The US Dollar Index has experienced a decline, settling at approximately 99.50 during the Asian session on Monday. US retail sales decreased by 0.6% month-over-month in July, following a 0.2% increase in June. Discussions between the US and Iran aimed at addressing the Middle East conflict continue to be at an impasse. The US Dollar Index, an index of the value of the US Dollar measured against a basket of six world currencies, is currently positioned around 99.50 during the Asian trading hours on Monday. The DXY experiences a reduction in momentum following data indicating an unexpected decline in US Retail Sales for July. Retail sales in the United States experienced a decline of 0.6% last month, following an unrevised increase of 0.2% in June, as reported by the US Census Bureau on Friday. Market consensus anticipated an increase of 0.1%. On an annual basis, Retail Sales recorded a growth of 5.0% in July, compared to an increase of 6.8% (revised from 6.7%).

The disappointing US Retail Sales figures, coupled with the weaker-than-anticipated Consumer Price Index and Producer Price Index inflation data released last week, have moderated expectations regarding a potential interest rate hike by the US Federal Reserve during its policy meeting on September 15-16. Traders are currently assigning a 31% probability to a rate hike in September, while the likelihood of an increase by December stands at 69%, as indicated by the CME FedWatch tool. “Softer U.S. data over recent weeks has reduced rate hike expectations, with ‌less than one full hike now priced for December,” analysts wrote. “The back end of the Treasury curve remains elevated, with some commentators attributing higher yields to credibility concerns.”

Traders will pay keen attention to the ongoing US conflict with Iran and the initiatives aimed at securing access to the Strait of Hormuz. Iran’s Foreign Minister Abbas Araghchi stated on Friday that there are “no negotiations currently taking place between Tehran and Washington.” Araghchi further stated that the US must acquiesce to Iran’s conditions for shipping to recommence thru the waterway. Strategists observe that the Dollar’s attempt to recover mid-week has quickly lost momentum, noting that “the mid-week rebound following the CPI data stalled yesterday around the PPI release and markets are once again leaning into the short dollar trade broadly amid fading expectations of a September Fed rate hike.” They suggest this renewed bias against the USD reflects investors’ growing conviction that the Fed is unlikely to tighten policy again in the near term.

In the daily chart, the Dollar Index Spot remains constrained below a significant range of moving-average and volatility resistance. The 100-day simple moving average and the midline of the Bollinger Bands are limiting upward movement, thereby maintaining a near-term bias skewed toward the downside. The lower reading of the 14-day Relative Strength Index around 37 reinforces a weak tone, suggesting downside pressure persists while price remains lodged under these ceilings. On the topside, initial resistance is situated at the 100-day SMA around 99.75, followed by the Bollinger midline at 100.35. The upper band, located near 101.80, represents a more distant barrier should a short-covering bounce extend. On the downside, the first notable support aligns with the lower Bollinger Band around 98.85, where volatility support could slow the decline if sellers press the index further.