US Dollar Index Strengthens on Safe-Haven Demand and Hawkish Fed Signals

The US Dollar Index (DXY) is showing strength, trading near 102.20 during early Asian hours on Monday. This rise is driven by safe-haven flows as traders await the US ISM Services Purchasing Managers Index (PMI) report for fresh insights. Factors boosting the dollar include rising US Treasury yields, ongoing Middle East conflicts, and fiscal concerns in France.

Matthew Ryan, head of market strategy at Ebury, noted that the dollar is benefiting from both higher Treasury yields and global debt selloffs, which are fueling safe-haven demand for the greenback. Meanwhile, the recent Nonfarm Payrolls (NFP) report showed a lower-than-expected increase of 29K in September, reducing the odds of a Federal Reserve rate hike this month to 82.3%, according to the CME FedWatch tool.

TD Securities anticipates a cooler US services sector in the latest ISM report, predicting the services index will drop to 54.0 in September. The bank also expects employment to improve slightly but remain in contraction, while prices paid will remain a focus due to recent cost pressures. Fed official Logan's hawkish remarks have further supported the dollar, emphasizing the need for additional rate hikes to control inflation.

Technical analysis indicates the DXY remains bullish, supported by its position above key moving averages. However, the Relative Strength Index (RSI) at 76.34 suggests overbought conditions, potentially leading to a corrective pause. Immediate resistance is near 102.60, with support levels at 100.50 and 100.15.