- The dollar is one of the victims in the financial markets of Trump’s reciprocal tariffs.
- A 10% base tariff for all countries that export goods to the US and additional taxes per country, being China that faces a total of 54%.
- The American dollar index is severely affected and falls below the level of 102.00 and even below 101.50.
The US dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, is experiencing another seismic correction, quoting at levels not seen since the beginning of October around 101,500 and correcting about 2.00% at the time of writing on Thursday. The US dollar is being expelled from portfolios while investors repathered effective by selling their participations in US shares amid a hard correction globally.
The markets are digesting the reciprocal tariffs that were implemented during the night by the US president, Donald Trump, where a 10% global tariff is the minimum for the 60 countries that export to the US to the US, from there, all other previous tariffs remain in force, which means, for example, a total tariff of 54% on China applicable from this Thursday. Meanwhile, the daily economic calendar continues with the Unemployment Subsidy Applications US weekly, the impression of ISM services and the job cuts of Challenger for March that will be published.
Daily summary of market movements: new regime
- The secretary of the Treasury, Scott Besent, commented, after the announcement of reciprocal tariffs by Trump, that tariffs could be raised or eliminated quickly if countries bring back their production to the US to the USA. Besent also issued a statement, saying that it is better that countries do not retaliate, since this could be considered the worst of the scenarios if they want to avoid more tariffs.
- The US Challenger Employment Cuts for March are seeing more cuts, reaching 275,240 with the previous publication in 172,017.
- The weekly data of US unemployment applications are about to be published. Initial requests reached 219,000, exceeding the estimation of 225,000 and coming from 224,000. Continuous requests jumped to 1,903 million, higher than the previous 1,856 million.
- At 13:45 GMT, US S&P Global will publish the final reading of the Purchase Management Index (PMI) of Services for March. 54.3 constants are expected.
- At 14:00 GMT, the US Supply Management Institute (ISM) will publish the March Services Report:
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- Services PMI is expected to fall to 53.0, from 53.5.
- There is no forecast available for the employment component, with the previous reading at 53.9.
- There is no survey available for new orders, which reached 52.2 above.
- There is no prognosis available for paid prices, with the previous reading at 62.6.
- The actions are facing acute corrections following the headlines of the previous night. European shares are falling between 2.00% and 3.00% on average. US actions are even seeing Nasdaq fall more than 4% in the day.
- According to the CME Fedwatch tool, the probability that interest rates are maintained in the current range of 4.25%-4.50%at the May meeting is 74.7%. For the June meeting, the chances of the debt costs being lower are at 72.5%.
- The yields of 10 years from the USA traded around 4.04%, just above their new minimum of five months in 4.01% while a massive escape is produced towards the safe refuge bonds.
Technical analysis of the US dollar index: it is better not to get in
The US dollar index (DXY) is finally giving life after consolidating around the range of 103.00-104.00 for almost a month. With this shock effect on the markets, the DXY falls below the 102.00 support and test the technical support level of 101.90 on Thursday. Once that level is broken, another considerable area will be opened for a greater devaluation of the dollar, with the round level of 100.00 as a decline.
With the considerable downward movement on Thursday, some support levels have become resistance. The first level to be taken into account is 103.18, which has maintained support during March. Above there, the crucial level of 104.00 and the simple mobile average (SMA) of 200 days in 104.90 come into play.
At the bottom, 101.90 is the first line of defense, and should be able to trigger a rebound since the impulse indicator of the Relative Force Index (RSI) is emitting warnings of overall conditions in the graphic diary. Maybe not this Thursday, but in the next few days, a break below 101.90 could see a downward movement around 100.00.
US dollar index: daily graphics
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
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.
