Dollar Regains Strength as Escalating Geopolitical Tensions Fuel Inflation Concerns
The U.S. dollar regained momentum in early Thursday trading, recovering part of the 0.6% decline recorded after the Federal Reserve’s policy announcement, which had briefly pushed the greenback to its weakest level since July 20.
As widely expected, the Federal Reserve left interest rates unchanged within the 3.50%–3.75% range. However, divisions among policymakers over the future path of monetary policy have added a layer of uncertainty to the outlook, leaving markets highly sensitive to upcoming economic developments.
While Fed officials continue to emphasize a data-dependent approach, investors maintain strong expectations for a rate hike in September, with the possibility of an additional increase before year-end still on the table. These expectations continue to provide underlying support for the U.S. dollar.
Meanwhile, escalating tensions in the Middle East have reinforced concerns that inflationary pressures could remain elevated. A prolonged disruption to energy supplies could have broader economic implications, increasing pressure on the Federal Reserve to maintain a restrictive policy stance for longer.
From a technical perspective, the sharp decline seen over the past two sessions appears more consistent with a corrective pullback within a broader uptrend than the beginning of a sustained reversal. Although the bullish trendline originating from the 97.40 base has been breached again, the move risks becoming another false downside break.
The daily chart continues to display a predominantly constructive outlook. The rising and thickening Ichimoku cloud remains supportive of the broader trend, while momentum indicators are holding in neutral-to-positive territory, suggesting room for renewed upside once the current correction stabilizes.
A break and daily close above the 20-day moving average at 100.83 would provide the first indication that bullish momentum is returning. Further gains above the key trendline resistance at 100.98, reinforced by the 10-day moving average, would strengthen the positive outlook and shift attention toward the recent highs around 101.48–101.55.
As long as the dollar index remains above the psychological 100.00 support zone, the broader bullish structure is expected to remain intact.
Res: 100.98; 101.48; 101.55; 102.00
Sup: 100.58; 100.22; 100.00; 99.48
