FED Hike Expectations Push Markets Lower

The Federal Reserve's rate-hike expectations have increased downside pressure across markets, pushing currency and bond prices lower. The GBP/USD and Dow Jones charts are testing defining support levels, while daily momentum indicators point to oversold conditions and potential reversal risks.

The probability of a 25-basis-point rate hike at the October meeting has risen above 70%, according to the CME FedWatch Tool. This has supported the U.S. Dollar Index and helped push it back toward its 2026 uptrend near 101.

The dollar and euro are testing daily overbought and oversold conditions last seen in June and near yearly extremes, increasing reversal risks below 101 in the DXY and above 1.13 in EUR/USD.