Forex News

• DXY gains strong positive traction on Monday amid persistent geopolitical uncertainties.
• Bulls seem unaffected by receding October Fed hike bets and retreating US bond yields.
• Traders now look to US ISM Services PMI and Fed speeches for short-term opportunities.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, catches aggressive bids following Friday's dismal US jobs data-led downtick and jumps to a fresh high since April 2025 at the start of a new week. The index sticks to strong intraday gains through the early European session and currently trades near the 102.30 region, up around 0.35% for the day.

The closely watched US Nonfarm Payrolls (NFP) report showed that the economy added only 29K jobs in September and the Unemployment Rate unexpectedly edged higher to 4.2%. Moreover, soft wage growth tempered expectations for an October Federal Reserve (Fed) rate hike, which dragged US bond yields away from multi-year highs. The immediate reaction, however, turned out to be short-lived, with a combination of supporting factors assisting the DXY to regain strong positive traction at the start of a new week.

According to the CME Group's FedWatch Tool, traders are still pricing in over an 85% chance that the US central bank will raise borrowing costs by the end of this year. Furthermore, persistent geopolitical uncertainties stemming from Middle East conflicts and the widening Russia-Ukraine war turn out to be another factor providing an additional boost to the safe-haven Greenback. In fact, Iran’s Foreign Minister, Abbas Araghchi, said that there is no military solution to the conflict with the US, but Tehran remains ready to return to war.

Adding to this, Iranian parliament speaker Mohammad Bagher Ghalibaf said that the Strait of Hormuz will not be opened until our conditions are met. Meanwhile, the head of Yemen’s governing body, Rashad al-Alimi, announced the start of military operations to retake the remaining territory held by the Houthis in the country. Separately, Ukraine reported deadly Russian air strikes on the Kyiv region, Kharkiv, and Dnipro on Sunday. Moreover, Ukrainian President Volodymyr Zelenskyy vowed that Russia will definitely face a response to this.

The aforementioned fundamental backdrop suggests that the path of least resistance for the DXY remains to the upside. Bulls, however, might opt to move to the sidelines and await the release of FOMC meeting Minutes on Wednesday for more cues about the future policy path before placing fresh bets. In the meantime, the US ISM Services PMI, due later today, along with speeches from influential FOMC members and further developments surrounding the Middle East crisis, will be looked upon to grab short-term opportunities.

DXY daily chart

Technical Analysis

Last week's breakout above the 101.60-101.70 horizontal barrier was seen as a fresh trigger for DXY bulls. Meanwhile, the Relative Strength Index (14) sits in overbought territory above 70, suggesting the latest leg higher is stretched but still dominated by buyers for now. Any corrective pullback, however, is more likely to attract fresh buyers and remain limited near the aforementioned resistance breakpoint.

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

DBS Group Research economist Philip Wee says the Dollar’s three-week rally is losing monetary-policy support as senior Federal Reserve officials push back against expectations for another rate hike at the October 28 FOMC meeting. He argues that the source of rising long-dated Treasury yields is becoming increasingly important for the USD, as higher term premia linked to debt supply, fiscal sustainability and market credibility may offer less support than Fed-driven tightening. The November 3 US midterm elections add another potential constraint to the Dollar outlook.

Fed hesitation challenges USD momentum

"The USD’s three-week rally is running out of monetary-policy fuel. Senior Fed officials have pushed back against expectations for a back-to-back hike at the October 28 FOMC meeting. After softer US PCE inflation and nonfarm payrolls data, another concern is emerging."

"Attention could therefore rotate back towards the more uncomfortable reason long-dated Treasury yields are approaching pre-Global Financial Crisis highs. This distinction matters for the USD."

"Higher yields driven by Fed tightening can support the USD. Higher term premia driven by concerns over debt supply, fiscal sustainability, and Treasury-market credibility need not."

"The November 3 US midterm elections add another constraint. President Donald Trump and his administration face voter backlash over rising living costs. Tariffs and the Iran conflict have driven up grocery and fuel prices, while households are also confronting higher mortgage and other borrowing rates amid weak real wage growth."

"If Republicans lose control of the House, markets could also reassess the US exceptionalism narrative that supported the USD after its post-Liberation Day sell-off."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)