US Dollar Index News: Safe Havens Rally Amid Israeli-Hamas Conflict

Highlights

• U.S. dollar and Japanese yen gain amid escalating Israel-Hamas conflict, as investors seek safe havens.
• Euro and sterling slide 0.5% against the greenback as German data stokes Eurozone recession fears.
• Market eyes bullish short-term stance on safe havens; 78% odds for Fed to hold rates steady.

Rising Geopolitical Tensions Fuel Safe-Haven Currencies

The U.S. dollar and Japanese yen, typical safe-haven currencies, gained ground on Monday amid escalating military conflict between Israel and Palestinian group Hamas. The skirmishes have heightened geopolitical risks, making investors increasingly cautious.

Shekel Takes a Hit, Central Bank Intervenes

The Israeli shekel declined sharply, dropping about 2.5% to settle at 3.9325 per dollar. The Bank of Israel intervened, announcing it would unload up to $30 billion of foreign currency in the open market to stabilize the shekel, which had earlier tumbled to an almost eight-year low of 3.9880 per dollar.

Dollar and Yen Strengthen, Supported by U.S. Jobs Data

The dollar index advanced 0.4% to 106.47, while the yen edged 0.1% higher to 149.09 per dollar. The greenback also found support from U.S. employment data, showing the most significant job increase in eight months in September. This robust employment outlook may set the stage for higher-than-expected inflation figures later this week.

Euro and Sterling Under Pressure, German Data Adds Concerns

The euro and sterling both lost ground against the strengthening dollar, falling 0.5% each. Added to the bearish outlook was German industrial production data, showing a 0.2% drop in August, further fueling concerns of a recession in the euro zone.

Short-Term Forecast: Bullish on Safe Havens

The market appears to be factoring in continued geopolitical tension and economic uncertainty, suggesting a bullish outlook for safe-haven currencies in the short term. Market pricing indicates a 78% chance that the Federal Reserve will keep interest rates steady in its November meeting, according to CME Group data.

Technical Analysis

The US Dollar Index (DXY) is currently trading at 106.271, slightly above its previous close of 106.101. The index is above both its 200-Day and 50-Day moving averages, at 103.174 and 104.421 respectively, signaling bullish momentum.

The current price is sandwiched between minor resistance at 106.904 and minor support at 105.628, with trend line support situated at 106.013. This suggests that DXY is in a tight trading range, yet leaning bullish as it holds above main support at 102.853. The current market sentiment for DXY appears to be cautiously bullish, but a break above the trend line resistance at 105.57 could trigger an acceleration to the upside.