Dollar Tests Key Resistance Amid Ongoing Oil Price Volatility

The US Dollar is testing its key resistance level near 102 after recovering from a selloff in 2025. The current movement indicates a recovery within a broader price range, and a sustained break above 102 would be necessary to confirm a bullish trend.

The dollar's recovery accelerated as oil prices rose due to renewed military operations between the US and Iran, but oil prices have since fallen sharply following diplomatic efforts. This has reduced some of the immediate inflation pressure, but the risk remains high if negotiations fail or disruptions through key shipping routes continue.

The latest inflation data showed a moderation in price pressures, with headline CPI slowing to 3.5% year over year in June and core CPI easing to 2.6%. However, the impact of the recent energy shock has not yet appeared in the official inflation data, which will become clearer in the July figures.

The Federal Reserve is facing a difficult decision ahead of its meeting on Wednesday, with markets assigning around a 30% probability to an immediate interest rate increase. A surprise rate hike would be a strong bullish catalyst for the dollar, but it's not the only scenario that could support a break above 102.