USD Stalls as Fed Hike Odds Jump to 67 Percent
Fed Chair Warsh’s hawkish stance has lifted September rate hike expectations to 67 percent, yet the Dollar Index remains pinned in a narrow range near 100.54.
The U.S. Dollar Index is stuck in a sideways pattern near 100.54. This happens despite a sharp rise in expected interest rate cuts. Federal Reserve Chair Kevin Warsh signaled a strong focus on inflation. This moved the market price for a September rate hike. The probability of a 25 basis point increase jumped to 67 percent. This is up from 30 percent before the speech.
The dollar has not risen because other central banks are also tightening policy. The yield spread between U.S. and G10 bonds is below 1.79 percent. This limits the upside for direct dollar pairs. Traders are now looking at currency crosses for better opportunities. These pairs are less affected by the direct dollar move.
Bullish signals appear in key crosses
AUD/NZD has bounced back from its 200-day moving average. It now trades above its 50-day line. The MACD indicator shows a bullish break from resistance. This suggests the uptrend from late 2025 is still active. The pair sits above the 1.1940 support level.
GBP/JPY also shows a bullish setup. It has held above key technical support levels. Both pairs are rebounding from their 200-day moving averages. This pattern often precedes a move higher. The market sees these as the strongest short-term opportunities.
Bearish pressure holds in other pairs
EUR/AUD is in a six-month downtrend. The pair is consolidating below its 200-day moving average. The RSI indicator shows a bearish breakdown. This points to further downside momentum. A close below 1.6135 would open the door to 1.5850.
EUR/GBP remains in a nine-month descending channel. It has traded below the 0.8865 high since November 2025. The RSI is capped below a resistance line at 58. This confirms the bearish bias. The pair struggles to break above the 0.8625 resistance level.
Market strategy shifts to FX crosses
The U.S. Treasury yield curve has flattened. This is due to the hawkish Fed stance. However, the Dollar Index stays range-bound. This creates a complex risk environment. Traders are avoiding direct USD pairs. They are focusing on crosses like AUD/NZD and GBP/JPY.
GN markets/fx (en-US) reports that these crosses offer better risk-reward. The direct dollar pairs are too constrained by the yield spread. The cross pairs show clearer technical signals. This makes them the primary focus for September.
