US Dollar Index Price Forecast: DXY eyes 99.75 confluence hurdle amid Fed bets, Iran risks

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, regains positive traction on Tuesday and climbs back above the mid-99.00s during the first half of the European session. The index has now reversed a part of the previous day's retracement slide from an over two-week high, though the near-term bias seems tilted in favor of bullish traders.

Against the backdrop of Federal Reserve (Fed) Chair Kevin Warsh's hawkish comments on Friday, inflation risks stemming from rising energy prices lift market bets for an interest rate hike in September. Moreover, a further escalation of tensions between the US and Iran turns out to be another factor underpinning the safe-haven Greenback, validating the positive outlook for the DXY.

Meanwhile, the Moving Average Convergence Divergence (MACD) has turned slightly positive and the Relative Strength Index (RSI) hovers near a neutral 50 area. Improving momentum indicators, however, only hint at stabilization rather than a clear bullish trend while the DXY remains capped by the clustered resistance just overhead, near the 99.70-99.75 region.

The said area comprises the 100-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the July-August fall, forming a tight barrier that the index would need to reclaim to ease immediate downside pressure. Further resistance is seen at the 50.0% retracement at 100.07 and the 61.8% level at 100.44, ahead of stronger Fibonacci caps at 100.95 and 101.61.

On the downside, first support emerges at the 23.6% Fibo. retracement at 99.26, with a deeper structural floor around the cycle low near 98.54.

DXY daily chart