US Dollar Index eases from five-week highs as safe-haven bid fades
- US Dollar Index pulled back toward the 200-day EMA after a sharp geopolitical rally stalls below 100.00.
- ISM services prices paid fell to 63 from 66.6 in February.
- Friday's NFP report is expected to show a sharp slowdown to 59K from January's 130K, alongside retail sales and the Fed's semi-annual Monetary Policy Report.
The US Dollar Index (DXY) slipped about 0.18% on Wednesday, settling close to 98.90 after retreating from the 99.68 high printed earlier in the week. The index surged nearly 2% across Monday and Tuesday on safe-haven flows triggered by the US-Israeli strikes on Iran and Iran's retaliatory attacks across the Gulf, but Wednesday's session saw that bid cool. The broader picture shows the DXY has rallied sharply off the late-January low near 95.56, with two consecutive strong bullish candles at the start of the week pushing price above the 200-day Exponential Moving Average (EMA) for the first time since late November.
The geopolitical backdrop continues to dominate. The conflict between the US, Israel, and Iran entered its fifth day on Wednesday, with casualties mounting and Iran's Revolutionary Guard declaring the Strait of Hormuz closed to shipping. Oil prices have surged to their highest levels since mid-2025, raising inflation concerns and complicating the Federal Reserve's (Fed) policy outlook.
Wednesday's data offered mixed signals: the ADP employment report printed 63K against a 50K consensus, while the ISM services PMI jumped to 56.1, well above the 53.5 forecast. The prices paid component, however, eased to 63 from 66.6, tempering some of the inflation anxiety. The Beige Book and a public appearance from the Fed's Miran rounded out the session. Attention now turns to Thursday's jobless claims and productivity data and Friday's heavyweight Nonfarm Payrolls (NFP) report, where consensus expects just 59K jobs added, down sharply from January's 130K print.
DXY daily chart
Technical Analysis
In the daily chart, Dollar Index Spot trades at 98.82. The near-term bias is mildly bullish as price rebounds above the rising 50-day exponential moving average and holds just under the 200-day average, signaling recovery within a broader consolidation. The 50-day EMA has turned higher again, underlining emerging upside pressure after the late-month bounce, while the 200-day EMA near current levels caps initial gains and defines the upper boundary of the immediate range. Stochastic hovers in elevated territory but has rolled over from overbought conditions, suggesting slowing momentum rather than an outright reversal at this stage.
Immediate support is at the 50-day EMA around 97.95, where a daily close below would expose the late pullback area near 97.60 and, if broken, the 96.90 region as a deeper downside objective. On the topside, initial resistance aligns with the 200-day EMA around 98.70–98.75, with a sustained break opening the way toward the recent swing high near 99.05. As long as price holds above the 50-day average, dips are likely to be treated as pauses within a developing upward phase toward the upper resistance band.
(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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