The Dollar Index (DXY) fell more than 0.5% on Wednesday, dropping to about 99.30 after opening near 99.90. It extended Tuesday’s move below 100.00 and reversed part of March’s 2.3% safe-haven rise from January lows near 95.55. Moves followed comments linked to a possible ceasefire, with US conditions tied to the Strait of Hormuz being “open, free, and clear”. Trump also said he expects US forces to leave Iran within two to three weeks, with further remarks due later on Wednesday. US data were mostly firm: ADP employment change for March was 62K versus 40K expected, and February retail sales rose 0.6% month on month versus 0.5%. ISM Manufacturing PMI was 52.7 for a third month, while Prices Paid rose to 78.3 from 70.5, above the 73 forecast. Markets now focus on Friday’s Non-Farm Payrolls, forecast at 60K after a prior -92K. On the 5-minute chart, spot was 99.34, with resistance at 99.45 and 99.60 and support near 99.30 then 99.20. On the daily chart, spot was 99.34, above the 50-day EMA near 98.90 and around the 200-day average near 99.10. Support sits at 99.00–98.90 then 98.50, while resistance is near 99.90 and 100.50, with 101.00 above. Looking back at the events of March 2025, we saw how a sudden shift in geopolitical narratives could completely overwhelm strong economic data. The DXY sold off aggressively on ceasefire headlines, even though reports on employment, retail sales, and manufacturing were all pointing to a robust US economy. This experience serves as a critical reminder that for the next few weeks, headlines can matter more than spreadsheets. This pattern suggests we should be prepared for heightened volatility driven by news flow rather than just economic fundamentals. When the CBOE Volatility Index (VIX) spiked over 35 during the onset of the Ukraine conflict in 2022, it demonstrated how quickly markets price in fear, and similar spikes can be expected in response to major geopolitical headlines. Therefore, using options to hedge existing positions or to speculate on sharp price swings could be a prudent strategy. For traders anticipating further risk-on sentiment, buying puts on a dollar index ETF like UUP could offer a defined-risk way to bet on more downside. Conversely, if we believe the de-escalation narrative is fragile, buying calls could protect against a snap-back rally in the dollar. The key is that these events create opportunities for those who are prepared for abrupt changes in direction. The technical levels from that 2025 period remain instructive for setting our parameters today. The convergence of the 50-day and 200-day moving averages around the 99.00 level acted as a major support zone then, and similar long-term averages should be monitored closely now as potential pivot points. A decisive break of such a level would signal a more significant trend change is underway. We also cannot ignore the underlying inflation story, which was a secondary theme in 2025 but is a primary driver now. The jump in the ISM Prices Paid component back then was an early warning signal of persistent price pressures. With the latest March 2026 CPI report showing inflation is still sticky at 3.1%, the Federal Reserve is in a difficult position, complicating any long-term directional bet on the dollar. This environment forces us to balance the short-term noise of geopolitics with the long-term influence of inflation on Fed policy. The market’s reaction to the upcoming Non-Farm Payrolls report will be a crucial test of which narrative has more control. A very strong jobs number could force the market to refocus on fundamentals and the likelihood of a hawkish Fed, regardless of overseas headlines.

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