The US Dollar Index dips slightly in early trading but remains supported by Fed rate hike expectations and geopolitical risks.
The US Dollar Index (DXY) retreated slightly to around 101.30 during early European trading on Friday, paring some of Thursday’s gains. The index is down over 0.15% for the day but remains near monthly highs, supported by a constructive technical setup and broader market dynamics.
The pullback follows profit-taking ahead of the weekend and repositioning before next week’s Federal Open Market Committee (FOMC) meeting. However, elevated crude oil prices and persistent inflation concerns fuel expectations of at least one more Fed rate hike, limiting downside pressure. Escalating US-Iran tensions and new US tariffs also bolster demand for the safe-haven dollar.
Technically, the DXY holds above its 200-period Simple Moving Average on the 4-hour chart, with momentum indicators like the RSI near 60 and the MACD marginally positive. The index’s slide stalled near the 23.6% Fibonacci retracement level of its July rally, reinforcing a bullish near-term outlook.