The dollar stopped its slide on Wednesday — barely. The US dollar index steadied between 101.60 and 101.90 in European trading on October 21. It held a tight range just above the support shelf that has become the currency market's most-watched line in the sand. That matters because it comes a week after the index printed an 18-month high above 102.70 on October 14. The retreat since has unwound more than a full percent of the dollar's recent rally.
Underneath the calm tape, positioning is anything but quiet. Traders cut October rate-hike odds to roughly 15%. Fed Chair Kevin Warsh refused to telegraph any decision for October or December. Meanwhile, pricing for at least one increase before year-end sits near 94%. That split is the whole dollar trade now: no move next week, almost certainly one in December.
Tuesday's nearly three-week low near 101.30 held. That kept the 100-day simple moving average at 100.50 out of reach, for now, and preserved the bullish structure the dollar has carried through autumn.
Why it matters
DXY anchors every major FX pair, and Wednesday's pause shows how the market reads the policy calendar. The Fed enters its blackout period ahead of the October 27-28 meeting. So the next hard signal traders get is the December outlook. The same hot inflation prints that killed October hike bets — September CPI at 3.7%, PPI at 6.3% — are the ones keeping December live. That is why the index could not hold its peak: the dollar rallied on hawkishness, then got sold when that hawkishness was pushed further out the curve.
EUR/USD traded near 1.1220-1.1237 with a slight bearish lean. A 153-basis-point French-German yield spread keeps a lid on the euro. GBP/USD held near 1.3399 with a bullish lean above its rising trendline. The UK's 3.5% September CPI made a November 5 Bank hike near-certain — full breakdown in our UK inflation coverage. USD/JPY sat around 158.19, edging lower ahead of Friday's Japan CPI, with the Bank of Japan expected to hold next week and act in December. Oil added a floor under the dollar too. WTI recovered toward $99 and Brent toward $108 after a diplomat denied reports of an imminent US-Iran agreement.
What to watch
- October 27-28 FOMC decision — Fed in blackout; markets price an 83% hold, with Chair Warsh's press conference the real event.
- October 29 ECB decision — arrives the day after the Fed; the French-German spread at 153bp is the euro's weak point.
- Japan CPI on Friday, then the BoJ next week — USD/JPY's 158.05-157.18 support zone faces both in sequence.
- November 5 Bank of England — a hike is nearly priced; GBP/USD above 1.3404 opens 1.3454-1.3492, below 1.3302 opens 1.3239.
- US-Iran headlines — compromise chatter was denied; Iran warned of wider pressure at Bab el-Mandeb; escalation rerates oil and the dollar together.
MarketRadar take
Neutral into the Fed, with the edge to range-trading. The math on the range is unusually clean.
| Scenario | Trigger | Next levels | Measured move from 101.68 |
|---|---|---|---|
| Breakout | Daily close above 102.01 | 102.26, then 102.45, then the Oct 14 high at 102.70 | ≈ +1.0% to the recent high |
| Breakdown | Daily close below 101.45 | 100.95, then the 100-day average at 100.50 | ≈ −1.2% to the 100-day average |
| Pair | Last (Oct 21) | Day change |
|---|---|---|
| EUR/USD | 1.1237 | +0.19% |
| GBP/USD | 1.3397 | +0.66% |
| USD/JPY | 158.19 | −0.21% |
The cross-rates tell the same story as the index: a dollar that is weakening in spots (sterling's +0.66% is the stand-out) but not breaking anywhere. A hawkish-leaning Fed hold on October 28 plus steady oil near $99-108 favors a grind back toward the top of the range. But any wobble in December hike pricing pulls the rug toward 100.50. This is a hold-and-watch tape, and the first real move probably waits for Warsh's press conference.
