Dollar Index steadies after denial reverses slide sparked by Iran deal report

• After hitting its lowest level since 1 October, DXY rebounds towards 101.70.
• The Euro gains as cheaper energy follows a Crude Oil decline on the Qatar-Pakistan proposal.
• With Fed officials in their quiet period, attention turns to Thursday's jobless claims and Friday's flash PMIs.

The Dollar Index slid to its weakest level since 1 October as reports suggested Washington and Tehran had both granted preliminary approval to a compromise proposed by Qatar and Pakistan. The initial report sent it from near 101.75 to around 101.65; details of the terms from Israel's Channel 12 then drove it to just above 101.50. A diplomat involved in the talks subsequently dismissed reports of an imminent deal as incorrect, prompting a recovery towards 101.70.

Cheaper energy supported the Euro, which accounts for more than half the index's weight, after the reports triggered a decline in Crude Oil. With Treasury Secretary Bessent attributing higher US rates to the energy shock, an agreement that brings the shock to an end could lower US rates and weaken the Dollar.

Weak housing data strengthened the argument against further Fed rate hikes, although the index advanced on the chart bars corresponding to both releases. September housing starts declined to 1.221 million, below the 1.3 million forecast. Pending home sales, meanwhile, sank 7.3% to a record low, compared with an expected decline of 0.5%.

What Is Next on the Economic Calendar?

No Fed commentary is due before the 28 October decision, as officials observe their quiet period ahead of the Federal Open Market Committee (FOMC) meeting on 27-28 October. Of 100 economists polled, 94 anticipate rates will remain at 3.75%-4.00% in October, while all 100 forecast a rate hike in December.

Thursday brings initial jobless claims at 12:30 GMT, followed by S&P Global's flash Purchasing Managers Index (PMI) readings for October at 13:45 GMT on Friday. Both releases feed into the argument for raising rates on 28 October rather than in December, an outcome expected by 6 of the 100 economists.

What Do the Charts Indicate?

By the time it reached its low, the index had retraced roughly a third of the rise from the 9 September low near 98.60 to the 14 October high just below 103.00. The session's trough also sits below Friday's dip near 101.60. Meanwhile, the 50-day Exponential Moving Average (EMA) lies just below 101.00, around three-quarters of a point lower.

DXY: 5-minute price chart