The US Dollar Index (DXY) opened the trading week on a slightly firmer footing, but Scotiabank strategists Shaun Osborne and Eric Theoret see the rebound running into resistance near the 100.00 mark. In a note published Monday, the pair observed that the greenback is modestly stronger as markets adopt a cautious tone, with equities trading defensively and Treasuries finding buyers.
“The USD is modestly stronger as markets start the week cautiously, with equities defensive and Treasuries firmer,” Osborne and Theoret wrote, pointing to a familiar dynamic where risk-off sentiment lends the dollar a degree of support without triggering a sustained breakout.
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DXY Stuck in a Range as Support and Resistance Hold
The dollar index has been oscillating in a relatively tight band in recent sessions, with the 100.00 level acting as a pivot point. On the downside, the 99.50–99.60 zone has provided support on multiple tests, while upside attempts have repeatedly stalled near 100.50. This range-bound behavior reflects a market that is reluctant to commit to a directional bet on the dollar without clearer signals from the Federal Reserve or the broader macro calendar.
Scotiabank’s assessment aligns with the broader technical picture: the DXY remains below its 50-day moving average, and momentum indicators have flattened, suggesting the rebound lacks conviction. The strategists emphasized that the currency’s near-term path hinges on whether risk sentiment deteriorates further or whether US data surprises to the upside.
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What’s Driving the Cautious Market Mood?
The cautious start to the week is being attributed to a mix of factors, including lingering concerns about global growth, geopolitical headlines, and positioning ahead of key economic releases. Equity futures pointed to a softer open in early trading, while yields on US Treasuries edged lower as investors sought the safety of government debt.
This flight-to-safety bid typically benefits the dollar, but the muted reaction in the DXY suggests that the currency is not the primary beneficiary this time. Instead, the yen and the Swiss franc have seen more pronounced safe-haven flows, a pattern that often emerges when the dollar’s yield advantage is less compelling.
Fed Policy and the Data Calendar Ahead
For dollar traders, the focus this week will be on a series of US data points that could influence the Federal Reserve’s policy trajectory. Chief among them are the latest consumer confidence figures, durable goods orders, and the Fed’s preferred inflation gauge, the core PCE price index, which is scheduled for release later in the week.
Market pricing currently implies a roughly 70% chance of a 25-basis-point rate cut at the September Federal Open Market Committee (FOMC) meeting, according to CME FedWatch data. A softer inflation print could solidify those expectations, putting downward pressure on the dollar, while a hot reading could revive the case for higher-for-longer rates and lift the DXY back above the 100 mark.
“The market is still trying to calibrate how much easing the Fed will deliver,” said a senior FX strategist at a European bank, speaking on condition of anonymity. “Until that picture clears, the dollar is likely to stay in a holding pattern.”
What to Watch for the Dollar
Beyond the data, traders will be monitoring comments from Federal Reserve officials, who are currently in the blackout period ahead of the September meeting. The tone of the post-meeting statement and Chair Jerome Powell’s press conference will be critical in determining whether the dollar’s recent range resolves to the upside or downside.
Scotiabank’s note suggests that a decisive break above 100.50 would open the door to a retest of the 101.00 region, while a loss of the 99.50 support could accelerate the decline toward 99.00. However, with the market in a cautious mood, the path of least resistance appears to be continued consolidation.
For investors and businesses with dollar exposure, the near-term outlook remains one of uncertainty. Currency hedging strategies that account for range-bound conditions may be more appropriate than directional bets, at least until the Fed provides clearer guidance on the timing and pace of rate cuts.
This article is for informational purposes only and does not constitute financial advice. The foreign exchange market is highly volatile and speculative. Readers should conduct their own research or consult a qualified financial advisor before making any trading or investment decisions.
