United States Dollar Index holds gains near 99.00 amid escalating geopolitical risks

• US Dollar advances on safe-haven demand as the US expands secondary sanctions targeting Iranian trade networks and Chinese institutions.
• Greenback upside remains restrained by the Treasury doubling long-dated bond buybacks using up to $1 trillion.
• Traders await crucial US PCE inflation data and Fed Chair Warsh's upcoming Jackson Hole address.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its gains for the second successive day and trading around 99.00 during the Asian hours on Tuesday.

The Greenback gains safe-haven support amid escalating geopolitical tensions. This upside follows the expansion of United States (US) secondary sanctions against entities trading with Iran. US Treasury Secretary Scott Bessent warned that a major financial institution could face enforcement action this week, explicitly clarifying that Chinese entities will not be exempt from these measures.

Despite these geopolitical tailwinds, further gains for the Greenback may be capped by the US Treasury's decision to double its buyback operations for longer-dated bonds. Reports indicate that Secretary Bessent could utilize up to $1 trillion from the Treasury General Account to finance these repurchases, potentially altering market liquidity and yields.

Market participants are turning their focus toward a dense schedule of U.S. economic data releases this week. Key indicators on the horizon include Tuesday's consumer confidence report and Wednesday's Personal Consumption Expenditures (PCE) price index, which serves as a crucial inflation metric for central bank policy.

The week will culminate on Friday when Federal Reserve Chair Kevin Warsh delivers his address at the annual Jackson Hole symposium. Investors anticipate that his speech will provide critical insights into the Fed's monetary policy outlook and the near-term trajectory of the US Dollar.

Strategists at Scotiabank highlight that the “calendar and event risk this week is significant,” noting that a busy slate of data and policy signals is encouraging investors to reassess exposures. In their view, the “potential for some moderate gains in the USD broadly in the short run is high as investors pare back positioning,” with the Dollar seen benefiting from precautionary position trimming rather than a wholesale shift in the underlying trend.

Technical Analysis: DXY rises despite a bearish near-term tone

In the daily chart, Dollar Index Spot trades at 99.00, maintaining a bearish near-term tone as it holds beneath both the short-term and medium-term Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) at 35 hovers just above oversold territory, suggesting downside momentum is still dominant even if selling pressure is not yet extreme.

On the topside, immediate resistance is seen at the nine-period EMA near 99.22, with the 50-period EMA around 99.98 forming a higher cap that would need to be reclaimed to ease the current downside bias. With no clear structural supports indicated below spot in this dataset, the index remains vulnerable to further slippage while it trades under these moving average barriers.

(The technical analysis of this story was written with the help of an AI tool. Know more.)