Dollar Resilience Holds Ahead of FOMC Meeting

The US dollar has shown resilience in the face of crude oil's sharp decline following reports of renewed US-Iran negotiations, highlighting underlying demand for the greenback ahead of this week's FOMC meeting.

While markets are pricing a growing chance of further Fed tightening, attention now turns to Chair Kevin Warsh's guidance and whether DXY and USD/JPY can extend their bullish trends.

The US dollar index (DXY) has rallied from the 10-week EMA and monthly pivot point, hinting that the prior week's spinning top Doji could mark an important swing low above the 100 handle. A break above 102 is possible if Middle East tensions persist and keep inflation expectations elevated.

The bullish trend on USD/JPY remains firm, with only market participants wary of another intervention from the MOF holding it back. The potential for a breakout above 164 exists, but traders may be cautious due to bearish divergence on the daily RSI within the overbought zone.