The US Dollar trades a touch softer on Monday with US traders enjoying the long weekend.

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• The US Dollar trades a touch softer on Monday with US traders enjoying the long weekend.
• Markets are digesting geopolitical headlines out of Gaza and the broader Middle East.
• The US Dollar Index tests 104 again and could slide below with the US session no present.

The US Dollar (USD) is digesting some geopolitical news that came out over the weekend and this Monday with tension being pushed back on high alert on Gaza and the Middle East. Israel has released an ultimatum for Hamas to give up the last hostages, otherwise a big military operation will take place before the Shabbat on March 8. Iran meanwhile reported that the attacks last week on one of its major Gas pipelines is the work of Israel, the New York Times reported.

On the economic data front, there are no numbers from the US and no US Federal Reserve speakers either. Fast forward to later this week and on Wednesday traders will move the markets on the publication of the US Fed’s most recent Minutes. Add Thursday with important US Purchase Manager Indices prints and although overall the calendar looks light, there could be some substantial movements later this week in the US Dollar Index.

The US Dollar Index (DXY) is holding its ground above 104 in a very calm start of the week. With US traders not present in the markets, expect very thin volumes to occur, on a Monday where volumes are often already rather on the low side compared to the rest of the week. Rather look for the middle of this week for things to finally come alive, while traders look for clues on the timing of that first rate cut, which is now hanging between June and July.

Should the US Dollar jump to 105.00 on Friday, 105.12 is a key level to keep an eye on. One step beyond there comes 105.88, the high of November 2023. Ultimately, 107.20 – the high of 2023 – could even come back into scope, but that would be when several inflation measures are coming in higher than expected for several weeks in a row.

The 100-day Simple Moving Average looks to be holding for now, though pressure is building on it to snap, near 104.18, so the 200-day SMA near 103.70 looks more solid. Should that give way, look for support from the 55-day SMA near 103.14.

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