Dollar's Rebound Sparks Caution as Market Sentiment Remains Cautious
Market sentiment remains cautious as momentum indicators on both hourly and daily time frames are stretched, signaling potential reversal risks. The U.S. Dollar Index is attempting to reclaim its 2026 uptrend, while crude oil prices have pulled back more than 12% from a 7-month resistance zone.
The dollar's rebound toward 101 is increasing pressure on major currency pairs, including the euro, which is trading close to its yearly lows. The pullback in crude oil is easing inflationary pressure and supporting a more resilient outlook for U.S. markets ahead of the midterm elections.
A sustained break above 101-101.80 in the DXY could strengthen bearish reversal risks across EUR/USD and the Nasdaq, while a failure by the dollar to break higher combined with softer crude oil prices could support further gains in risk assets despite overbought momentum conditions.