US Dollar Index (DXY) Slumps Below 97.80 as Market Eyes Fed Chair Powell’s Testimony

US Dollar Sinks as Ceasefire Boosts Risk Sentiment, Fed Easing in Focus

The US Dollar Index (DXY) has dropped sharply below 97.80, shedding more than 1.3% since Monday as a wave of risk-on sentiment sweeps the markets following the ceasefire agreement between Israel and Iran. Simultaneously, dovish remarks from Federal Reserve officials ahead of Chair Jerome Powell’s testimony further weigh on the greenback.

Geopolitical Easing Dents Demand for Safe-Haven USD

Investor appetite for risk returned strongly after US President Donald Trump announced that both Israel and Iran had agreed to a ceasefire, ending nearly two weeks of escalating tension in the Middle East.

Although Tehran denied breaching the ceasefire, Israel has warned of strong retaliation if provoked again. Nonetheless, markets remain calm with European equities rising and Oil trading over $10 below Monday highs, reducing the need for USD as a safe-haven currency.

DXY Pressured Ahead of Powell’s Congressional Testimony

As of Tuesday, the DXY has retraced nearly all gains from the past two weeks, trading just above the three-year low of 97.13. All eyes are now on Fed Chair Powell’s testimony before Congress, which is expected to provide insight into the Fed’s policy direction.

“Dovish Fed signals and improving risk sentiment may keep the dollar on the defensive,” analysts noted.

Fed officials have recently flagged concerns about labor market fragility, boosting expectations of a rate cut in July, which could further depress USD valuation.

Technical Outlook: Key Levels to Watch

• Resistance: 97.80 (short-term ceiling)
• Support: 97.13 (three-year low)
• Trend Bias: Bearish in short-term, neutral longer-term

The DXY’s momentum remains negative unless Powell delivers unexpectedly hawkish remarks.

Related Reads on Tredu:

• Gold Price Drops Below $3,320 After Israel-Iran Ceasefire
• WTI Crude Sinks as Supply Fears Ease on Middle East Truce
• EUR/USD Holds Near 1.1630 with Eyes on Fed Powell