U.S. Treasury yields continue to decline after reaching multi-year highs. This, combined with rising expectations that the Federal Reserve will keep rates unchanged at next week's meeting, forces dollar buyers to take a cautious stance. At the same time, traders price in roughly a 90% probability of a Fed rate hike in December. Inflation risks tied to higher oil prices, along with ongoing geopolitical uncertainty, support the dollar as a safe-haven currency and limit DXY's downside.

On the Middle East situation: Iranian foreign minister Abbas Araghchi said Tehran is ready to give diplomacy another chance if the U.S. demonstrates a sincere interest in finding a settlement. The New York Times reported that the U.S. and Israel have prepared plans for a possible new series of strikes on Iran that could follow the U.S. midterm elections. Under these conditions, market participants should exercise caution when opening new short positions on the dollar index (DXY).

Traders should also adopt a wait-and-see approach ahead of next week's key events. Pay particular attention to the outcome of the two-day Federal Open Market Committee (FOMC) meeting, which concludes on October 28. Additional guidance may come from the Personal Consumption Expenditures (PCE) price index and the preliminary U.S. Q3 GDP estimate, both due next Thursday. Those releases could materially affect Fed policy expectations and give DXY a directional impulse.

In the short term, the technical picture does not reassure bears, as the index remains above the 200-period simple moving average (SMA) and the 100-period SMA, though it has slipped slightly below the 20-day SMA. To resume an uptrend, the index needs to reclaim and hold above the 20-day SMA. A clear break above that level would open the door to further gains and tests of higher levels. On the downside, nearest support is at 101.40, with the 50-day EMA near 101.00 below that. Oscillators remain positive for now, and bulls are not ready to surrender.

The table below shows the dollar's performance versus major currencies over the past seven days. The largest appreciation was versus the Japanese yen.