The US Dollar Index is currently around 99.25, holding strong. The Federal Reserve is expected to keep interest rates steady later this month, with no further cuts anticipated soon. The CME FedWatch tool suggests the Fed will maintain interest rates between 3.50% and 3.75%. Recent cuts of 25 basis points haven’t fully impacted the economy yet, and ongoing US CPI data supports the decision to hold rates steady.

The US Dollar’s Momentum

Atlanta Fed President Bostic stressed the need for a tight monetary policy because inflation has surpassed the 2% target. The US Dollar Index has a short-term bullish trend, currently at 99.16 and above a rising trend line. Key indicators, such as the 20-day Exponential Moving Average and the 14-day Relative Strength Index, show rising momentum. A major resistance level is at 100.27, with support around 98.11. The Federal Reserve’s job is to adjust interest rates to balance price stability with employment. It holds eight policy meetings each year to assess economic conditions. Quantitative Easing and Quantitative Tightening are special measures that can influence the Dollar’s value, used during different economic periods. The US Dollar remains strong, hovering near 99.25 as the Fed signals a pause. After a series of rate cuts late in 2025 to help a struggling job market, the Fed has now decided to hold steady. The market is adapting to the fact that with December’s headline CPI at 3.4%, more cuts are not likely for the time being.

Market Strategies

For traders in derivatives, it’s wise to keep or start long positions on the Dollar. Consider buying call options on the Dollar Index with strike prices approaching the 100.27 resistance level. This strategy bets that the Fed’s determination to tackle inflation will be stronger than concerns about slow job growth, which averaged only 95,000 new jobs in the last quarter of 2025. Expect more fluctuations in currency markets as traders balance signs of a weak labor market with stubborn inflation. This situation is perfect for volatility plays, such as option straddles on major pairs like EUR/USD ahead of the next CPI or jobs reports. Unlike the clear trends of 2022 during the rate hiking cycle, the Fed’s current pause leads to uncertainty that can be capitalized on. Interest rate futures are now forecasting a prolonged hold, making immediate trading opportunities centered on the currency itself. The strength of the DXY is expected to continue as long as Fed officials, like Bostic, stick to a tight stance. A stronger dollar could also pose challenges for commodities; therefore, consider using put options on gold or oil ETFs as a related strategy. Create your live VT Markets account and start trading now.

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