DXY Near Six-Week High on Oil Surge and Hawkish Fed Outlook

Traders' Opinions

Summary:

The US Dollar held near six-week highs on Wednesday as escalating US-Iran tensions and rising oil prices forced traders to scale back expectations for Federal Reserve rate cuts. Markets are increasingly betting the Fed could keep interest rates higher for longer amid renewed inflation risks.

BUY USDX

EXP

TRADING

99.300

Entry Price

100.400

98.800

99.340 -0.210 -0.21%

0.0

Pips

Flat

98.800

Exit Price

99.300

Entry Price

100.400

The US Dollar remained firmly supported on Wednesday, with the US Dollar Index (DXY) trading near a six-week high around 99.40 as markets sharply reduced expectations for Federal Reserve rate cuts amid escalating geopolitical tensions and rising oil prices.

Investor sentiment shifted aggressively in favor of the Greenback after fears of a wider US-Iran conflict pushed crude oil prices higher, fueling concerns that inflation pressures could intensify again. Traders now see a 56.3% chance that the Federal Reserve could deliver at least one additional rate hike this year, according to the CME FedWatch Tool — a dramatic reversal from earlier expectations for two rate cuts before tensions in the Middle East escalated.

The latest rally in the Dollar has been driven by both safe-haven demand and growing expectations that the Fed may be forced to maintain restrictive monetary policy for longer if energy prices continue rising. Markets remain particularly focused on the Strait of Hormuz, a critical global oil transit route, where fears of supply disruptions have kept oil prices elevated.

Geopolitical tensions intensified after US President Donald Trump warned that Washington could launch new military strikes against Iran within days if Tehran refuses to agree to a deal. In response, Iran’s Islamic Revolutionary Guard Corps threatened retaliation extending beyond the Middle East if the US resumes attacks.

In my view, the market is increasingly transitioning from a “Fed cuts” narrative toward a “higher-for-longer” rate environment. As long as oil prices remain elevated and geopolitical risks persist, the US Dollar is likely to remain well supported across global currency markets.

Technical Analysis

From a technical perspective, the US Dollar Index (DXY) remains entrenched in a well-defined bullish structure on the 4-hour chart after staging a strong recovery from the 97.80 support region earlier this month. Price action continues to print higher lows and higher highs, reinforcing the broader upside momentum as the index trades near a fresh six-week high around the 99.30 area. The recent breakout above the 99.20 resistance zone marked a significant bullish development and confirmed renewed buying interest following several weeks of consolidation.

The index is currently consolidating just above the former 99.20 resistance area, which has now turned into an important near-term support zone. This price behavior suggests bullish continuation rather than exhaustion, particularly as buyers continue defending dips above breakout territory. The latest rebound structure also indicates growing momentum toward the next major resistance region near 100.30–100.40, which represents a key supply zone visible on the chart and aligns with previous rejection highs from March and April.

A sustained break above the 100.40 resistance barrier would likely trigger another leg higher and reinforce broader bullish sentiment toward the US Dollar. Such a breakout could open the door toward the psychological 101.00 handle, potentially attracting additional momentum-driven buying and long positioning across currency markets.

On the downside, the 99.20 zone remains the first major support level to monitor. A decisive breakdown below this region would weaken immediate bullish momentum and expose the 98.80 support area, where previous consolidation and buying activity emerged earlier this month. A sustained move below 98.80 would signal a deeper corrective phase and potentially shift market structure back toward the 97.80 support floor.

Momentum indicators continue to favor the upside despite signs of short-term consolidation. The Relative Strength Index (RSI) remains firmly in bullish territory near 60, suggesting momentum continues to support buyers without yet reaching extreme overbought conditions. This indicates that the current consolidation phase may simply represent a pause before another potential upside extension. Meanwhile, the Moving Average Convergence Divergence (MACD) remains above the zero line and continues to trend positively, although momentum has started to flatten slightly, reflecting temporary consolidation near resistance before the next directional move.

TRADE RECOMMENDATION

BUY DXY

ENTRY PRICE: 99.30

STOP LOSS: 98.80

TAKE PROFIT: 100.40

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