The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, is trading around 99.60 during Asian hours on Wednesday after minor gains the previous day [1]. The Dollar is receiving support from safe-haven demand, largely due to ongoing geopolitical tensions between the United States and Iran and persistent concerns over global supply disruptions. US President Donald Trump confirmed that the US naval blockade remains in effect, with no active negotiations underway with Tehran. Despite official claims that the Strait of Hormuz is open and mines have been cleared, shipping risks remain elevated, severely restricting transit through the region [1].
Market participants are closely watching the Minutes from the Federal Reserve’s July Meeting for clues on future monetary policy. The Fed left interest rates unchanged at its last meeting, but three officials dissented in favor of a rate hike, highlighting division within the central bank. According to the CME FedWatch tool, traders now price in only a 35% chance of a rate hike at the Fed’s September meeting, down from 47% a month earlier. This shift follows recent economic data showing US Retail Sales dropped in July for the first time in nine months, unexpected job losses last month, and subdued CPI inflation figures, all contributing to easing expectations for a rate hike [1].
Strategists at Scotiabank note that a "mild risk-off mood is extending the USD broad support intraday," with front-end rates "mildly firmer" and longer-term US bond yields under pressure from inflation worries. This dynamic is steepening the US Treasury curve and reinforcing the Dollar’s intraday bid within its recent range [1].
Technical analysis shows the Dollar Index Spot at 99.60, maintaining a bearish near-term bias as it trades below both the nine-day and 50-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) at 38.94 is just above oversold territory, indicating persistent downside pressure. Resistance levels are identified at the nine-day EMA near 99.77, the 50-day EMA at 100.19, and a horizontal barrier at 101.80. Immediate support is at 97.62, with secondary cushions at 96.49 and 95.56 [1].
CONCLUSION
The US Dollar Index remains supported by safe-haven demand amid geopolitical tensions, but faces headwinds from weakening economic data and reduced expectations for a September Fed rate hike. Technical indicators suggest continued downside pressure, with traders awaiting further clarity from the Fed’s meeting minutes. Overall, market sentiment is cautious, with the Dollar holding above key support levels.