The US dollar index on Tuesday has solidified within the 99 range, concurrently setting a 5-week high. The EUR/USD pair continues its downward trend amid the broader strengthening of the US dollar. On Tuesday, the pair confidently broke through the support level of 1.1650 (the lower line of the Bollinger Bands indicator on the four-hour chart) and is currently testing the 15 figure.

It is noteworthy that the dollar is strengthening not only because of its status as a safe-haven asset (though geopolitics remains the primary driver), but also because the ISM manufacturing index, released on Monday, was in the green zone. Overall, the collection of fundamental factors suggests that the Federal Reserve will maintain its pause not only during spring meetings but also early in the summer. At least, the chances of a rate cut in June are diminishing rapidly.

According to data released on Monday, the ISM manufacturing index for February was nearly at January's level, at 52.4. Recall that in January, this key macroeconomic indicator surged from 47.9 to 52.6. The indicator not only entered the expansion zone (for the first time in the last 40 months) but also set a multi-month high. Most analysts had forecast a drop to 51.7 in February, yet it held steady at January's level.

The report's structure also speaks volumes. Firstly, the Backlog of Orders sub-index jumped five points to 56.6, the highest value since May 2022. This important component guarantees capacity utilization for the coming months, especially since the New Orders sub-index remained in the expansion zone at 55.8. In this same context, it's worth noting the low value of the Customers Inventories sub-index, which stayed at 38.8. A persistently low level of inventories is known to be a leading indicator of future production, thus signaling potential growth in new orders.

In support of the dollar, the prices sub-index also rose to 70.5, marking its highest value since June 2022. This indicates a significant increase in inflationary pressure amid rising metal prices.

The only "spoonful of tar" here is the employment index, which was still in the contraction zone at 48.8 in February. However, the sub-index increased by 0.7 percentage points from January. Last month recorded the slowest contraction in company headcounts in the past year. Such dynamics signal stabilization in the industrial labor market.

The ISM manufacturing index provided additional support to the dollar, as it further weakened dovish market expectations regarding the Fed's future actions. According to data from the CME FedWatch tool, the market is almost 100% confident that the regulator will maintain all monetary policy parameters unchanged in March and April. Meanwhile, the probability of easing monetary policy at the June meeting has dropped to 35%. For comparison, just two weeks ago, traders were pricing in a 70% likelihood of a rate cut in June. However, the acceleration of the core PCE index and January's PPI amid geopolitical turbulence forced traders to reconsider their forecasts.

Nevertheless, the key driver of the American currency's strength remains the geopolitical factor. For instance, if the United States were to sit down for negotiations with Iran tomorrow, the dollar would sharply weaken across the market amid increased interest in riskier assets.

But as of Tuesday, there are no prerequisites for that. On the contrary, the parties are making belligerent statements, further escalating the situation. For example, on Monday, US Secretary of State Marco Rubio stated that the current phase of the attack is just the beginning and that the next stage of the military operation would be "even more punitive" for Iran. He noted that the US would not stop until Iran's missile capabilities and naval potential are completely destroyed. He expressed hope that the Iranian people would take this opportunity to rise against their government.

Tehran, for its part, has made it clear that it will not engage in negotiations under pressure and will expand the conflict zone to countries in the Persian Gulf, where US forces are present. Considering that Rubio effectively ruled out the possibility of diplomatic negotiations in the near future (against a backdrop of similar statements from the Iranian side), it can be assumed that interest in the dollar will remain amid heightened risk aversion and the ongoing rise in oil prices.

From a technical standpoint, the pair on the four-hour and daily charts has crossed below the lower line of the Bollinger Bands, and it is now below all the lines of the Ichimoku index, which has formed a bearish "Parade of Lines" signal. On the weekly chart, the price is located between the middle and lower lines of the Bollinger Bands and below the Tenkan-sen and Kijun-sen lines (but above the Kumo cloud). The main target for the downward movement in the medium term is the 1.1490 mark (the lower Bollinger Bands line on the W1, coinciding with the upper boundary of the Kumo cloud).