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Geographical risks reignite the wave of risk aversion, but plummeting consumer confidence cannot stop the dollar
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange]: Geographical risks have reignited the wave of hedging, consumer confidence has plummeted but it is difficult to stop the US dollar". Hope this helps you! The original content is as follows:
During the New York session on Friday (March 27), the U.S. dollar index fluctuated slightly and strengthened, maintaining the 100.0664 line during the session, up 0.14% from yesterday's closing. Although the cumulative gains for three consecutive days are limited, March as a whole has recorded an increase of nearly 2%, which is the strongest monthly performance in the past eight months.
Although Trump announced that he would extend the deadline for attacking Iran's energy facilities by 10 days to April 6, Iranian officials continue to deny the progress of substantive negotiations, concerns about the prolongation of geopolitical conflicts remain, and safe-haven funds continue to flow into the U.S. dollar. At the same time, high oil prices push up inflation expectations. These two factors jointly support the resilience of the U.S. dollar.
Fundamental Analysis
Geopolitical risks: Trump announced on Thursday that he would extend the suspension of strikes on energy facilities for 10 days at Iran's request and said that "negotiations are going very well." However, Iranian officials made it clear that they have rejected the US 15-point ceasefire plan and denied that any substantive dialogue is ongoing. Market concerns about an escalation of conflict or continued obstruction of the Strait of Hormuz before the weekend have not eased, and crude oil prices have therefore remained strong, further pushing up global inflation expectations. As the world's leading safe-haven asset, the U.S. dollar naturally benefits from this xmaccount.combination of "risk premium + high interest rates."
The Federal Reserve’s policy path is expected to remain hawkish: Oil prices continue to be high and inflationary pressures are xmaccount.compounded, and the market has significantly reduced expectations for the number of interest rate cuts by the Federal Reserve this year. Signals released after the Federal Reserve meeting in March showed that policymakers are still cautious about the path of inflation, and that the high interest rate environment will provide long-term structural support to the U.S. dollar. even thoughShort-term geopolitical factors have eased, and it is difficult for the US dollar to fall back quickly.
The impact of today’s core economic data is neutral and weak: the final value of the University of Michigan’s consumer confidence index in March was recorded at 53.3, significantly lower than the initial value of 55.5, and also lower than the final value of 56.6 in February, a new low since the end of 2025. Consumers' pessimism about the economic outlook has intensified, which is usually negative for the U.S. dollar; however, in a market environment dominated by geo-risks, risk aversion logic xmaccount.completely overshadowed the impact of economic data, and the U.S. dollar instead took the opportunity to consolidate gains.
The linkage effect between crude oil and inflation is significant: crude oil prices remain high due to uncertainty in the Middle East, further consolidating the US dollar's role as an inflation hedge. Every increase in oil prices will indirectly strengthen the need for the Federal Reserve to maintain restrictive policies and provide additional support for the US dollar.
Mainstream View
Barchart analysts clearly pointed out that although Trump announced an extension of the deadline for Iran’s energy strikes by 10 days, Iranian officials immediately issued a tough statement denying that any substantive negotiations were ongoing, causing market optimism about the prospect of a ceasefire to quickly fade. As a result, the U.S. dollar has received continued support from safe-haven buying. At the same time, U.S. stocks have been generally weak and oil prices have risen sharply due to uncertainty over the weekend, further pushing up inflation expectations. In the short term, DXY will fluctuate repeatedly near the 100 mark, but as long as geopolitical risks are not substantially alleviated, the US dollar's monthly strong pattern will continue.
Reuters quoted multiple diplomatic sources in Washington and Tehran as saying that Trump’s move to extend the deadline by 10 days was widely interpreted by the market as a “temporary delay.” Iran formally rejected the plan in writing and proposed its own five non-negotiable conditions, indicating that “there are currently no substantive negotiations.” This "discrepancy between words and deeds" signal made investors remain highly cautious before the weekend, and risk aversion continued to ferment, which directly promoted the U.S. dollar index to maintain resilience in early trading in New York. Reuters analysis believes that the simultaneous rise in oil prices has further strengthened the dollar's inflation-hedging properties.
The TradingEconomics foreign exchange team believes that DXY is currently fluctuating slightly around 100, and the main driving factor is the linkage effect between the uncertainty of the Middle East conflict and crude oil prices. The cumulative appreciation in March has reached 1.78%, far exceeding the market's previous expectations; analysts emphasized that if there is no breakthrough in the Iran negotiations this weekend, the US dollar is expected to continue to consolidate its best monthly performance and set the 100.50 area as the next target. The report also reminds that any military or diplomatic breaking news may trigger violent fluctuations over the weekend.
Investing experts pointed out that the US dollar has strengthened for three consecutive days, geopolitical risks have xmaccount.completely dominated the current market trend, and the 100 psychological mark has become the focus of xmaccount.competition between bulls and shorts. If the U.S. dollar effectively stands above 100 and trading volume increases, the technical outlook will further open up room for upside; conversely, if there is unexpected progress in the Iran negotiations before the weekend, the safe-haven premium may fall quickly. Experts recommend that investors maintain flexible positions in the current environment and focus on real-time changes in oil prices and geopolitical news.change.
Technical Analysis
Moving average system: The short-term MA (5/10/20) shows a clear bullish arrangement, and the price stands firmly above 99.80, showing that the short-term trend is still strong; the medium- and long-term MA (50/200) golden cross status remains intact, supporting the US dollar to continue testing the 100 integer mark.
RSI (14) and MACD: RSI is currently about 65-67, which is strong but has not yet entered the overbought extreme zone. The MACD columnar line continues to expand, and the momentum indicator still supports the bulls; we need to be wary that if the RSI quickly falls back below 60, short-term profit taking may occur.
Key positions and patterns: The upper resistance during the day focuses on 100.15-100.40 (recent high point and psychological barrier), and the lower support is 99.80 and 99.60.
If it effectively stands above 100 and is accompanied by an increase in trading volume, it will open up further upward space to the 101.50 area; conversely, if it falls below 99.80, it may pull back to test the 98.80-99.00 range in the short term.
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