The US Dollar Index (DXY), which measures the Greenback against a basket of currencies, continued to trade with a negative bias for the third consecutive day, hovering around the 99.65 region during the Asian session on Thursday. This level is close to the lowest point since June 17, which was touched earlier in the week, as market participants await further developments in the Middle East and the upcoming US monthly jobs data release on Friday [1].
Recent data releases have contributed to the bearish sentiment. The ADP report showed that private-sector employers added only 44,000 jobs in July, a sharp decline from 98,000 in the previous month and well below consensus estimates. Additionally, the US ISM Services PMI for July came in at 54.1, slightly above June's 54 but still missing forecasts. These figures have dampened expectations for aggressive Federal Reserve rate hikes, keeping USD bulls on the defensive [1].
Geopolitical factors are also influencing the market. Iran’s Foreign Ministry spokesperson stated that Iran and Oman are close to finalizing a framework for commercial shipping through the Strait of Hormuz, fueling optimism for diplomatic progress in the region. However, Yemen’s Iran-backed Houthis claimed responsibility for missile attacks on a Saudi oil tanker near Yanbu and another vessel in the Gulf of Aden, which led to a modest increase in crude oil prices. This development keeps inflation risks and the possibility of Fed rate hikes in play, potentially limiting further downside for the USD [1].
From a technical perspective, the DXY trades at 99.66, maintaining a bearish near-term bias below the 50-day Simple Moving Average (SMA) at 100.55. The index remains in the lower band of its recent range, and previous attempts to rebound have failed to reclaim the medium-term trend marker. A move above the 50-day SMA would be necessary to ease immediate downside pressure [1].
Traders are expected to remain cautious ahead of the US Nonfarm Payrolls (NFP) report on Friday, which could provide fresh cues regarding the Federal Reserve's policy path and the near-term trajectory for the DXY. Ongoing geopolitical developments are also likely to contribute to volatility in the global financial markets and create short-term trading opportunities around the USD [1].
CONCLUSION
The US Dollar Index remains under pressure due to weaker-than-expected US jobs data and ongoing geopolitical uncertainties. While inflation risks and potential Fed rate hikes may provide some support, traders are likely to await the upcoming Nonfarm Payrolls report for clearer direction. Market volatility is expected to persist in the near term.