United States Dollar Index edges up to near 99.50, supported by higher bond yields

The US Dollar (USD) trades slightly higher against its peers on Tuesday, as long-dated United States (US) Treasury Yields rally due to surging oil prices in the wake of renewed Middle East conflicts.

In early European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.1% higher to near 99.50. 10-year US Treasury Yields post a fresh 19-month high at 4.78%. Yields on 10-year bonds are slightly below the multi-year high of 4.81%. Meanwhile, 30-year US Treasury Yields jump are up 0.5% to near 5.27%, the highest level seen in over a week.

US bond yields have capitalized on de-anchored inflation projections amid higher oil prices. The WTI Oil price is up almost 0.6% to near $86.00. The exchange of attacks between the US and Iran has prompted fears of prolonged energy supply disruption.

Earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it shot down a US MQ-9 drone over the Strait of Hormuz using air defense missiles, causing it to crash into Gulf waters. The military attacks between the US and Iran restarted after Central Command (CENTCOM) struck Iranian rocket launchers on Sunday that were preparing to send mines into the Strait of Hormuz.

On the domestic front, investors await the US ISM Manufacturing PMI data for August and the JOLTS Job Openings data for July, which will be published at 14:00 GMT.

This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for August, which will be released on Friday.

US Dollar Index Technical Analysis

In the daily chart, the Dollar Index Spot trades at 99.48, maintaining a mildly bearish near-term bias as it holds just beneath the 20-day exponential moving average (EMA) at 99.53. The index’s inability to reclaim this nearby EMA suggests upside attempts remain capped for now, while the Relative Strength Index (RSI) at 46.62 stays below the neutral 50 line, hinting at subdued bullish momentum rather than outright oversold conditions.

On the topside, immediate resistance is located at the 20-day EMA at 99.53, which is the first hurdle that bulls would need to clear to ease the current downside pressure and open the way for a more sustained recovery. With no clear structural supports derived from the present dataset below spot, traders may look to intraday price action around the 99.50 area as a tactical pivot, with sustained trading under the 20-day EMA likely to keep the Dollar Index biased to the downside in the short term.