our desk · Major Pairs

The US dollar index regained traction in early Thursday trading after recouping part of Wednesday’s 0.6% post-Fed decline, which had pushed the currency to the lowest level since July 20, according to Action Forex.

The Federal Reserve left rates unchanged in the 3.50% to 3.75% range, but policymakers were described as split in their policy outlook, adding uncertainty around the next steps. Markets continue to price in a September rate hike, with the possibility of one additional increase by the end of the year.

Action Forex linked the dollar’s support to expectations that worsening Middle East tensions could prolong inflation pressures, including through potential oil supply disruptions that could have wider effects. The outlet said the recent sharp drop over the past two days looks like a corrective move rather than a full trend reversal, while noting the technical picture remains mostly bullish.

On the trading charts, Action Forex cited Ichimoku support and said a daily break and close above the 20-day moving average at 100.83 is seen as the minimum requirement to validate a positive signal, with attention then turning to prior peaks near 100.48 to 100.55. The outlet also said larger bullish conditions are expected to hold if the index stays above the 100 support zone.

Latest closeDollar index 100.80 ▼0.6%

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