DXY Bounces From Fresh Lows As Ceasefire Cracks Widen On All Sides

The US Dollar Index (DXY) continued to grind lower during the front half of the US trading session on Wednesday, falling roughly 1% from the prior session's close near 100.00 to tag a low around 98.50 as the US-Iran ceasefire announcement triggered a broad wave of risk-on selling in the US Dollar. The index has since recovered back above 99.00, trimming about half of the session's losses as ceasefire complications mounted through the back end of the New York trading window.

The initial Dollar sell-off followed President Donald Trump's announcement of a two-week "double-sided ceasefire" with Iran, brokered by Pakistan and contingent on the reopening of the Strait of Hormuz. Markets reacted swiftly, with Crude Oil plunging over 15% and global equities surging on hopes that the five-week conflict was nearing a resolution. However, optimism is fading quickly.

Iranian Parliamentary Speaker Mohammad Bagher Ghalibaf posted on X, accusing the US and Israel of violating the terms of the tentative truce, while Israeli Prime Minister Netanyahu declared the ceasefire "does not include Lebanon" and launched a fresh wave of strikes on Hezbollah targets in Beirut and southern Lebanon. Iran's Fars news agency reported that oil tanker traffic through the Strait of Hormuz was halted again following the Israeli strikes, and Tehran warned it would withdraw from the agreement entirely if fighting in Lebanon continued. The rapid unraveling pushed the US Dollar off its lows as safe-haven demand began to creep back in.

The Federal Open Market Committee's (FOMC) March 17 to 18 Meeting Minutes, released earlier on Wednesday, struck a notably cautious tone. The Committee held the federal funds rate at 3.50% to 3.75% by an 11 to 1 vote, with Governor Stephen Miran dissenting in favor of a 25 basis point cut. The vast majority of participants judged that upside risks to inflation and downside risks to employment were both elevated, and the majority noted these risks had increased with developments in the Middle East. Critically, many policymakers pointed to the risk that inflation could stay elevated for longer amid persistently high oil prices, noting this "could call for rate increases" to bring inflation back to the 2% target.

Some participants argued there was a strong case for a two-sided description of the Committee's future rate decisions, explicitly flagging the possibility of hikes if inflation failed to cool. Options pricing discussed in the Minutes showed the probability of rate hikes through early next year had risen to about 30%. On the labor market side, the vast majority saw downside risks to employment skewed lower, with many warning that low rates of net job creation left the labor market vulnerable to adverse shocks, particularly from a protracted Middle East conflict. Most participants reiterated it was too early to know how the war would ultimately affect the US economy, but the overall tone leaned hawkish relative to the January Minutes.

DXY 15-minute chart

Technical Analysis

In the fifteen-minute chart, Dollar Index Spot trades at 99.12, holding a bearish near-term bias as it remains capped by the 200-period Exponential Moving Average (EMA) at 99.33. The index is attempting to stabilize after its earlier decline, but the inability to reclaim this overhead dynamic barrier suggests rallies are still vulnerable. A high and rising Stochastic RSI around overbought territory hints that upside momentum has stretched, increasing the risk of a pause or minor pullback while price trades under the 200-period EMA.

On the topside, immediate resistance is defined by the 200-period EMA at 99.33, and a sustained break above this level would be needed to ease the current bearish pressure and open the door to a more constructive recovery phase. On the downside, with no clear intraday moving-average or structural supports visible in the provided data, short-term dips may look to recent price congestion zones for tentative demand, but the broader tone stays pressured while the index holds beneath the 99.33 resistance cap.