- The conflict in the Middle East drives the demand for safe refuge, helping the US dollar index to stand firm near the key support.
- The US dollar stabilizes after the Fed decision to keep the fees, but bets for a cut in September limit the broader rise potential.
- The US dollar finds short -term support while markets expect Trump’s decision on Iran intervention in two weeks.
The US dollar index (DXY) is operating laterally on Friday, staying above 98.00, while markets digest the key developments of this week’s geopolitical and monetary policy.
Although the growing tensions in the Middle East have maintained the appetite for the risk under control, the profits of the dollar are still limited in the middle of the increasing expectations of rates cuts by the Federal Reserve (Fed) this year.
Investors remain in tension after the reports that President Trump has given a period of two weeks to decide whether the US will join Israel in the launch of military actions against Iran.
This movement allows time to continue the negotiations led by Europe in Geneva, but also increases bets if diplomacy fails. Uncertainty has helped the US dollar find a modest support as an active refuge.
Despite the short -term impulse, the broader perspective for the US dollar remains uncertain. The Fed left interest rates unchanged this week, but President Jerome Powell adopted a cautious tone, emphasizing the importance of dependence on the data and the possible inflation risks associated with tariffs. Markets are still valuing a possible rate cuts as soon as in September.
Adding to complexity is the growing divergence in global monetary policy. The Swiss National Bank and Norges Bank surprised the markets with features of fees, while the European Central Bank, the Bank of England and the Australian Reserve Bank remain on hold but are increasingly Dovish. This policy gap has created a temporary support for the US dollar through yield differentials, although the feeling is still fragile.
Technically, the DXY is struggling to build impulse. The index clings to its simple mobile (SMA) average of 20 days at 98.91, with the 50 -day SMA in 99.50 adding upward resistance. The key support is about 97.61, the minimum of the range from January to June.
Upwards, the psychological level of 100.00 and the fibonacci setback of 23.6% in 100.57 are still critical obstacles. The impulse also seems off, with the relative force index (RSI) in 46, even below the neutral brand of 50.
Unless the dollar index can break decisively above the area of ​​99.50–100.57, the broader bassist trend will probably persist while operators balance the safe refuge flows against the perspective of a relief of the Fed and the change in the feeling of global risk.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
