The US Dollar Index (DXY) extended its gains for a second consecutive day, trading around 99.00 during Asian hours on Tuesday, supported by safe-haven flows amid escalating geopolitical tensions, particularly following the expansion of US secondary sanctions targeting entities trading with Iran [1]. US Treasury Secretary Scott Bessent warned that a major financial institution could face enforcement action this week, emphasizing that Chinese entities would not be exempt from these measures [1]. In parallel, Bessent announced a campaign to further isolate Iran from the global economy, with Iran's Supreme National Security Council secretary, Mohsen Rezaei, threatening to halt all oil exports through the Strait of Hormuz if economic pressure persists [2].
Despite these geopolitical developments, the US Treasury's decision to double its buyback operations for longer-dated bonds—potentially utilizing up to $1 trillion from the Treasury General Account—may cap further gains for the Greenback by altering market liquidity and yields [1]. Technical analysis shows the DXY at 99.00, maintaining a bearish near-term tone as it remains below both short- and medium-term EMAs, with the 14-day RSI at 35 indicating continued downside momentum [1]. Immediate resistance is seen at the nine-period EMA near 99.22, with a higher cap at the 50-period EMA around 99.98 [1].
The GBP/USD pair traded in a sideways range around 1.3630, with the firming USD acting as a headwind for the British Pound [2]. The pair maintains a bullish near-term bias above the 200-day SMA, but a break above the 1.3660-1.3665 supply zone is needed to confirm further gains [2]. On the downside, the 200-day SMA at 1.3431 serves as key support [2]. This week, the USD was the strongest against the Japanese Yen, with a 0.32% gain, and rose 0.33% against the GBP [2].
Market participants are closely watching a dense schedule of US economic data releases, including Tuesday's consumer confidence report and Wednesday's Personal Consumption Expenditures (PCE) price index, a key inflation metric for central bank policy [1][2]. The week will culminate with Federal Reserve Chair Kevin Warsh's address at the Jackson Hole symposium on Friday, which is expected to provide critical insights into the Fed's monetary policy outlook and the near-term trajectory of the US Dollar [1][2]. Strategists at Scotiabank noted that the significant calendar and event risk this week is prompting investors to reassess exposures, with the potential for moderate USD gains in the short run as investors trim positions [1].
Traders remain cautious about placing aggressive bullish bets on the USD, awaiting more clarity on the Fed's policy path. While July's tamer US inflation data shifted expectations toward a policy hold at the September 15–16 FOMC meeting, markets are still pricing in over a 75% chance of at least one Fed rate hike by year-end due to ongoing inflation risks from volatile crude oil prices [2].
CONCLUSION
The US Dollar is holding firm near 99.00, buoyed by safe-haven demand amid heightened geopolitical risks and anticipation of key US economic data and Fed commentary. While technical and policy factors may limit further upside, the market remains focused on upcoming inflation data and the Jackson Hole symposium for direction. Investors are reassessing positions, with moderate USD gains likely in the short term as uncertainty persists.