The U.S. dollar index halted its decline and moved higher during Tuesday's Asian trading session, reclaiming the 98.50 level and ending a two-day correction. The current rebound is primarily supported by increased safe-haven demand, while markets have adopted a cautious stance ahead of the Federal Reserve's interest rate decision, contributing to overall stabilization in the currency.
Geopolitical tensions remain a key factor, with negotiations between the U.S. and Iran still stalled. Although Iran has proposed restoring passage through the Strait of Hormuz and delaying nuclear discussions if the U.S. lifts sanctions and ends conflict, Washington maintains a firm stance, with core disagreements unresolved. This suggests that Middle Eastern tensions are unlikely to ease quickly, sustaining uncertainty around critical energy channels and boosting market risk aversion.
Additionally, the U.S. Treasury Department is intensifying sanctions in related sectors, further heightening geopolitical concerns. These policy moves reinforce market caution toward risk assets and provide additional support for the dollar.
From a macroeconomic perspective, the upcoming Federal Reserve interest rate decision has become a central focus. Markets widely expect the federal funds rate to remain unchanged within the 3.50%–3.75% range, marking the third consecutive pause. While the near-term rate path appears stable, attention is shifting toward future policy direction, particularly amid diverging inflation and economic growth trends.
Market expectations for future interest rate cuts are divided. Some investors anticipate a more aggressive easing cycle ahead, while Fed officials emphasize policy independence, signaling no imminent shift. This divergence leaves the dollar without a clear directional bias, though it retains support during periods of elevated risk.
Market reactions indicate the dollar index is currently balancing multiple influences. Safe-haven demand and interest rate advantages support the currency, while expectations for future policy easing limit its upside. Global capital continues to rotate between risk and safe-haven assets, leading to heightened volatility without a clear trend.
Investor sentiment is clearly in an "event-driven waiting period." With the Fed decision and Middle East situation still uncertain, markets are inclined toward defensive positioning, providing temporary support for the dollar.
Technically, daily charts show the dollar index stabilizing after a pullback, remaining within a broader consolidation range. Immediate resistance lies near 99.20; a break above could test the 100 level. Key support sits at 98.00, with a break lower potentially leading to a retreat toward 97.50. Momentum indicators show the RSI recovering to neutral territory, while the MACD shows early signs of stabilization, suggesting short-term rebound momentum is building. On the 4-hour chart, the index displays a corrective rebound structure, with prices gradually rising from lows and forming a short-term upward channel. The RSI holding above 50 indicates near-term bullish dominance, while a golden cross in the MACD signals strengthening momentum. A sustained move above 98.50 could extend the rebound; failure to hold this level may lead to renewed consolidation.
In summary, the dollar index is currently driven by both safe-haven demand and policy expectations, showing a technical rebound after recent declines. Middle East uncertainties provide underlying support, while the Fed's policy path will determine the medium-term direction. In the near term, the dollar may maintain a firm-to-steady tone, though sustained gains will depend on central bank guidance and shifts in risk sentiment. During this critical event window, market volatility may intensify, warranting close attention to key resistance and support levels.