• DXY adds to the monthly recovery north of the 99.00 hurdle.
• The US Dollar remains propped up by steady geopolitical uncertainty.
• The Fed’s Williams said the current monetary policy is modestly restrictive.

The US Dollar (USD) maintains its positive performance for the third consecutive day on Wednesday, this time lifting the US Dollar Index (DXY) to the vicinity of two-month highs near 99.50 and opening the door to a potential test of the psychological 100.00 hurdle in the relatively short term.

Geopolitics… and the Fed

The US Dollar has been gathering fresh momentum since the beginning of June, underpinned by persistent uncertainty surrounding the Middle East crisis, alongside the usual back-and-forth from the White House.

Another factor supporting the Greenback’s advance has been investors’ repricing of the Federal Reserve’s (Fed) policy path for this year. Indeed, one direct consequence of the US-Iran-Hormuz conflict has been the sharp rise in crude oil prices, which has, in turn, fuelled expectations of higher inflation in the months ahead.

This has reinforced the growing view that the Fed may need to maintain its restrictive policy stance for longer, a message that many Fed officials have been conveying in recent weeks.

Returning to inflation, New York Fed President John Williams said in earlier remarks that inflation has risen “quite a bit”, while noting that the labour market remains healthy. He also expressed confidence that energy prices will eventually ease, although he acknowledged that upside risks to inflation have increased.

The US “exceptionalism” is back

Lastly, a steady stream of upbeat economic data has continued to support the Greenback, reinforcing the narrative of US exceptionalism relative to its major peers.

Markets received another batch of encouraging figures on Wednesday. The ADP report showed that the US private sector added 122K jobs in May, comfortably beating market expectations. At the same time, the ISM Services PMI surprised to the upside, rising to 54.5 and pointing to continued resilience in the sector.

And once again, the inflation story remains in focus: the ISM Services Prices Paid Index climbed to 71.3, its highest reading since August 2022, adding to concerns that price pressures may prove more persistent than previously anticipated.

DXY: Levels to watch

In the daily chart, Dollar Index Spot trades at 99.52. The near-term bias is mildly bullish as price holds above the 55-day, 100-day and 200-day simple moving averages clustered just under 99.00, while also sitting slightly over a horizontal support level at 99.50. The Relative Strength Index around 60 suggests firming upside momentum, although the Average Directional Index near 18 hints that the trend remains relatively weak and susceptible to swings.

On the topside, initial resistance emerges at 100.39, ahead of a nearby cap at 100.64, with a stronger barrier sitting higher at 101.98. On the downside, immediate support is seen at 99.50, followed by the 55-day SMA around 98.95 and the broader moving-average band between the 100-day SMA at 98.56 and the 200-day SMA at 98.60, before more distant floors at 97.62 and the mid-95.00s.

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