Insights 
VT 
Federal Reserve Chair Jerome Powell spoke before Congress, reiterating the data-dependent approach of the Fed. The US Dollar weakened as Middle East tensions eased with the Israel-Iran ceasefire, causing the Dollar Index to fall below 98.00.
The US Dollar Index traded lower after the ceasefire news between Israel and Iran reduced the safe-haven demand. With the Dollar Index near 97.65, it hovers just above its June low of 97.61 amidst easing geopolitical concerns.
Power of Geopolitical Impact
Powell’s hawkish comments to Congress did not convince markets of a July rate cut, leading to a shift in focus to the ceasefire which generated a risk-on sentiment. The Dollar found itself under pressure as safe-haven flows reversed.
The Dollar Index failed to retest the 100.00 level after Monday’s optimism about the ceasefire’s geopolitical relief. With the ceasefire confirmed, the US Dollar Index continued to fall under pressure.
Currently below 98.00, the Dollar Index is facing resistance at this level, risking further losses. The Relative Strength Index suggests that the short-term momentum is strained, as it nears oversold territory close to 38.0.
Market’s Reactive Sentiment
Given the backdrop of Powell’s testimony and recent price action in the Dollar Index, we are observing a move that appears increasingly tethered to shifting geopolitical currents instead of just monetary policy expectations. The chair’s repeated emphasis on data dependency suggests rates are unlikely to be altered without clear signals from inflation or employment prints. However, despite this insistence, markets have diverted attention elsewhere – towards geopolitical calm.
With the ceasefire between Israel and Iran cemented, there has been a notable unwind of safe-haven flows. That unwind has directly impacted demand for the Dollar. We’ve seen a consistent rejection of previous support levels now acting as overhead resistance, particularly the psychological barrier at 98.00. If the Dollar Index remains below that level, it becomes more exposed. It’s not merely sentiment driving this – technicals also show decreasing momentum, especially as the RSI edges below 40, a region often associated with pricing weakness.
Financial agents should be mindful that the retreat from safe-haven positioning could stretch the downside in USD further, especially against higher-beta currencies. We’re not seeing expectations reset as much from Powell’s tone, despite his language retaining a hawkish tilt. That’s telling. The market appears far more reactive to the geopolitics at the moment, at least in the short run.
A lack of follow-through on earlier Dollar strength, particularly the failure to reclaim 100.00, hints at deteriorating conviction on further gains. For now, downside risks are not just technical—they’re also stemming from the fading premium of geopolitical fear, which had buoyed the Greenback just weeks ago.
From where we stand, any upcoming macro data—namely, CPI prints or the next jobs report—will act as checkpoints. But until then, it would be misguided to expect Dollar strength to return convincingly without fresh catalysts. The markets have clearly pivoted to risk-on modes of thinking. For positioning ahead, it might be beneficial to realign assumptions about asset direction with the reduced geopolitical premium and the market’s modest appetite for Dollar exposure.
We notice that previously reliable support structures are now turning into levels of hesitation. Until the RSI shows signs of reversal or stabilisation above 40, traders should treat rallies as corrective rather than directional. The structure of the market has shifted—tactics must do the same.
