US Dollar Index Price Forecast: Trades with caution near 20-day EMA on US-Iran deal optimism
The US Dollar (USD) trades cautiously as the appeal of safe-haven assets has diminished due to renewed optimism over the United States (US)-Iran deal.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is flat at around 99.00. The DXY corrected sharply from its over seven-week high of 99.10 on Thursday, following media reports that the US and Iran have reached a 60-day Memorandum of Understanding (MoU), which still needs the approval from US President Donald Trump.
The DXY came under pressure as renewed US-Iran deal hopes weighed heavily on oil prices. The US Dollar had been outperforming since the start of the Middle East war, as elevated energy prices boosted the US inflation, which forced traders to price out the possibility of interest rate cuts this year.
The CME FedWatch tool shows that the possibility of the Fed holding interest rates steady at their current levels by the year-end is 52.9%, while the rest favor at least one interest rate hike. This is a sharp turnaround from two interest rate cuts anticipated before the war started.
Going forward, investors will focus on the US ISM Manufacturing and Services PMI and the Nonfarm Payrolls (NFP) data for May, which will be released next week.
US Dollar Index technical analysis
The Dollar Index Spot trades almost flat at around 99.00 at press time. The spot has remained confined in a tight range between 98.84 and 99.54 for the last two weeks. The index holds a mild bullish near-term bias as it stays above the 20-day Exponential Moving Average (EMA) at 98.91 and well over the former uptrend-line break area around 98.15.
The Relative Strength Index (RSI) at 52.71 hovers just above the neutral band, suggesting a modest positive tone rather than strong directional conviction.
On the downside, initial support is seen at the 20-day EMA at 98.91, with a deeper cushion emerging near the broken support trend line around 98.15. As long as price holds above these layers, pullbacks are likely to be treated as corrective within the broader recovery structure, while a sustained break above the March 28 high at 99.54 would lead to further upside towards 100.00.
(The technical analysis of this story was written with the help of an AI tool.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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