The US Dollar Index (DXY) extended its decline for a third consecutive day, trading around 101.20 during European hours on Monday, as safe-haven demand eased following reports that Washington and Tehran have agreed to halt attacks ahead of peace talks in Doha this week [1]. This diplomatic pause comes after days of retaliatory strikes, with both sides accusing each other of violating a prior ceasefire. Official delegations are scheduled to meet in Qatar on Tuesday to negotiate an end to the conflict [1].
Despite the softer US Dollar, downside pressure may be limited due to persistent hawkish expectations for the Federal Reserve. The CME FedWatch Tool indicates traders are pricing in a 79.5% probability of rate hikes in December. Upcoming US labor market data, particularly Thursday’s Nonfarm Payrolls (NFP) report, is expected to provide further guidance on the Fed's policy trajectory. Forecasters anticipate June job growth of 114,000 and an unemployment rate holding steady at 4.3% [1].
On the currency front, the US Dollar was the weakest against the New Zealand Dollar, falling 0.29%, and also declined 0.21% against the Euro and 0.19% against the British Pound. Against the Canadian Dollar, the USD slipped 0.08% [1].
In the USD/CAD pair, the US Dollar lost ground for the third straight day, trading near 1.4180 after retreating from a 14-month high of 1.4248 reached on June 24 [2]. Technical analysis shows the pair remains within an ascending channel, maintaining a bullish near-term bias as it trades above both the nine-day and 50-day Exponential Moving Averages (EMAs). However, the 14-day Relative Strength Index (RSI) at 75.3 signals overbought conditions, suggesting the recent advance may be vulnerable to consolidation or a corrective pullback [2]. Key support is seen at the nine-day EMA of 1.4155, with further downside targets at the lower boundary of the channel around 1.4020 and the 50-day EMA at 1.3924. A rebound toward the 14-month high of 1.4248 is possible if resistance is broken, potentially opening the door to 1.4400 [2].
The Canadian Dollar was the strongest against the Japanese Yen, gaining 0.12%, and also appreciated 0.09% against the US Dollar [2].
CONCLUSION
The US Dollar's decline reflects easing geopolitical tensions and shifting risk sentiment, while hawkish Fed expectations provide some support. The USD/CAD pair remains technically bullish but faces overbought conditions, suggesting potential for near-term consolidation. Market participants are closely watching upcoming US labor data and Middle East developments for further direction.