US Dollar Index (DXY) consolidates around mid-98.00s as bulls await 200-day SMA breakout

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, holds steady around mid-98.00s during the Asian session on Tuesday, consolidating its gains registered over the past two days. Meanwhile, rising US-Iran tensions back the case for further appreciation, with bulls awaiting a sustained move beyond a technically significant 200-day Simple Moving Average (SMA) before placing fresh bets.

The fragile ceasefire between the US and Iran is on the brink of collapse after a severe flare-up of violence in the Persian Gulf on Monday. The United Arab Emirates (UAE) and South Korea reported strikes on ships in the vital channel. The UAE also said a fire broke out at the oil port of Fujairah following Iranian missile and drone attacks. Meanwhile, US President Donald Trump warned that Iran would be blown off the face of the earth if it attacks American vessels escorting ships through the Gulf under a new initiative called "Project Freedom".

This keeps geopolitical risks in play and continues to underpin the US Dollar's (USD) reserve currency status. Furthermore, the US-Iran standoff remains supportive of elevated Crude Oil prices, fueling inflationary concerns and bets for more hawkish central banks, including the US Federal Reserve (Fed). According to the CME Group's FedWatch Tool, the probability of a Fed rate hike by the end of this year currently stand at roughly around 35% compared to less than 10% last Friday. This further validates the positive outlook for the DXY.

Traders now look forward to the US economic docket – featuring the release of ISM Services PMI, JOLTS Job Openings, and New Home Sales data. Apart from this, speeches from influential FOMC members and further developments surrounding the Middle East crisis should provide some impetus to the DXY. This week's key focus, however, will be on the key US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report.