- The US dollar descends on Monday after the Moody’s qualification agency surprised the markets on Friday.
- It is expected to see some repercussions yet, while the Trump administration will try to convince markets with another commercial agreement or an advance in Ukraine.
- The US dollar index seems pressed, returning to 100.00
The US dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, is down on Monday and quotes around 100.40 at the time of writing. The DXY is experiencing some sale pressure with the dollar losing some support and confidence in the markets again. The fact that Moody’s announced on Friday that reduced the United States credit rating (USA) to ‘AA1’ from ‘AAA’ and said in its report that “although we recognize the significant economic and financial strengths of the US, we believe that these no longer completely counteract the decrease in fiscal indicators”, Moody’s points out what several analysts have already pointed out what several analysts have already pointed out what several analysts have already pointed Since US President Donald Trump imposed tariffs, Reuters reports.
It will be interesting to listen to what the Federal Reserve (FED) thinks of a series of Fed speakers on Monday. With this reduction of Moody’s, yields will increase as market participants demand a small risk premium before considering buying US debt. That could be a setback for the Fed if the Central Bank wants to cut its reference rate, with a possible dislocation between the current monetary policy and where the US rates are in the normal bidding market.
Daily summary of market movements: Bostic says there will be a chain effect
- An army of speakers of the Fed is ready on a Monday that, otherwise, is dry in terms of US economic data:
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- At 12:30 GMT, the president of the Bank of the Federal Reserve of Atlanta, Raphael Bostic, spoke on a panel at the 2025 financial market conference of the Atlanta Fed in Florida. Bostic de la Fed said the reduction could have a chain effect through the economy. He continued to say that a waiting time is needed for another 3 to 6 months to see how uncertainty is based. The longer the transition of tariffs, the more the behavior of the consumer will impact, Bloomberg reports.
- At 12:45 GMT, the vice president of the Federal Reserve Bank, Philip Jefferson, pronounces a speech on liquidity facilities at the Atlanta Federal Reserve Bank in Florida.
- In that same period, the president of the Bank of the Federal Reserve of New York, John Williams, moderates a discussion at the MBA Secondary and Capital Conference in New York.
- At 17:15 GMT, the president of the Bank of the Federal Reserve of Dallas, Lorie Logan, pronounces opening comments at the 2025 financial market conference in Florida.
- Closing at 17:30 GMT, the president of the Bank of the Federal Reserve of Minneapolis, Neel Kashkari, participates in a conversation in the young American leaders of Minnesota (MYALP) at the University of Minnesota.
- The actions are not reacting well to the fact that the largest developed economy in the world is seeing a reduction in its credit rating. European actions are in red while US futures are substantially lower.
- The CME Fedwatch tool shows that the possibility of an interest rate cut by the Federal Reserve at the June meeting is only 8.3%. Later, the decision of July 30 is likely that rates are lower than current levels at 36.8%.
- The yields of 10 years from the US are traded around 4.51%, a strong rebound from 4.3%, the minimum last Friday.
Technical analysis of the dollar index: another warning signal
The US dollar index is losing its solvency and safe refuge status. Moody’s only confirmed what several analysts have long predicted since the Trump administration completely committed to tariffs. The US dollar is no longer stable, and it is only a matter of time before that translates into the DXY.
On the positive side, 101.90 is the first great resistance again. He already acted as a pivotal level throughout December 2023 and as a basis for the formation of inverted head and shoulders (H&S) during the summer of 2024. The simple mobile average (SMA) of 55 days in 101.94 reinforces this area as a strong resistance. In the event that the dollar bundles push the even higher DXY, the pivotal level of 103.18 comes into play.
On the other hand, the previous resistance in 100.22 now acts as a firm support, followed by the minimum of the year until the date of 97.91 and the pivotal level of 97.73. Below, a relatively thin technical support appears 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.
