United States Dollar Index holds gains near 99.00 amid escalating geopolitical risks

The US Dollar Index (DXY) has continued its upward trajectory for two days straight, trading near 99.00 during Tuesday's Asian hours. The strengthening of the Greenback can be attributed to the expanding secondary sanctions imposed by the United States on entities involved in trade with Iran. US Treasury Secretary Scott Bessent has cautioned that a major financial institution might face regulatory action this week, making it clear that Chinese entities will not be exempt from these measures.

However, further gains for the DXY could be limited by the Treasury's decision to double its buyback operations for longer-dated bonds, potentially amounting to up to $1 trillion from the Treasury General Account. This move could impact market liquidity and yields. Investors are now closely monitoring a packed schedule of U.S. economic data releases throughout the week, including the consumer confidence report on Tuesday and the Personal Consumption Expenditures (PCE) price index on Wednesday.

The week will conclude with Federal Reserve Chair Kevin Warsh's address at the annual Jackson Hole symposium, where his remarks are expected to offer crucial insights into the Federal Reserve's monetary policy outlook and the near-term prospects of the US Dollar. Market analysts at Scotiabank emphasize the heightened "calendar and event risk" this week, cautioning that investors might reassess their positions due to the abundance of data and policy announcements.

The Dollar Index is currently trading at 99.00, showing a bearish short-term trend as it is located below both the short-term and medium-term Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) stands at 35, just above oversold territory, indicating that downside momentum is still prevalent despite not yet being extreme.

While there is immediate resistance at the 99.22 nine-period EMA, the 50-period EMA at 99.98 would need to be reasserted to provide a bullish outlook. With no apparent structural support below the current spot price, the DXY remains susceptible to additional downward movement while trading beneath these moving average constraints.