- The US dollar suffers a fall and loses traction against almost all its main peers on Friday.
- Operators prepare for US retail sales, although tariffs and geopolitics are on stage.
- The US dollar index (DXY) falls substantially below 108.00 and is directed to the low region of 106.
The American dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, falls, quoting around 106.80 at the time of writing this article on Friday. The dollar fell under pressure again after the US president Donald Trump signed a memorandum on Thursday that instructed staff to work in reciprocal tariffs. These tariffs will take weeks or even months to be implemented, which gives time to US business partners to negotiate and find solutions.
The economic calendar focuses on US retail sales this Friday. Although US data tends to move the market, it seems that markets are ignoring this week’s figures. Next week, investors will focus on the preliminary data of the Purchase Management Index (PMI) of Global S&P for February, which will be published on Friday 21.
What moves the market today: signed but not yet implemented
- At 13:30, almost all important data on Friday will be published:
- The import/export prices of January are expected, with the expected monthly export price index that constantly increases 0.3% and the import price index that rises 0.4% compared to 0.1% of December.
- Retail sales of January will be published, with the expected main figure that 0.1% is reduced compared to the growth of 0.4% in December. Retail sales without cars and transport should fall to 0.3% from 0.4% of the previous month.
- The actions are mixed due to all geopolitical elements in motion. On average, most indices are down or upward in less than 0.5%.
- The CME Fedwatch tool shows a probability of 57.4% that interest rates remain unchanged in current levels in June. This suggests that Fed would keep the rates without changes for longer to fight persistent inflation.
- The 10 -year performance of the United States trades around 4.54%, a deep fall from the maximum of this week of 4,657%.
Technical analysis of the US dollar index: there it goes
The US dollar index (DXY) has ended this week. A clear weekly loss is inevitable, and strong resistance in 107.35 is far. From here, the DXY is technically at the mercy of mobile socks and the relative force index (RSI), which still has a lot of space for more falls. The simple mobile average (SMA), which quotes around 104.93, could be the one to be monitored.
Upwards, that previous support in 107.35 has now become a firm resistance. Above, the 55 -day SMA in 107.90 must be recovered before claiming 108.00.
Down, look for 106.52 (maximum of April 16, 2024), 106.34 (SMA of 100 days), or even 105.89 (resistance in June 2024) as better support levels. Although the RSI shows space for more falls, the 200 -day SMA in 104.93 could be a possible result.
Dollar index: daily graphic
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.
