The US Dollar Index (DXY) rallies from Monday's losses but encounters headwinds as traders await President Trump's comments on infrastructure. The DXY trades near 108.00, vulnerable to further declines if selling pressure intensifies. Market focus remains on Trump's economic policies and their potential impact on the US Dollar.
The US Dollar is experiencing a reversal of its earlier recovery attempt ahead of US cash trading. Traders are closely watching for upcoming comments and announcements from President Trump , particularly regarding infrastructure. The US Dollar Index ( DXY ), which tracks the performance of the US Dollar against six major currencies, is hovering just above 108.00. If selling pressure intensifies, it could slip into losses.
\The DXY experienced a significant drop on Monday, losing over 1%, when it became clear that tariffs were not included in the executive orders signed by President Trump. Markets had anticipated a more lenient stance on tariffs and a broad delay. However, a surprise comment from President Trump late Monday night triggered a turnaround across all major currency pairs, including the US Dollar. Trump stated that 25% tariffs on imports from Canada and Mexico would be implemented at the beginning of February, leading to immediate devaluation of the Canadian Dollar and Mexican Peso. \Tuesday is seeing reversals from Monday's losses across various asset classes affected by those comments. The US Treasury will release some data on Tuesday, although the economic calendar is relatively light. At 16:30 GMT, 3-month, 6-month, and 52-week Bills will be allocated in the markets. Equities are showing positive gains on Tuesday. European equities are stable, while US futures are up nearly 0.50%. The CME FedWatch tool assigns a 54.2% probability that interest rates will remain unchanged at current levels during the May meeting, suggesting a potential rate cut in June. Expectations are that the Federal Reserve (Fed) will maintain a data-dependent approach, considering uncertainties that could influence inflation during President Trump's term. The US 10-year yield is trading around 4.57% and faces a considerable climb if it aims to return to last week's levels near 4.75%. \Technically, the US Dollar Index (DXY) experienced a bearish decline on Monday, followed by a bullish recovery on Tuesday. However, traders should be aware of potential obstacles if the DXY attempts to reach 109.00 and beyond. The ongoing Tuesday recovery might encounter pivotal upside levels that trigger a heavy rejection, resulting in a dead-cat-bounce. This could trap US Dollar bulls and push them towards 107.00 and lower. For the recovery to continue its upward momentum, the crucial level to overcome is 109.29 (July 14, 2022 high and rising trendline). Further upward movement would face resistance at 110.79 (September 7, 2022 high). Beyond this, there is a significant gap to 113.91, a double top from October 2022. On the downside, the initial support level to watch is 107.85-107.90, which held Monday's correction. Further down, the confluence of the October 3, 2023 high and the 55-day Simple Moving Average (SMA) around 107.35 should act as a double safety feature to catch any falling knife
US Dollar DXY US Dollar Index President Trump Inflation Federal Reserve Interest Rates Economic Calendar Tariffs Canadian Dollar Mexican Peso
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