DXY GIVES BACK EARLY GAINS AS AI RISKS KEEP USD UNDER PRESSURE
The US dollar opened higher on French fiscal risks, but gave back those gains amid continued AI concerns. In Monday’s Asian session, the US Dollar Index (DXY) trades around 101.80 after retreating from an intraday high of 102.01. Meanwhile, French 10-year bond yields have risen 1.55% to near 4.85%, close to the more-than-two-decade high of 5% reached earlier this month.
The US Dollar has struggled to hold its early gains as uncertainty over the continuation of the AI investment cycle continues to weigh on AI-related stocks and the broader Dollar outlook.
According to OCBC, AI-linked investment has become an important support for US growth, equities, yields and the US Dollar. However, the bank notes that if the investment cycle cools, those supports could reverse, leaving the dollar vulnerable even in a risk-off environment.
OCBC describes the current setup as an “unusual combination: risk-off, lower Treasury yields and a softer USD” and notes that recent AI jitters are “a bump rather than a break” in the broader investment story, although concerns “are far from over.”
On the monetary policy front, traders remain confident that the Federal Reserve will keep interest rates steady at its policy meeting later this month, according to the CME FedWatch tool. Expectations for no immediate rate increase have strengthened after several Fed officials indicated there is no urgency for another hike.
From a technical perspective, Dollar Index Spot trades at 101.87, holding above the 20-day EMA at 101.65. The RSI (14) at 57 remains above the neutral 50 level. A clear break below 101.65 would signal fading bullish pressure and open the way for a deeper corrective pullback.
For market participants, the key factors remain DXY near 101.80, the 102.01 intraday high, French 10-year yields near 4.85%, uncertainty surrounding AI investment, Fed rate expectations, the 101.65 technical support level and RSI at 57, which may provide further context for the near-term direction of the US Dollar.
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