USD rebounds as EUR/USD reverses on fading dollar decline narrative

The US Dollar Index (DXY) has staged a recovery, climbing 0.4% to 105.20 as the anticipated dollar decline narrative loses momentum. EUR/USD posted a bearish reversal, falling 0.5% (55 pips) to 1.0780 after failing to sustain gains above the 1.0850 resistance level. The dollar's rebasement trade reflects renewed confidence in US economic resilience despite mixed data, with traders reassessing overly bearish positioning. Technical indicators show the DXY reclaiming its 50-day moving average at 105.00, signaling potential further strength. AUD/USD also retreated 0.3% to 0.6420 as commodity currencies faced pressure. The reversal suggests market participants are repositioning ahead of this week's Fed officials' speeches, which could provide clarity on the monetary policy outlook. Key support for EUR/USD now sits at 1.0750, with a break below potentially accelerating declines toward 1.0700.