US Dollar Index tests below 100.00 as Middle East peace hopes undercut the war premium
- Iranian media reported that Tehran is prepared to end the war under specific conditions, tilting markets toward risk.
- Iran set the Kuwait-flagged Al-Salmi tanker ablaze off Dubai on Tuesday, undercutting the peace narrative.
- Friday's NFP report and Wednesday's ISM Manufacturing PMI lead a data-heavy week for the US Dollar.
The US Dollar Index (DXY) is down 0.50% on Tuesday and counting, testing below the 100.00 handle for the first time since mid-March, snapping a five-session winning streak. The session tagged a high near 100.65 before sellers drove the index through the round number to a low around 99.90, where price continues to press. The move has unwound a good portion of March's rally, with the index now threatening to lose the key psychological figure after climbing nearly 3% month-to-date from the January lows close to 95.55.
The US Dollar came under broad selling pressure as markets tilted toward risk appetite after Iranian state media reported that Tehran is prepared to end the war, provided specific conditions are met and all attacks cease. However, the peace-talk lean looks premature; Iran struck the Kuwait-flagged Al-Salmi off Dubai on Tuesday morning in a drone attack on a vessel carrying two million barrels of crude, and Iran's Foreign Ministry dismissed the US 15-point ceasefire proposal as "unrealistic" and "excessive" just a day earlier. The conflicting signals suggest markets may be over-invested in a de-escalation that the facts on the ground have not yet confirmed, with Trump's April 6 deadline for Iran to reopen the Strait of Hormuz fast approaching.
On the data front, the Conference Board's Consumer Confidence Index edged up to 91.8 in March, beating the 87.8 consensus but doing little to shift sentiment in a session dominated by geopolitics. The Chicago Purchasing Managers Index (PMI) missed at 52.8 against a 55.0 forecast, while the Job Openings and Labor Turnover Survey (JOLTS) printed at 6.88 million against 6.92 million expected. The week's marquee releases land later: Wednesday brings the Institute for Supply Management (ISM) Manufacturing PMI and February Retail Sales, while Friday's Non-Farm Payrolls (NFP) report carries a 60K consensus against a prior reading of negative 92K.
DXY 5-minute chart
Technical Analysis
In the daily chart, Dollar Index Spot trades at 99.94. The near-term bias is mildly bullish as price holds above the rising 50-day exponential moving average near 98.90 and continues to respect the 200-day exponential moving average just below 99.15 as underlying trend support. The recent pullback from the 100.50 area has not broken these dynamic supports, suggesting the broader upswing from the mid-97.00s remains intact despite loss of immediate momentum. Stochastic RSI has retreated from overbought extremes toward the low-20s, indicating a cooling phase, yet the oscillator stabilizing rather than collapsing favors a corrective pause within an uptrend rather than a full reversal.
Initial support emerges at the 99.50 area, ahead of stronger backing at the confluence of the 200-day exponential moving average and the recent reaction low around 99.20. A break below this band would expose the 98.70 region, where the 50-day exponential moving average sits as the next line of defense for bulls. On the topside, immediate resistance aligns with the psychological 100.00 level, followed by 100.50, the recent swing high that currently caps the advance. A sustained daily close above 100.50 would confirm trend resumption toward higher highs, while failure to hold above 99.20 would shift the focus back toward a deeper consolidation phase.
In the 5-minute chart, Dollar Index Spot trades at 99.94. The near-term bias is bearish, with price holding below the 200-period exponential moving average near 100.30 and extending a sequence of lower intraday highs from the 100.20 area. The Stochastic RSI has retreated from persistent overbought readings above 80 to the lower band, confirming fading upside momentum and aligning with the break below the psychological 100.00 handle. While the downside appears to be slowing as the oscillator approaches oversold territory, the dominant signal remains one of intraday selling pressure while the index stays capped beneath the 200-period average.
Initial resistance emerges at 100.00, which now acts as a pivot level after the recent breakdown, followed by 100.15 and 100.20, where earlier rebounds stalled before the latest slide. A recovery above 100.20 would be needed to challenge the 200-period EMA around 100.30 and weaken the immediate bearish tone. On the downside, minor support is seen at 99.90 ahead of last visible lows near 99.80; a clear break below this zone would open room toward deeper intraday weakness. As long as price trades below 100.20, rallies are likely to face supply into nearby resistance bands rather than establish a sustained reversal.
(The technical analysis of this story was written with the help of an AI tool.)
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 found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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