USD Gains Momentum as Market Fundamentals Align

The US dollar began the week with renewed strength, finally synchronizing with key catalysts including elevated energy costs, firm front-end rates, and a cautious risk appetite. While the DXY index may consolidate ahead of tomorrow’s FOMC decision, the overall trend remains tilted toward further appreciation, with 100.0 serving as a viable near-term objective. The 10-year Treasury yield recently hit the 5.0% mark, a level currently viewed as a manageable premium rather than a trigger for panic. Market participants are closely watching for signs of Treasury intervention; however, with recent buyback operations failing to impress, the bar for official action remains high. The yen has retreated from its recent strength, pushing USD/JPY toward the 155.0 level, with potential for further gains toward 156-157. Oil prices remain a critical variable, with Brent holding near $107/bbl due to supply concerns. Meanwhile, the euro faces pressure as global equity volatility and interest rate differentials dominate. Despite some resilience in the pound, we remain skeptical of its recent outperformance ahead of the upcoming Bank of England meeting. With limited economic data on today's calendar, the market is largely positioned for the Fed’s policy verdict.