FXStreet notes that the U.S. Dollar Index (DXY) has firmed to 12-month highs. Economists at Westpac suggest that more near-term DXY upside is likely now.

“In the wake of the hawkish reshuffling to the Fed’s dots at the Sept meeting OIS markets are now pricing in 3 Fed hikes by end-2023. That is very close to the 2023 median dot at 1.00%. But for 2024, there’s a large disconnect between the dots and market rates. With markets still under-pricing the Fed’s intent, there’s plenty of scope for real rates to provide ongoing support for the USD.”

“DXY retracement targets for the Mar 2020 103.0 highs to the Jan 2021 89.0 lows point to 96.0 as a realistic upside target.”