After breaking above the 9 October range high of 99.563, the USD Index (DXY) has reclaimed the 100 level and looks poised to test, and potentially break above, the 200-day moving average (currently 100.339).

The USD is now trading firmly above its medium- and long-term moving averages against GBP, NZD, CAD, and JPY. A sustained break above 100.339 could open the door for a rally towards 101.648 (the 38.2% retracement of the 12-month high-to-low range) and 101.945 (the 12-month average price).

A measured move of the recent range extension would even suggest the DXY could target 104.00 — implying EURUSD could fall towards its 12-month average price of 1.1129, USDJPY could reach 155, and GBPUSD could slip below 1.2800.

It’s not just that the USD has its own positive catalysts — several factors are weighing on other major currencies within the G10 FX complex.

• Short covering and repositioning:
  Entering September, markets held a sizeable net short USD position. Over the past month, that short exposure has been substantially reduced, though real money accounts (pension funds, insurers, and asset managers) still hold meaningful short exposure.
• Resilient US growth:
  Despite concerns over the labour market and lower-income households, the Atlanta Fed’s GDP Nowcast model tracks Q4 US GDP growth at 3.9%.
• Improved US–China sentiment:
  The recent trade agreement has helped remove part of the negative risk premium previously priced into the USD.
• Hawkish FOMC tone:
  The recent FOMC meeting was more hawkish than expected, with Chair Jerome Powell stating that a December rate cut is far from a “foregone conclusion.” While USD swap markets still imply a high probability of a December cut, Powell’s comments have reintroduced policy optionality for the Fed.
• Rising implied terminal rate:
  Market pricing for the Fed’s terminal rate (the potential low point for this easing cycle) has risen from 2.82% to 3.07%, effectively removing one full 25bp cut from expectations — adding upside pressure to the USD.
• Political developments:
  Reports suggest Donald Trump is working to rally Senate Republicans to vote to end the filibuster. If successful, this could accelerate the reopening of the US government and allow other legislative changes to pass more easily.

• United Kingdom:
  The upcoming UK budget is expected to include higher taxes, especially for top earners, raising fears of capital outflows and weaker consumer spending. The probability of the BoE cutting rates either at this week’s meeting or on 18 December has also increased. GBPUSD is falling fast and eyeing a break of 1.3000. 

• Eurozone:
  While the ECB has maintained a hawkish tone and rate-cut expectations remain muted, ongoing French political issues have dampened sentiment. Traders see no clear path to a sustainable deficit reduction.
• Canada:
  Concerns have risen around US–Canada trade relations and a widening output gap. The BoC has already been cutting rates and may need to do so again in Q1 2026.
• New Zealand:
  The NZD has been hit hard by deteriorating data. Following today’s jobs report, the RBNZ may even consider a 50bp cut, though the market currently prices only an 8% probability.
• Japan:
  The JPY has weakened as new PM Sanae Takaichi and BoJ Governor Ueda reaffirm that BoJ policy will remain unchanged, with no rush to tighten.

The USD’s strength is being fuelled by a combination of domestic positives and external negatives — a perfect storm that has boosted demand for the greenback.

These dynamics are likely to remain in play for a while longer. And although the US government shutdown persists and funding market stress is monitored closely, a break above the 200-day moving average on the DXY could encourage further USD buying as momentum builds through November.