The US Dollar Index (DXY) was trading around the 101.00 area on Monday, up 0.26%, with safe-haven demand tempered after the US granted a temporary 60-day licence for Iranian oil sales during peace negotiations. Iran was also reported to have committed to allowing International Atomic Energy Agency (IAEA) nuclear inspectors and keeping the Strait of Hormuz open, developments that pressured oil prices and reduced concern over a broader supply shock.
Focus is shifting to the US Personal Consumption Expenditures Price Index (PCE), the Federal Reserve’s preferred inflation measure, with a firmer reading seen supporting tighter monetary policy expectations and a retest of the 101.00 area, while a softer print could prompt profit-taking after the index’s run towards yearly highs. On the four-hour chart, DXY spot stood at 101.01 and held above the 20-period Simple Moving Average (SMA) at 100.70 and the 100-period SMA at 99.81, with supports at 100.99, 100.86 and 100.81; the Relative Strength Index (RSI) hovered near 69. Resistance was marked at 101.06, while a move below 100.99 would bring 100.86 and 100.81 into view.
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Market Catalyst and Technical Context
We are watching the US Dollar Index hold near 101.00, caught between easing geopolitical tensions and the market’s intense focus on inflation. Given that the May jobs report showed a robust addition of 215,000 payrolls, the upcoming Personal Consumption Expenditures (PCE) report is the key catalyst we are waiting for. This data will likely clarify the Federal Reserve’s path and the dollar’s next significant move.
With the Relative Strength Index (RSI) hovering near 69, the dollar’s upward momentum appears stretched ahead of this major data release. We believe this presents an opportunity to use options to position for either consolidation or a pullback before the PCE announcement. Selling weekly call options with a strike price above the 101.06 resistance could be a viable strategy to collect premium.
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Options Strategies and Key Levels
For those expecting a decisive move after the data, we think positioning for a breakout is the primary play. A long straddle, which involves buying both a call and a put option, could profit from a sharp price swing if the PCE figures significantly surprise expectations in either direction. This strategy directly bets on an increase in volatility following the release.
We remember the Dollar Index trading firmly above the 104 level for parts of 2025, so the current level represents a critical juncture. Should the PCE data come in softer than anticipated, we would look to buy puts targeting a break below the 100.70 support level. A sustained downside move could accelerate toward the key psychological mark near 100.00.
