DXY Trapped in Sideways Range as Hawkish Sentiment Drives FX Crosses
The US Dollar Index (DXY) is trading in a range-bound manner after Federal Reserve Chair Kevin Warsh's keynote address at the Jackson Hole Economic Symposium on August 28, 2026. The speech led to a sharp repricing towards a more hawkish Fed funds futures market, according to OANDA.
Warsh stressed that 'the Fed's predominant focus right now should be on prices' and pointed out that 54% of PCE basket components are still compounding above 3%. This effectively lifted September FOMC's 25 basis points rate hike odds to 67%, up from around 30% pre-speech.
The two-year spread premium between the US Treasury note and an equal-weighted average of sovereign bonds from Germany, the UK, Japan, Canada, Switzerland, Australia, and China has remained below the 1.79% resistance. The DXY has entered a potential broad sideways chop near key resistance at 100.54.
The most compelling macro risk/reward opportunities over the next multi-week horizon lie in FX crosses rather than direct USD pairs. Several currency pairs are worth watching: AUD/NZD, EUR/AUD, EUR/GBP, GBP/JPY, and CHF/JPY.