• The USD appreciates on Monday as geopolitical concerns dampen risk appetite.
• This week, a dovish turn by the Federal Reserve might halt US Dollar’s recovery.
• DXY has scope for further recovery past 104.55, aiming for 105.15.

The US Dollar (USD) has opened the week on a somewhat firmer pace. Market concerns about the escalating tensions in the Middle East have shadowed investors' hopes of a Fed dovish turn later this week.

Israel is considering retaliation to Hezbollah in Lebanon after a deadly rocket attack in the Golan Heights this weekend. This would stir an already tense area and is threatening to involve Iran in a full-blown regional war.

Geopolitical concerns are overshadowing the fundamental docket, especially Wednesday’s Federal Reserve’s (Fed) monetary policy meeting.  The Fed is likely to keep rates unchanged but investors are expecting a dovish turn in the bank’s rhetoric, acknowledging the cooling inflation trends and hinting towards a rate cut in September.

Before that, the JOLTS Job Openings for June and the Conference Board’s Consumer Sentiment Index for July, due on Tuesday, are expected to show moderate contractions, which will provide the right framework for a dovish message from the central bank.