DXY declines as easing tensions in the Middle East diminish the demand for safe-haven assets and lower the probabilities of a rate hike by the Federal Reserve in December. US-Iran peace talks stabilise crude oil prices, contributing to a reduction in immediate inflation worries. Strong US GDP figures and a constrained labour market mitigate losses for the Dollar, showcasing the economy’s resilience. The US Dollar Index, which measures the value of the US Dollar against six major currencies, is losing ground for the third successive day and trading near 101.70 during Asian hours on Friday. The Greenback encounters pressure as safe-haven demand diminishes, buoyed by optimism surrounding US-led diplomatic peace negotiations. Easing tensions in the Middle East have contributed to alleviating concerns regarding oil supply and inflation, thereby reducing expectations for a Federal Reserve rate hike at its upcoming December meeting. The CME FedWatch Tool indicates that traders are currently assigning a probability of approximately 75% to a 25-basis-point rate increase, a decrease from 84.2% the previous day.
Crude oil prices remained stable after a report indicated that US Vise President JD Vance contacted Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, on Wednesday to initiate discussions aimed at resuming peace negotiations. US President Donald Trump confirmed his approval of Vance’s diplomatic outreach, noting that Iran requires assistance with medical supplies and other essential resources. However, recent US economic data underscores ongoing resilience and heightened expectations for Fed rate hikes. Preliminary Gross Domestic Product registered at 3.4% YoY, surpassing expectations of 3.2% and increasing from Q2’s 2.2% figure, propelled by robust consumer spending at 3.8% YoY.
Furthermore, the Fed’s preferred inflation metric, the Core PCE Price Index, rose 3.1% YoY in line with expectations, while initial jobless claims dipped slightly to 194K, reinforcing signs of a heating economy and a tight labour market. In the daily chart, the Dollar Index Spot is currently trading at 101.70. Price maintains its position above the 50-day Exponential Moving Average, yet is constrained by the nine-day EMA, resulting in a neutral near-term outlook following the recent decline from the peaks. The 14-day Relative Strength Index has eased to 51.47, indicating a phase of consolidation rather than a definitive directional movement. Meanwhile, the FXS Fed Sentiment Index at 141.89 reflects heightened policy-related uncertainty, which may constrain the potential for sustained trending movements.
On the topside, immediate resistance is positioned at the 9-day EMA at 101.93, and a decisive break above this threshold would pave the way for a retest of recent peaks. On the downside, initial support is observed at the 50-day EMA at 101.21. A daily close below this level is likely to alter the bias toward a more bearish configuration, as the index would begin to slide beneath its medium-term trend base. Strategists highlight that recent “price action in the Treasury curve was notable,” with Chair Warsh’s remarks ultimately delivering “a meaningful steepening in 2s-10s – a powerful signal for growth.” They describe the move as “a welcome move away from inversion,” stressing that it is one “that carries clear implications for the USD more broadly,” as investors reassess the growth outlook and the currency’s underlying support.
