The US Dollar (USD) has started Q4 2026 on a strong note, supported by resilient US growth and hawkish Federal Reserve (Fed) risks, according to OCBC strategists Sim Moh Siong and Christopher Wong. However, they anticipate only a moderate USD rally into year-end as markets scale back near-term Fed hike expectations and as bond-market volatility increasingly drives FX dynamics. Markets have sharply reduced expectations of an October Fed rate hike after several Fed officials signaled no urgency to tighten policy further, though roughly three rate hikes are still priced in over the coming 12 months [1].
Technical analysis shows the US Dollar Index (DXY) is maintaining a bullish near-term bias, holding above both the nine-period and 50-period Exponential Moving Averages (EMAs), with the 14-day Relative Strength Index (RSI) at 76.30 indicating overbought conditions. The DXY hovered around 102.20 after pulling back from nearly 18-month highs of 102.53 during the European hours on Monday. The FXSFedSentiment Index near 137.58 suggests a supportive policy backdrop for the dollar. The technical picture points to a temporary bullish continuation, but warns of a possible bearish reversal or correction if the ascending wedge pattern breaks lower. The USD was the strongest against the Euro, with a daily gain of 0.36% [3].
In the USD/CHF pair, United Overseas Bank (UOB) strategist Quek Ser Leang notes a sharp reversal from 0.8382 to close at 0.8286, with intraday price action expected to edge lower toward 0.8245 while staying above 0.8225. Over the next 1–3 weeks, UOB expects USD/CHF to trade in a tight range between 0.8245 and 0.8365, as upward momentum has fizzled out. Over 1–3 months, a rebound is anticipated, but not strong enough to revisit the July peak [2].
For USD/JPY, the pair consolidates below 158.00, nearly unchanged for the day, following a bounce from sub-157.00 levels after a weak US Nonfarm Payrolls (NFP) report. Traders are pricing in a greater chance that the Bank of Japan (BoJ) will hike rates as soon as October, which, along with intervention risks, supports the Japanese Yen. The USD retreats slightly after hitting a fresh high since April 2025, capping USD/JPY gains. Technical analysis shows a mildly bullish bias above the 100-period SMA and 61.8% Fibonacci retracement, with resistance at 158.74 and support at 157.49 [4].
Across the board, the USD showed strength against most major currencies, particularly the Euro and New Zealand Dollar, but was slightly weaker against the Japanese Yen and Swiss Franc. The heat maps from sources [3] and [4] confirm these daily percentage changes.
CONCLUSION
The US Dollar remains supported by resilient US growth and bond market volatility, but the rally is expected to be moderate as Fed hike expectations are scaled back. Technical indicators suggest near-term bullish momentum, though overbought conditions and range-bound trading in key pairs like USD/CHF and USD/JPY point to limited upside. Market sentiment is cautiously optimistic, with medium impact expected as traders await further central bank signals and inflation data.