United States Dollar Index Price Forecast: Pullbacks could be bought into near 101.00

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, drifts lower during the early European session on Friday and erodes a part of the previous day's strong gains back closer to the monthly high. The index currently trades around the 101.30-101.25 region, down over 0.15% for the day, though the downside seems limited amid a constructive setup.

The intraday uptick could be attributed to some profit-taking heading into the weekend and some repositioning trade ahead of the crucial FOMC policy meeting next week. Any meaningful depreciation, however, still seems elusive as elevated crude oil prices continue to fuel inflationary concerns and expectations of at least one interest rate hike by the US Federal Reserve (Fed). Furthermore, escalating US-Iran tensions, along with US President Donald Trump's new sweeping tariffs, weigh on investors' sentiment and could further lend support to the safe-haven Greenback.

From a technical perspective, the near-term tone is bullish as the DXY holds well above the 200-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, the intraday slide stalls near the 23.6% Fibonacci retracement level of the move up from the July swing low. Adding to this, momentum indicators back this constructive bias. The Relative Strength Index (RSI) hovers near 60 and the Moving Average Convergence Divergence (MACD) indicator stays marginally positive, though its flattening profile hints that upside traction may be slowing as the index approaches overhead levels.

Nevertheless, the broader technical setup suggests that buyers remain in control and any slide below the 23.6% Fibo. is likely to be bought into near the 38.2% level at 101.09, which is followed by the 50.0% retracement at 100.95. Deeper pullbacks would expose clustered support around the 61.8% and 78.6% retracements at 100.81 and 100.61, ahead of the prior swing low region at 100.35 and the underlying 200-period SMA at 100.79. On the topside, the next hurdle for bulls is the recent swing high area at 101.55, and a sustained break above opens the way for a continuation of the recovery phase in the DXY.

DXY 4-hour chart