Dollar Index Consolidation Hints at Bearish Continuation

The US Dollar Index is experiencing a narrow consolidation above its seven-week low after last week's sharp fall, which saw it drop by 1.5%.

Currently, the index remains biased lower due to predominantly bearish daily studies, including strong negative momentum and multiple MA bear-crosses.

The prolonged consolidation is largely attributed to the uncertainty surrounding the situation in the Middle East, with peace talks ongoing but traders remaining cautious.

If these talks succeed, it could put pressure on the dollar as de-escalation would ease inflation risk and lower pressure on the Fed for policy tightening. However, the recent stall of the US-Iran agreement serves as a reminder that history can repeat itself.