United States Dollar Index hovers above 99.50 due to safe-haven support

• Traders await Fed July Meeting Minutes for clues on future monetary policy direction.
• US Dollar rises as US-Iran conflict and Strait of Hormuz risks elevate market anxiety.
• Weak retail sales and cooling inflation reduce September rate hike probabilities to 35%.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is steadying after registering minor gains in the previous day and trading around 99.60 during the Asian hours on Wednesday. Traders turn their attention to the Minutes from the Federal Reserve’s (Fed) July Meeting to gather fresh clues on the monetary policy outlook.

Meanwhile, the US Dollar (USD) is receiving support from safe-haven demand, driven by ongoing geopolitical friction between the United States and Iran and sustained market concerns over global supply. With little indication of a potential agreement to end the conflict and fully reopen the strategic Strait of Hormuz, market participants remain on high alert.

US President Donald Trump confirmed that the US naval blockade remains in effect, noting that there are currently no active negotiations with Tehran. Despite official assertions that the waterway is open and mines have been cleared, shipping risks stay elevated, severely restricting transit through the region.

However, the Greenback could face headwinds amid easing expectations of a US interest rate hike next month. Recent economic data showed that US Retail Sales dropped in July for the first time in nine months, compounding concerns after unexpected job losses last month and tame CPI inflation figures.

While the Fed left interest rates unchanged at its last meeting, three officials dissented in favor of a rate hike, leaving traders looking to the upcoming minutes for deeper insight into the division within the central bank. According to the CME FedWatch tool, traders now price in just a 35% chance of a rate hike at the Fed’s September meeting, down significantly from 47% a month earlier.

USD support extends as curve steepens on inflation worries

Strategists at Scotiabank observe that the “mild risk-off mood is extending the USD broad support intraday,” with front-end rates “mildly firmer” even as “longer-term US bond yields are under slightly more pressure from inflation worries.” They note that this dynamic is “driving the US Treasury curve a little steeper still,” reinforcing the Dollar’s intraday bid within its recent range.

Technical Analysis:

In the daily chart, Dollar Index Spot trades at 99.60, retaining a bearish near-term bias as it holds below both the nine-day and 50-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) at 38.94 hovers just above oversold territory, hinting at persistent downside pressure rather than a decisive exhaustion of the recent decline.

On the topside, initial resistance is seen at the nine-day EMA near 99.77, followed by the 50-day EMA at 100.19, while a more distant cap emerges at the horizontal barrier around 101.80. On the downside, immediate support rests at 97.62, ahead of secondary cushions at 96.49 and 95.56, levels that would come into focus if sellers extend control below the current area.

(The technical analysis of this story was written with the help of an AI tool. Know more.)