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DBS Group Research strategist Philip Wee highlights that the DXY Index’s failure to break above 99.7 marks a pivotal shift in 2026 risk sentiment. The fading 'energy apocalypse' narrative, coupled with coordinated actions by G7 and IEA to stabilize energy markets, is reducing the Dollar’s appeal as a safe-haven asset. This development challenges the Dollar’s dominance amid evolving macroeconomic dynamics. For traders, this signals potential volatility in forex markets as the Dollar’s upward momentum faces structural resistance. The shift in safe-haven demand could accelerate if energy prices stabilize further, impacting Dollar pairs like EUR/USD and USD/JPY. Central banks’ policy divergence will also play a critical role in shaping the Dollar’s trajectory. Looking ahead, investors should monitor the DXY’s behavior around key resistance levels and the Federal Reserve’s stance on rate cuts. The interplay between energy market stability and global risk appetite will determine whether the Dollar consolidates or faces renewed pressure in 2026.
