US Dollar Index Edges Up Within Range With Midterm Elections Front And Centre

• The US Dollar Index is picking up from session lows but remains within previous ranges, below 102.00.

• The Greenback is drawing support from hostilities in Iran and higher Oil prices, but US political uncertainty is capping gains.

• ING experts affirm that a Democratic sweep might put some short-term pressure on the USD.

The US Dollar shows a mild bullish tone against most of its main peers on Tuesday as fresh hostilities in Iran cast doubt over a peace process and boost Oil prices, while uncertainty about the US midterm elections keeps rallies limited so far. The US Dollar Index (DXY) has bounced up from session lows in the 101.50 area but remains capped below the 102.00-102.10 area, which capped upside attempts on Monday and Friday.

The Greenback is drawing some support from the increasing concerns of a resumption of hostilities in Iran after the US military hit targets on the Iranian Qeshm Island in the Strait of Hormuz, in what the US authorities called a “defensive” operation.

Trump remains optimistic about a peace deal with Iran

Meanwhile, efforts to bring the parties back to the negotiating table remain alive, and have obtained some support from the US side. US President Donald Trump downplayed the possibility of an all-out war and affirmed that a peace deal with Iran “could happen,” as, in his opinion, Tehran "wants a settlement, as soon as possible."

On the macroeconomic front, US ISM Manufacturing Purchasing Managers' Index (PMI) figures, released on Monday, showed stronger-than-expected factory activity, with price pressures at high levels, suggesting thst the US economy entered the fourth quarter on strong footing.

The data, however, failed to provide any significant support to the US Dollar, as investors await the result of US midterm elections to make investment decisions. Strategists at ING argue they “don’t expect today’s US midterm results to cause structural shifts in FX.” ING analysts, however,, flag some “short-term pressure” for the Dollar if the Democrats were to secure both the House, which is “widely expected,” and the Senate, described as a “close call.”