DXY Falls Below 100. 99.5 Becomes the Key Test
DXY has slipped back below 100, easing off last week’s highs. The key zone I’m watching is a pullback into 99.5—how price reacts there will tell us if this is a healthy reset or the start of a deeper unwind.
The dollar is cooling as oil eases and markets reassess Iran-related inflation risk. Signs that Iranian tankers may be allowed through Hormuz have taken heat out of crude, temporarily reducing the inflation shock that was supporting USD. The endgame is still unclear, and headlines can flip sentiment quickly.
The next major catalyst is the Fed later this week. Rates are expected to stay on hold, but traders will focus on how policymakers frame the recent energy spike and what it means for inflation and borrowing costs. Right now, markets are only pricing one 25bp cut, likely not before December.
Oil and yields are the tell. If yields flare, markets are leaning hawkish and USD gets fuel. If yields stay suppressed, dollar upside likely stays capped.
- Alan
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