- The US dollar index rises and exceeds 100.00 after news on a possible commercial agreement between the US and the United Kingdom.
- With euphoria due to the possibility of a first commercial agreement, questions about the underlying details immediately arise.
- The American dollar index proves its rising resistance around a maximum of a month.
The American dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, extends the profits on Thursday after the decision of the Federal Reserve (Fed) and the next announcement of Donald Trump on a “large commercial agreement” between the United States (USA) and, supposedly, the United Kingdom (UK).
The dollar shot up since Wednesday afternoon, promoted by the FED decision and the comments of the Fed President Jerome Powell. The Fed maintained its policy rate without changes in the range of 4.25%-4.50%, as expected, while President Powell maintained his approach to wait and see on the rates, since the uncertainty is high and there are risks of a return of inflation. This means that the Fed will not cut in the short term, strengthening the US dollar with the yield differential between the US and other countries by maintaining wider in favor of the dollar as the highest yield.
The second wave that triggered an increase in the US dollar came with the announcement of a commercial agreement between the United States (USA) and the United Kingdom (UK). The euphoria for these rumors promoted upward shares in all areas and saw the US dollar advance in front of most of its main peers. The announcement of US President Donald Trump is expected to be around 14:00 GMT.
What moves the market today: background data
- Several merchants and analysts are expressing concerns about the commercial agreement between the United Kingdom and the US. The risk here is that this could only be an agreement in principle or even a simple exchange of goods without details or concrete actions so far, says Bloomberg.
- The Trump administration is considering canceling or ignoring the chips law of former President Biden, which limits the chips exports of ASML, AMD and NVIDIA from the US. The news that the Trump administration is considering annulling the order is seeing an increase in Nasdaq futures in the pre-market.
- At 12:30 GMT, the weekly data of US unemployment applications will be published. The initial applications are expected to fall 230,000 compared to the previous 241,000. Continuous requests are expected to decrease to 1.89 million, from 1,916 million.
- At 14:00 GMT, President Trump will give a speech on the expected commercial agreement with the United Kingdom.
- The shares are rising in all areas, with European shares up 1%, while US futures see Nasdaq leading the load, with an increase of more than 1%.
- The CME Fedwatch tool shows the possibility of an interest rate cut by the Federal Reserve at the June meeting at 20.2%. Later, the decision of July 30 is likely that rates are lower than current levels at 66.4%.
- The yields of 10 years of the US are negotiated around 4.30%, without moving much after the Fed ads and the commercial agreement.
Technical analysis of the American dollar index: A break or again a failure?
The American dollar index (DXY) has returned quickly above 100.00 in a position of positivity after the holders of the commercial agreement. First, this is one of the smallest possible commercial agreements because the United Kingdom is not the main problem of the great US trade deficit in goods. Secondly, a commercial agreement with still many gaps to fill – or a very minor agreement on only one sector or an agricultural article – will raise the question of whether billions in revenues promised by Trump will be really received.
On the positive side, the first resistance of the DXY is found in 100.22, a level that supported the index in September 2024. A firm recovery would be a return to 101.90, which acted as a crucial level during December 2023 and as a basis for the formation of inverted shoulder-hombre (H&S) during the summer of 2024.
On the other hand, the support at 97.73 could be quickly tested before any substantial bearish holder. 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
Commercial War between the US and China Faqs
In general terms, “Trade War” is a commercial war, an economic conflict between two or more countries due to the extreme protectionism of one of the parties. It implies the creation of commercial barriers, such as tariffs, which are in counterbarreras, increasing import costs and, therefore, the cost of life.
An economic conflict between the United States (USA) and China began in early 2018, when President Donald Trump established commercial barriers against China, claiming unfair commercial practices and theft of intellectual property by the Asian giant. China took retaliation measures, imposing tariffs on multiple American products, such as cars and soybeans. The tensions climbed until the two countries signed the Phase one trade agreement between the US and China in January 2020. The agreement required structural reforms and other changes in China’s economic and commercial regime and intended to restore stability and confidence between the two nations. Coronavirus pandemia diverted the attention of the conflict. However, it is worth mentioning that President Joe Biden, who took office after Trump, kept the tariffs and even added some additional encumbrances.
Donald Trump’s return to the White House as the 47th US president has unleashed a new wave of tensions between the two countries. During the 2024 election campaign, Trump promised to impose 60% tariff particularly in investment, and directly feeding the inflation of the consumer price index.
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.
