The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, rebounded to trade near 101.00 during the European session on Thursday after two days of losses, reflecting a mildly bullish near-term bias as it remains above the 50-day Exponential Moving Average (EMA) [1][3]. The DXY was up 0.2% on the day, with the US Dollar showing particular strength against the Swiss Franc and moderate gains against the Japanese Yen and Euro [2][3].
The recovery in the US Dollar was attributed to several factors, including renewed geopolitical tensions in the Middle East. The US launched strikes against Iran following Iranian missile attacks on American forces in the region, and joint US-Saudi strikes targeted Iran-aligned groups in Iraq. These developments, along with reports of potential new fees on shipping by Iran-backed Houthis in Yemen, have raised concerns about disruptions to global energy supplies and contributed to a firmer Greenback as a safe-haven asset [2][3].
On the monetary policy front, the Federal Reserve left interest rates unchanged in the 3.50%-3.75% range at its latest meeting, warning of upside inflation risks. Three out of twelve rate-setting members dissented, favoring a 25-basis point hike. Fed Chair Kevin Warsh reiterated the commitment to bringing inflation down to 2% but provided little guidance on the policy path, leading to some skepticism among market experts about the Fed's resolve [3]. The FXSFedSentiment Index stood elevated at 147.58, indicating that policy expectations remain supportive for the dollar, even as technical analysis suggests the DXY is consolidating just below near-term resistance [1].
Technical indicators show the DXY's 14-day Relative Strength Index (RSI) at around 51, suggesting balanced but slightly positive momentum. Immediate resistance is seen at the nine-day EMA of 101.14, with a potential test of the 14-month high at 101.80 if the bullish bias is reinforced. On the downside, primary support lies at the 50-day EMA at 100.54, with further declines possibly targeting the nearly five-month low of 97.62 [1].
Market reactions were evident in currency pairs such as AUD/USD and USD/JPY. The AUD/USD pair remained defensive, trading just above the mid-0.6900s, as the stronger US Dollar and geopolitical risks weighed on the Australian Dollar [2]. The USD/JPY pair rose 0.1% to around 163.60, supported by the rising 20-day EMA and the firmer US Dollar [3]. Looking ahead, traders are focused on upcoming US economic data releases, including Advance Q2 GDP and the PCE Price Index, as well as the Bank of Japan's policy meeting and Tokyo CPI data [2][3].
CONCLUSION
The US Dollar rebounded near 101.00, buoyed by heightened geopolitical tensions and ongoing uncertainty around the Federal Reserve's policy direction. Technical and sentiment indicators suggest a mildly bullish outlook, though market participants remain attentive to upcoming economic data and central bank decisions for further direction.