DXY – Outlook and Analysis
Outlook: We maintain a slightly bullish bias on the U.S. dollar, driven by continued tensions between the United States and Iran. Unless clearer signals emerge regarding the direction of the situation, the USD is likely to remain supported by its safe-haven status, while oil prices are expected to remain elevated.
This week was relatively quiet in terms of economic data releases. Consumer sentiment came in slightly above expectations at 48.0, compared with the forecast of 46.3. However, sentiment fell to a five-month low, reflecting concerns over inflation, potentially driven by rising prices and higher interest rates.
Meanwhile, President Trump said on Saturday that "striking Iran remained a possibility, although the two countries could still reach a deal". Other reports indicated that the United States was moving some diplomats and their family members out of Middle Eastern posts amid the growing threat of regional escalation. These developments suggest that the risk of further escalation remains elevated.
Iran-aligned Houthi forces have also continued their attacks in the region, adding to geopolitical uncertainty and raising further concerns about the outlook for oil prices.
Looking ahead, we expect the DXY to remain supported by geopolitical tensions and elevated energy prices. However, concerns about rising borrowing costs among AI companies could temporarily ease some upward pressure on the dollar, particularly if these concerns weigh on risk sentiment and prompt investors to seek safer assets.
As of October 25, the DXY is trading at 101.751. Bullish momentum remains intact but appears to be fading, with the RSI slipping towards the 50 level. Nevertheless, the index continues to trade above the 25-day simple moving average (SMA). As noted in my previous post, support remains at 101.511, while resistance is at 101.961.
The week ahead will be crucial, with the FOMC meeting and the U.S. advance GDP release scheduled for October 29. We expect the Federal Reserve to hold interest rates steady. While Kevin Warsh is not expected to provide forward guidance, markets will be watching closely for any comments he makes during the press conference that could offer clues about the future direction of monetary policy.
“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”.
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