US Dollar Price Forecast: Safe Haven Demand Rises on Iran Tensions
Author: Arslan Ali
Updated: April 28, 2026
Key Points
- US-Iran tensions and disruptions in the Strait of Hormuz are increasing demand for the US dollar as a safe haven, despite rising inflation in the US.
- The DXY index is struggling below the 99.18 resistance level, facing bearish pressure from weak momentum and moving averages.
- EUR/USD has broken its upward trendline, indicating a potential shift in bullish momentum, with critical support at 1.1650.
- GBP/USD remains above its rising trendline, but signs of exhaustion are emerging as the RSI slows down.
US Dollar – A Safe Haven in Turbulent Times
The ongoing tensions between the US and Iran, along with disruptions in the Strait of Hormuz, are driving investors towards the US dollar as a safe haven. This trend persists even as the US consumer price index rose to 3.3% year-on-year in March, primarily due to energy prices, while core inflation eased to 2.6%. Financial markets are anticipating only limited easing from the Federal Reserve by 2026, focusing heavily on incoming economic data as the US economy shows resilience amid persistent inflation concerns.
Euro – ECB Likely to Keep Rates Steady for Now
The European Central Bank (ECB) is expected to maintain its deposit rate at 2.00% during its upcoming meeting on April 29-30. The headline inflation rate is projected to hover around 2.0% to 2.2% next year, influenced by energy costs and moderate economic growth of 1.1% to 1.3%. ECB officials are cautious, weighing geopolitical and trade risks.
Pound – Inflation Remains a Sticky Problem
UK inflation stood at 3.3% year-on-year in March, with the core rate rising to 3.1%. The Bank of England (BoE) is likely to keep rates steady at 3.75% on May 1, balancing energy-driven price pressures against signs of a weakening labor market, as unemployment increased to 4.9%. Overall, UK growth remains relatively strong compared to the eurozone.
DXY Weakness Hits 98.67
The Dollar Index (DXY) is currently trading at 98.67, struggling below a downward trendline that has thwarted previous rallies. The index has repeatedly faced resistance near 99.18, with bearish moving averages indicating a continued downward trend. The RSI is at 44, suggesting weak momentum, with key support levels at 98.23 and 97.82. A break below 98.00 could lead to a drop to 97.49, while a close above 99.18 is needed for bulls to challenge higher levels.
GBP/USD Steadies at 1.3508
GBP/USD is trading at 1.3508, above its rising trendline, but showing signs of market fatigue. The moving averages remain bullish, but the RSI at 52 indicates slowing momentum. Key support is at 1.3486, with deeper support at 1.3435. Resistance is at 1.3550 and 1.3588. A break above 1.3550 could lead to further gains, while a close below 1.3486 may signal a pullback.
EUR/USD Holds at 1.1695
EUR/USD is trading at 1.1695, having broken below its upward trendline, indicating waning bullish momentum. The RSI is at 48, leaning bearish, with support at 1.1650 and resistance at 1.1730. A break below 1.1650 could lead to a decline to 1.1600, while reclaiming 1.1730 may restore bullish momentum.
Trade Ideas
- Consider selling if DXY breaks below 98.20, with a stop loss above 99.20.
- For GBP/USD, a break above 1.3550 may present a buying opportunity, with a stop loss at 1.3480.
- For EUR/USD, a break below 1.1650 could be a signal to sell, with a stop loss at 1.1735.
About the Author
Arslan Ali holds an MBA in finance and an MPhil in behavioral finance. He specializes in financial analysis and investor psychology, providing insights into market sentiment and potential overbought or oversold conditions.