- The US dollar is experiencing a change in trend this Tuesday, breaking its loss streak.
- Some support for the dollar with the Fed confirming stable interest rates.
- The dollar index is directed above 99.00 in search of the figure of 100.00.
The US dollar index (DXY), which tracks the value of the dollar value against six main currencies, is accumulating some minor earnings, quoting around 99.40 at the time of writing this Tuesday. The strongest dollar has emerged right at the end of Asian negotiation hours, after the Japanese Finance Ministry (MOF) commented that its bond emission plan could see some adjustments, with lower volumes. This caused Japanese yields to collapse and that the Japanese yen (JPY) devalued against the dollar, with a domino effect in favor of the US dollar compared to several main currencies.
Meanwhile, the Federal Reserve (FED) has issued comments from the president of the Fed of Minneapolis, Neel Kashkari, who commented that the rates will remain stable until there is clarity about tariffs. The Fed Kashkari also pointed out that there are no rapid victories in commercial conversations, and that these conversations may take months or years to conclude.
While the markets are optimistic about a commercial agreement between the US and the EU in the next few days, this week will begin with US data planned for this Tuesday, after the public holiday of the Fallen Day, which kept the markets closed. Operators can anticipate the orders of the US durable goods for April and the manufacturing business index of the Dallas Federal Reserve for May, which is a good advanced indicator to see how the manufacturing sector is maintained after the introduction of tariffs.
What moves the market today: here comes the first data set of this week
- At 12:30 GMT, orders for the US last goods will be published for April. The main figure is expected to be reduced by -7.9%, coming from 9.2% in March. It is expected that the orders of the US durable goods without transport will be reduced by -0.1% from 0% in March.
- At 14:00 GMT, the US consumer confidence will be published for May, without available prognosis and with the previous figure in 86.0.
- At 14:30 GMT, the manufacturing business index of the Dallas Fed for May for May will be published. Without forecast available, with the previous number falling sharply at -35.8.
- The actions are seeing some small profits in Asia and Europe. The US futures are advancing much more aggressively, with the three main indexes by rising more than 1.50% before the US negotiation session.
- The CME Fedwatch tool shows that the possibilities of an interest rate cut by the Federal Reserve at the June meeting are only 2.1%. Later, the July 30 meeting is likely that rates are lower than current levels at 24.4%.
- The 10 -year performance of the United States is 4.47% at the time of writing, another decrease from the maximum yield of 4.62% seen last Thursday.
Technical analysis of the dollar index: achieving profits
The American dollar index is ready for a recovery after a long period of devaluation, and that narrative is gaining strength this Tuesday after very early signs were seen on Monday. The DXY is expected to rise again and look for firm resistance. That could trigger a firm rejection at higher levels and push the DXY beyond the minimum of May, causing more devaluation for the dollar and losses for the DXY.
On the positive side, the level of 100.22, which kept the DXY at Raya in September-October, is the first resistance, followed by the ascending trend line broken about 100.80. Above, the simple mobile average (SMA) of 55 days in 101.32 is the next level to take into account, followed by 101.90, a pivotal level throughout December 2023 and a base for the form formation of heads and shoulders inverted (H&S) during the summer of 2024. In case the bulls of the US dollar push the even higher DXY, the pivot level of 103.18 will enter.
If the DXY sees some renewed sales pressure, a minced movement could materialize towards the minimum of the year to 97.91 and the pivotal level of 97.73. Below, a relatively thin technical support is located at 96.94 before looking at the lowest levels of this new price range. These would be 95.25 and 94.56, which would mean new minimums not seen since 2022.
US dollar index: daily graphics
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values ​​that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
