• USD attracts some intraday sellers on Monday amid renewed hopes for US-Iran peace talks.
• Receding hawkish Fed expectations turn out to be another factor weighing on the Greenback.
• The technical setup favors the USD bears and backs the case for a further depreciating move.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, turns lower for the second straight day on Monday and moves further away from a one-week high, around the 99.00 mark touched last Thursday. The index remains depressed below mid-98.00s through the early European session and seems vulnerable amid renewed optimism over US-Iran peace talks.

Reports suggested that Iran gave the ‌US a new proposal on reopening the Strait of Hormuz and the ending of the war, with nuclear negotiations postponed for a ‌later stage. This eases geopolitical risks and turns out to be a key factor undermining the US Dollar's (USD) reserve currency status. Moreover, receding inflation fears on the back of softer Crude Oil prices temper hawkish US Federal Reserve (Fed) expectations and further weigh on the Greenback.

From a technical perspective, the DXY keeps a modest bearish bias following last week's failed attempt to make it through the 200-period Exponential Moving Average (EMA) pivotal resistance on the 4-hour chart. A subsequent fall below the 38.2% Fibonacci retracement level of the recent recovery from a nearly two-month low, touched in April, favors the USD bears and suggests that the path of least resistance for the Index remains to the downside.

Meanwhile, the Moving Average Convergence Divergence (MACD) has slipped into negative territory, and the Relative Strength Index (RSI) hovers around 45. The momentum indicators together suggest fading upside momentum and leaving the index vulnerable while it remains capped by overhead levels. On the topside, initial resistance is set at the 38.2% Fibonacci retracement at 98.44, followed by the 23.6% retracement at 98.63.

A sustained break higher would then expose the 200-period EMA at 98.84 and the swing high anchor near the 98.94 zone. On the downside, immediate support is seen at the 50.0% retracement around 98.29, ahead of the 61.8% Fibo. level at 98.13, with deeper losses eyeing the 78.6% retracement at 97.91 and the April swing low near 97.64.

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

DXY 4-hour chart