US Dollar Forecast: Fed Decision Puts DXY Breakout in Focus as Euro and Pound Slide

What to Know

• The US dollar enters October 28 with monetary policy in focus as the Federal Reserve concludes its two-day meeting later Wednesday.
• CME FedWatch showed about a 91% probability of no change in the target range ahead of the decision.
• September orders for nondefense capital goods excluding aircraft rose 0.5%, while shipments in that category increased 1.2%.
• The 10-year Treasury yield stood at 5.00% on October 26, keeping long-term borrowing costs elevated.
• The US Dollar Index is trading near 102.43 on the 4-hour chart, with 102.59 emerging as the next breakout test.
• EUR/USD is trading near 1.1120 after extending its decline below 1.1150, with 1.1113 acting as immediate support.
• GBP/USD is trading near 1.3281 after breaking below 1.3307, placing attention on 1.3245 support.
• The European Central Bank decision is due on October 29, while the Bank of England decision is scheduled for November 5.
• Britain’s Budget on October 28 may influence sterling and gilt prices through energy-cost support, revenue measures and borrowing plans.

US Dollar Holds Firm as Fed Guidance Takes Center Stage

The US dollar is starting October 28 with traders focused squarely on the Federal Reserve’s policy message. While markets were largely positioned for no immediate change in the target range, the main question is how officials frame the outlook for December. CME FedWatch showed about a 91% probability of no change ahead of the decision, which means the reaction may depend less on the rate announcement itself and more on the tone of guidance from Chair Kevin Warsh.

For currency markets, the policy signal matters because the dollar has been supported by a mix of relative yield strength, resilient economic data and cautious positioning across major counterparts. September business-equipment figures added to that backdrop. Orders for nondefense capital goods excluding aircraft rose 0.5%, while shipments in the same category increased 1.2%, giving dollar bulls another argument that underlying business investment has not weakened sharply.

Longer-term borrowing costs are also a central part of the story. The 10-year Treasury yield stood at 5.00% on October 26, a level that keeps financing conditions tight and may continue to support the dollar if investors believe US yields will remain attractive relative to alternatives. Elevated yields can draw capital toward dollar assets, although they may also tighten financial conditions enough to weigh on growth if sustained.

DXY Technical Picture: 102.59 Is the Breakout Level

The US Dollar Index is trading near 102.43 on the 4-hour chart after extending its recovery from the 101.54 support area. Technical traders are watching the way price has reclaimed the short-term moving average while continuing to hold above a rising trendline. That combination keeps the broader structure constructive, particularly as the recent pattern of higher lows suggests buyers have remained active on pullbacks.

The next level in focus is 102.59. A clean break above that area would place 102.92 in view, followed by 103.32. Those levels matter because a move through nearby resistance could encourage momentum traders to add exposure, especially if the Fed’s guidance does not push back against the market’s current expectations. In that scenario, the dollar could continue to benefit from the view that US policy remains comparatively restrictive.

On the downside, 102.03 is the first important support level. If sellers force a move below that area, attention would shift back to 101.54, then 101.18 and 100.87. Market participants generally see the immediate setup as constructive while DXY holds above 102.03 and the rising trendline, but a break under that zone would weaken the near-term bullish case. RSI is in the upper portion of its range, confirming firm momentum while also suggesting that the advance is becoming somewhat stretched.

Euro Faces ECB Decision, Energy Risk and French Funding Pressure

The euro enters the session with a more complicated macro setup. The European Central Bank decision is due on October 29, and traders are balancing inflation risks against signs that tighter credit and higher financing costs could weigh on demand. The ECB has raised rates twice in 2026, most recently in September, taking the deposit rate to 2.50%. The September decision cited the Middle East conflict as a source of inflation pressure, keeping energy-linked risks in focus.

France adds another layer of uncertainty for the single currency. Its 10-year TEC 10 yield rose to 5.13% on October 22 before easing to 4.94% on October 27. The Banque de France has warned that fiscal and political uncertainty could intensify as the 2027 budget and elections approach. For FX traders, the issue is not only whether borrowing costs remain high, but whether fiscal uncertainty begins to affect confidence in the euro-area growth outlook.

The ECB’s third-quarter bank-lending survey also recorded tighter loan terms in France. That matters because credit conditions can transmit monetary policy into the real economy. If banks become more cautious, households and businesses may face tougher access to financing. The policy trade-off for the ECB is therefore difficult: energy-related pressures may lift inflation risk, while tighter lending and elevated yields may weigh on activity.

EUR/USD Technical Picture: 1.1113 Support Under Pressure

EUR/USD is trading near 1.1120 on the 4-hour chart after extending its decline below the 1.1150 support level. The pair remains below both moving averages, and the broader sequence of lower highs and lower lows continues to favor sellers. With price hovering just above 1.1113, the next move around that level could be important for short-term direction.

The first support level is 1.1113. A clean break below that point would expose 1.1081, followed by 1.1051. In a market where dollar strength is already pressuring major pairs, a break of support could reinforce bearish sentiment toward the euro, particularly if the ECB is seen as constrained by weaker credit conditions and fiscal risks in France.

