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US Dollar Forecast: DXY Stabilizes as Traders Weigh Trump Comments on Iran War
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Key Points:
- The US Dollar holds steady as traders weigh potential Middle East de-escalation and persistent geopolitical uncertainty.
- Markets react cautiously to Trump’s remarks as conflicting signals from Iran raise doubts about a quick end to tensions.
- DXY maintains a bullish technical bias while holding above the 50-day and 200-day moving averages.
U.S. Dollar Holds Steady as Traders Weigh Middle East De-escalation Hopes
The U.S. Dollar is nearly flat against a basket of major currencies on Tuesday as traders continue to trim long positions and shorts re-emerge on hopes for a de-escalation in the Middle Eastern war between the United States and Iran. However, today’s weakness is a little subdued on concerns the optimism is being fueled by premature talk and no solid action.
At 19:35 GMT, DXY is trading 98.911, up 0.184 or +0.19%.
Trump’s Remarks Spark Caution — Mixed Signals From the White House
Yesterday, President Trump triggered a break in the market after he said the U.S. progress in the war was ahead of schedule, however, traders are a little cautious because he also threatened to continue the attacks more aggressively should Iran block oil shipments through the Strait of Hormuz.
Furthermore, there is opposition from Iran’s Revolutionary Guards who called Trump’s pledge “nonsense”. The IRG also threatened to continue the blockade until the United States and Israel stop the bombing of Iran.
Why the Dollar Isn’t Following Oil Lower
Despite Trump’s remarks, the volatility in the financial markets is expected to stick around for a while until the war is officially declared over and the threats to oil supply have gone away. Crude oil dropped sharply lower Tuesday afternoon but there wasn’t the same response from the dollar suggesting it’s going to take more than oil prices to have an impact on the greenback.
Traders have liked the dollar since the war began because the U.S. oil industry can better withstand price shocks. This is because as a major producer, the U.S. is an exporter, while other areas like Europe and Asia count on imports.
$100 Crude Oil — The Level That Changes Everything for the Dollar
For now, the dollar looks stable with traders eyeing the key $100 crude oil price as a major indicator. If crude oil remains under $100 a barrel then the dollar will eventually lose its luster as a safe haven asset and investors will return to risky assets. A prolonged period above $100 and we can see anything from slower economic growth to policy pivots from central banks. This is what is at stake now.
Dollar Forecast — Bullish Tone Holds Until the All-Clear Signal
As for the Fed, a March cut is off the table, a June cut is less than 50/50, but traders appear to have shifted their interest to the late July Fed meeting. But the markets have resilience and precedent. They recovered quickly from the Russian invasion of Ukraine after initial shocks and they’ve certainly worked through the ongoing war. Dollar traders are fully aware of that situation and are just waiting for conditions to calm. In the meantime, I think they’ll maintain their currently somewhat bullish tone until they get an all-clear signal.
Technically, holding above both the 200-day moving average at 98.338 and the 50-day moving average at 97.998 gives the market an upside bias. If they start to fail along with a trendline from the 95.551 bottom then we can finally declare a shift in momentum back to the downside.
More Information in our Economic Calendar.
About the Author
James Hyerczykauthor
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.
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