US Dollar Index Falters Below 98.00 Amid Risk-Off Mood and Fed Uncertainty

US Dollar Index Struggles Near 98.00 Despite Risk-Off Sentiment

The US Dollar Index (DXY) continues to trade near multi-week lows, unable to break past the 98.00 resistance mark, even as risk aversion dominates global markets. Ongoing Israeli-Iranian tensions and cautious investor sentiment ahead of Wednesday’s FOMC rate decision have driven demand for safe-haven assets — but the Dollar has failed to fully capitalize.

Geopolitical Risks Push Demand for Safe Havens

As conflict escalates in the Middle East, global markets are witnessing a surge in demand for traditional safe-haven assets. While gold and Japanese Yen have responded positively, the USD remains underwhelming — weighed down by dovish expectations for the Federal Reserve's monetary policy outlook.

Despite Monday’s modest recovery, the Dollar’s momentum has been limited. The DXY briefly tested 98.00 early Tuesday but quickly retraced, holding near 97.50, its lowest level in several years.

Trump’s Sudden G7 Exit Raises Uncertainty

Adding to market anxiety, US President Donald Trump abruptly left the G7 summit, fueling speculation about looming geopolitical shifts. While Trump denied that his early departure was linked to Middle East ceasefire negotiations, he cryptically cited a “much greater reason.” This statement failed to lift sentiment or inspire confidence in USD-backed positions.

Looking Ahead: Fed Rate Decision in Focus

All eyes now turn to the Federal Reserve’s FOMC meeting, with markets heavily anticipating forward guidance on the rate path for 2025. A dovish Fed stance could further pressure the DXY, while any hawkish surprises may offer temporary support.

Technical Outlook: Key DXY Levels to Watch

Resistance: 98.00, followed by 98.40
Support: 97.50 (multi-year low), 97.00

Conclusion: USD Lacks Traction Despite Safe-Haven Flows

The US Dollar remains under pressure, despite a global shift to risk-off positioning. Weak Fed expectations and lingering geopolitical fears have dulled investor appetite for the greenback. The next directional move likely hinges on Wednesday’s FOMC outcome.