DXY Rebound Capped Near 100 Amid Event Risk and Calendar Events

The US Dollar Index (DXY) has shown a cautious rebound in recent days, but Scotiabank strategists Shaun Osborne and Eric Theoret believe that any gains may be limited to the 100 area.

According to Osborne and Theoret, the dollar is modestly stronger as markets start the week cautiously, with equities being defensive and Treasuries firmer. They attribute this trend to risk aversion and calendar events such as sanctions on Iran, US Personal Consumption Expenditures (PCE) Price Index data, and Fed Chair Warsh's Jackson Hole speech.

While the broader dollar trend remains negative, Osborne and Theoret note that price action has reflected a sense of caution in the market about pushing the USD lower still at the moment. They also point out that technical trends remain bearish and oscillator signals are showing some moderation in the dollar decline, but no reversal is evident yet.

The strategists expect moderate gains in the short run as investors pare back positioning, but they question whether these developments will change the dollar's fundamental trajectory overall.