The Middle East situation temporarily eases, reducing the demand for safe-haven assets; the US dollar index fluctuates at a high level.

Huitong Finance APP News—— The US dollar index slightly retreated during the Asian session on Friday, ending a three-day upward trend, currently trading around 99.90. This pullback is primarily due to a temporary improvement in market risk sentiment. According to market surveys, the US indicated it would suspend potential actions against Middle Eastern energy facilities and extend the negotiation window, which somewhat eased market concerns over further escalation of the situation, thereby reducing the safe-haven demand for the dollar.

However, the market remains cautious regarding geopolitical situations. Relevant news indicates that Iran has not clearly made related requests, reflecting considerable uncertainty in current diplomatic progress. The fluctuations in the situation make it difficult for the market to form a clear direction; although the dollar has retreated in the short term, it still has overall support.

From a macro perspective, inflation expectations remain one of the core factors affecting the dollar’s movement. With rising energy prices, the market is concerned that inflation pressures may rise again, thereby impacting the Federal Reserve’s policy path. Recently, Federal Reserve officials have expressed cautious views, believing that the short-term impact of rising energy prices on inflation is limited, but if the shocks persist, they could have broader effects on the overall price system. This viewpoint has gradually diminished market expectations for rate cuts, and some are even starting to price in potential rate hikes within the year.

Driven by changes in interest rate expectations, US Treasury yields remain high, providing important support for the dollar. Although improved risk sentiment has weakened safe-haven demand, the interest rate differential still keeps the dollar relatively strong, which is a key reason limiting the downside potential of the dollar index.

In terms of economic data, the number of initial jobless claims in the US remains at 210,000, consistent with market expectations, having little impact on the market and failing to provide new directional guidance for the dollar. The current market focus is shifting towards the upcoming University of Michigan Consumer Sentiment Index and one-year inflation expectations data, which will provide important clues for assessing consumer resilience and inflation trends.

From a technical perspective, the daily chart of the dollar index still maintains a slightly stronger oscillating structure. After a series of rebounds, the price encountered resistance around 100.50 and retreated, indicating some selling pressure above. The current exchange rate continues to operate above the main moving averages, with the moving average system in a bullish arrangement but with a flattening slope, indicating a slowdown in upward momentum. The MACD is above the zero line but the momentum bars are shortening, showing a weakening of bullish momentum; the RSI has fallen into the neutral zone, indicating that the market is entering a consolidation phase. Key support levels are located around 99.50 and 99.00; if broken, it may lead to further pullbacks; resistance above focuses on 100.50 and 101.00.

Observing the 4-hour chart, the short-term trend shows a corrective consolidation pattern. After a continuous rise, a technical pullback has occurred, with prices falling back to operate near the moving averages, and short-period moving averages are gradually flattening. The MACD has dropped near the zero line, indicating a weakening of short-term momentum; the RSI is around 50, reflecting a balance of bullish and bearish forces. Short-term support is focused on 99.70 and 99.50; if broken, it may further test 99.00; resistance above is concentrated in the 100.20 and 100.50 areas, and a breakthrough would be needed to restart an upward movement.

Editor Summary:

The current movement of the dollar index reflects a typical “dual drive” characteristic: on one hand, easing geopolitical tensions weaken safe-haven demand, putting short-term pressure on the dollar; on the other hand, inflation expectations and interest rate outlook support the dollar’s medium-term movement. Overall, the dollar may maintain a high-level oscillating pattern in the short term, with directionality depending on inflation data and changes in policy expectations. Investors need to pay close attention to inflation indicators and Federal Reserve statements to assess the subsequent trends of the dollar.

(Edited by: Wang Zhiqiang HF013)

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