- The US Dollar trades flat after Ukraine and Russian delegates ended meeting in Turkey without any resolution.
- Traders look ahead to the preliminary May reading for the University of Michigan Consumer Sentiment reading.
- The US Dollar Index trades below 101.00, trying to find a floor.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is trading flat around 100.80. The DXY is for now able to avoid a weekly loss while market participants are starting to raise questions over the stability of the Greenback. With United States (US) President Donald Trump flip-flopping on its tariff approach and how ill-conceived the first trade deals are, traders are starting to challenge the viability of the grand scheme from the Trump administration and its meaning towards the Greenback.
The US Dollar retreated on Thursday after a slew of economic data pointed that price pressures and consumer spending are cooling. The Producer Price Index (PPI) data unexpectedly showed prices fell in April compared with the previous month, while Retail Sales grew by a marginal 0.1% after March’s 1.5% surge.
President Trump said the U.S. will unilaterally set tariffs for many countries soon. Speaking on his Middle East tour, the president said 150 countries were seeking to making a deal, “but you’re not able to see that many countries.” Trump said Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick would tell countries what import duties the U.S. plans to impose. “So at a certain point over the next two to three weeks, I think Scott and Howard will be sending letters out, essentially telling people- it will be very fair but we will be telling people what they will be paying to do business in the United States,” Trump said, Bloomberg reports.
Daily digest market movers: Ukraine talks fizzled out
- Both Ukraine and Russian delegations entered in talks in Istanbul, but did not deliver any fruitful outcome with talks being concluded this Friday, Bloomberg reports.
- The US economic calendar meanwhile saw some data come out:
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- April’s monthly Housing Starts fell to 1.361 million, coming from 1.37 million in March.
- April’s Import-Export Price Indexes came out as well. Export prices came in at 0.1% from 0.1% previously where -0.5% was expected. Import prices came in higher at 0.1%, missing the contraction of -0.4%, and up from the previous -0.4% contraction.
- At 14:00 GMT, the University of Michigan publishes its preliminary report for May:
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- The Consumer Sentiment Index is seen edging up slightly to 53.4 from 52.2 in April’s final reading.
- The 5-year inflation expectation is expected to remain stable at 4.4%.
- On equity markets, European indices soar on Friday, up just shy of 1%. US futures are lagging a touch but are also in the green, up by less than 0.50%.
- The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 8.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 38.6%.
- The US 10-year yields trade around 4.39%, softening from its peak performance on early Thursday at 4.54%
US Dollar Index Technical Analysis: Looking for direction
The US Dollar Index could be on the verge of a crisis as an increasing number of financial market participants start to question the stability status of the Greenback, given the unstable policies of the Trump administration. The “Trump put” is becoming an actual theme, and in this scenario it isn’t likely that the US Dollar revisits levels such as 107.00 or 110.00 for a long time. Add in the fear of a joint Asian currency intervention, where local currencies are appreciated against the Greenback, and US exceptionalism might be over for an extended period of time.
On the upside, 101.90 is the first big resistance again. It already acted as a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 55-day Simple Moving Average (SMA) at 102.06 comes into play.
On the other hand, the previous resistance at 100.22 is now acting as firm support, followed by the year-to-date low of 97.91 and the pivotal level of 97.73. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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