USD Holds Firm Ahead of FOMC Meeting Amid US-Iran Tensions

The US dollar has shown resilience in the face of crude oil's sharp decline following reports of renewed US-Iran negotiations. Despite the drop, the greenback's underlying demand remains strong ahead of this week's FOMC meeting. Market expectations suggest a growing chance of further Fed tightening, which could lead to increased inflationary pressures and subsequent interest rate hikes.

The recent pullback in the dollar was minimal, falling by as little as 0.25% from its weekly open before reaching a new high for the day. As the FOMC meeting approaches, traders will be closely watching Chair Kevin Warsh's comments on Middle East tensions and their potential impact on monetary policy.

The technical analysis of the US dollar index (DXY) suggests that prices may continue to rise, with support coming from the 10-week EMA and monthly pivot point. However, a bearish divergence on the daily RSI within the overbought zone could signal a potential reversal.