USD Index – downside remains at risk despite fresh signals of war escalation

The dollar opened higher on Monday, following fresh signs of escalation in the Middle East after US/Iran peace talks failed, but lacked strength to maintain gains, reversing a good part of its overnight advance during European and early US trading.

Although greenback played a role of leading safe-haven asset during the five-week war, last week’s sharp drop on optimistic outlook and easing bets for tighter Fed monetary policy, have dented its firm stance.

Also, today’s quick reversal of overnight’s gains, warns that traders might be changing their perception after disappointing actions of the US military, as well as frequent and conflicting messages from President Trump.

This may add to building pressure on dollar, as near-term action is weighed by last week’s large bearish candle (the dollar was down 1.6% for the week), while technical picture on daily chart is weakening (14-d momentum remains in the negative territory / multiple bear-crosses of 5/10/20/30 DMAs).

However, negative signals remain challenged by strong supports at $98.42/30 zone, consisting of converged100 / 55 / 200 DMAs (including 55/200DMA golden cross) and top rising and thickening daily Ichimoku cloud.

Fresh weakness needs to register a clear break of these supports to signal continuation of the bear-leg from $100.48 (new 2026 high, posted on Mar 31) and open way for deeper correction of $95.35/$100.48 rally (the latest pullback has so far retraced around 38.2% of the move).

Recent tops at $98.95zone formed a lower platform which currently acts as initial but significant resistance, with potential break higher to still require stronger upside action and fill last week’s gap ($99.45/$98.45), to neutralize near-term bearish structure.

Res: 98.80; 98.95; 99.23; 99.45
Sup: 98.42; 98.30; 97.91; 97.40