On the upside, 1.1150 has become the first resistance area. If buyers manage to push price above that level, attention would turn to 1.1184 and 1.1228. RSI is near oversold territory, which confirms strong downside pressure but also increases the risk of a corrective rebound. For now, some chart watchers remain bearish while EUR/USD stays below 1.1150 and the short-term moving average. A sustained move below 1.1113 would strengthen the case for 1.1081, while a recovery above 1.1184 would begin to ease downside pressure.

Sterling Watches the UK Budget and Bank of England Path

Sterling is being shaped by fiscal and monetary policy at the same time. Britain’s Budget on October 28 is a major focus for markets, with traders watching the balance between energy-cost support, revenue measures and borrowing. Any shift in the fiscal outlook could affect both sterling and gilt prices, especially with public finances already under scrutiny.

Public-sector net debt reached £3,005 billion at the end of September, moving above £3 trillion for the first time. That figure gives the Budget added significance because investors will be looking for clues on whether borrowing pressures may rise or whether the government can present a credible path for fiscal management. Currency markets tend to react sharply when fiscal plans alter expectations for growth, inflation or debt issuance.

The Bank of England’s next decision is scheduled for November 5, adding another policy milestone for sterling. September CPI inflation accelerated to 3.5% year over year from 3.1% in August, while services inflation rose to 3.7%. At the September MPC meeting, six members voted to hold Bank Rate at 3.75%, while three backed a 25-basis-point increase to 4.00%. That split shows that policymakers are still weighing inflation pressure against broader economic risks.

GBP/USD Technical Picture: 1.3245 Comes Into View

GBP/USD is trading near 1.3281 on the 4-hour chart after extending its decline below the 1.3307 support area. Price has also slipped beneath the short-term moving average, while the broader descending trendline and longer-term moving average continue to cap the upside. That leaves the structure bearish even after an earlier recovery from the October lows.

The first support level is 1.3245. A clean break below that point would expose 1.3195, followed by 1.3137. If the Budget raises concerns around borrowing or if the dollar strengthens after Fed guidance, sterling could remain vulnerable to another downside test. However, traders will also be alert to the possibility that any credible fiscal framing could stabilize sentiment.

On the upside, 1.3307 is now the first resistance level. A recovery above that area would ease immediate downside pressure, while 1.3407, 1.3448 and 1.3498 would become more relevant if buyers regain control. RSI has dropped into the lower end of its range, showing that bearish momentum is strengthening and approaching oversold conditions. Some technical traders remain bearish while GBP/USD trades below 1.3307 and the descending trendline.

Market Outlook: Policy Risk Dominates Major FX

The main FX theme for October 28 is the intersection of monetary policy and fiscal risk. The dollar is waiting for decision-day guidance from the Fed, the euro is weighing energy-driven inflation against French borrowing costs and tighter credit, and sterling is facing the UK Budget ahead of the Bank of England’s November 5 meeting. This combination leaves major currency pairs sensitive to headlines, especially where policy expectations are already priced with a high degree of confidence.

For DXY, 102.59 is the level that could determine whether the recovery extends toward 102.92. For EUR/USD, 1.1113 is the support level that may decide whether the downtrend gathers pace toward 1.1081. For GBP/USD, 1.3245 is the next key downside level after the break below 1.3307. Until these levels resolve, traders may continue to treat rallies and pullbacks through the lens of central-bank guidance, fiscal credibility and bond-market pressure.

Frequently Asked Questions (FAQs)

Why is the US dollar in focus on October 28?

The dollar is in focus because the Federal Reserve concludes its two-day meeting later Wednesday, with traders looking for guidance on the December policy outlook rather than expecting a major change in the immediate target range.

What probability did CME FedWatch show before the Fed decision?

CME FedWatch showed about a 91% probability of no change in the target range ahead of the decision, making the Fed’s guidance especially important for market reaction.

What is the key DXY resistance level?

The key resistance level for the US Dollar Index is 102.59. A clean break above that level would expose 102.92, followed by 103.32.

What is the first important DXY support level?

The first important support level for DXY is 102.03. A move below that area would bring 101.54, 101.18 and 100.87 back into focus.

Why is the euro under pressure?

The euro is under pressure as traders weigh the European Central Bank’s policy path, energy-related inflation risks, French borrowing costs and tighter loan terms in France.

What level matters most for EUR/USD right now?

EUR/USD is trading near 1.1120, with 1.1113 acting as immediate support. A sustained break below 1.1113 would strengthen the case for a move toward 1.1081.

Why is sterling sensitive to the UK Budget?

Sterling is sensitive to the Budget because markets are focused on energy-cost support, revenue measures and borrowing, all of which could affect the fiscal outlook and gilt prices.

What is the key GBP/USD support level?

The first key support level for GBP/USD is 1.3245. A clean break below that level would expose 1.3195, followed by 1.3137.

When is the next Bank of England decision?

The next Bank of England policy decision is scheduled for November 5, following a September meeting where six members voted to hold Bank Rate at 3.75% and three supported a 25-basis-point increase to 4.00%.