• DXY consolidates its recent move up back closer to a two-year peak amid the Fed’s hawkish shift.
• Geopolitical risks and trade war fears further underpin demand for the safe-haven Greenback.
• The USD bulls turn cautious and wait for the release of the US NFP report before placing fresh bets.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, stands firm above the 109.00 mark, or its highest level since November 2022 as traders await the US Nonfarm Payrolls (NFP) report before placing fresh bets. 

In the meantime, the prospects for slower rate cuts by the Federal Reserve (Fed), which has been a key factor behind the recent surge in the US Treasury bond yields, continue to act as a tailwind for the buck. Apart from this, concerns about US President-elect Donald Trump's tariff plans, geopolitical risks and a weaker risk tone turn out to be other factors underpinning the safe-haven Greenback. 

From a technical perspective, this week's goodish rebound from the 107.55-107.50 resistance-turned-support and the subsequent move up favors bullish traders. Moreover, oscillators on the daily chart are holding in positive territory and are still away from being in the overbought zone. This suggests that the path of least resistance for the index is to the upside and supports prospects for further gains. 

That said, it will still be prudent to wait for a move beyond the 109.55 area, or over a two-year peak touched earlier this month, before placing fresh bullish bets. The USD might then accelerate the move-up towards the 110.00 psychological mark. The momentum could extend further towards the 110.50-110.55 region en route to the 111.00 mark and the November 2022 peak, around the 111.15 zone.

On the flip side, the 108.75 region could offer some support, below which the index could accelerate the fall towards the 108.15 area en route to the 108.00 mark and the 107.55 horizontal zone. Some follow-through selling below the latter should pave the way for a deeper corrective decline and drag the USD below the 107.00 round figure, towards testing the next relevant support near mid-106.00s.
 

DXY daily chart

(Click on image to enlarge)

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