Global risk sentiment has improved as US–Iran diplomacy keeps a ceasefire in place. Brent crude has fallen to just under $100 a barrel, stocks and bonds have risen, and the US Dollar has weakened against major currencies.
The US Dollar Index (DXY) is expected to be driven mainly by rate differentials again. It is forecast to remain within its established 96.00–100.00 range over the next few months.
Risk Sentiment And Energy Markets
The energy shock may continue, but its worst phase is described as likely past. March 30 is identified as a possible low point for risk sentiment.
A weaker long-term US Dollar view is linked to fading confidence in US trade and security policy. It is also linked to worsening US fiscal credibility and the politicisation of the Federal Reserve.
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With financial markets shifting into a risk-on mode, we see an opportunity in the volatility space. The CBOE Volatility Index (VIX) has recently fallen below 15, a significant drop from its highs above 25 seen earlier in the year. This suggests that selling options to collect premium, such as through put credit spreads on major indices, could be a viable strategy in the coming weeks.
Dollar Range And Options Positioning
The US Dollar Index (DXY) is expected to stay within its 96.00 to 100.00 range, and is currently trading near 97.80. This stability makes strategies like iron condors on currency-tracking ETFs attractive, as they profit from low volatility and a confined price channel. The narrowing of interest rate differentials, particularly with the European Central Bank, supports this view of a capped upside for the dollar.
For longer-term positions, we maintain our bearish view on the dollar due to deep structural issues. Looking back at the trends we observed throughout 2025, concerns over US fiscal credibility have only grown. With the Congressional Budget Office projecting the US debt-to-GDP ratio will climb past 110% this year, buying longer-dated put options on the DXY could serve as a valuable position.
The recent drop in Brent crude prices to below $100 a barrel, retreating from its March highs, indicates the worst of the energy shock is likely behind us. Traders could consider buying put options on oil futures to position for a further slide toward the mid-$90s. This aligns with the improved geopolitical sentiment surrounding ongoing US and Iranian diplomacy.
