- The US dollar index stops while the markets weigh tariff threats of Trump and the independence of the Fed.
- The US dollar depends on the banking and economic data of the US that will be published on Tuesday.
- The action of the DXY price remains under pressure with psychological resistance consolidating in 98.00.
The US dollar index (DXY), which measures the fortress of the US dollar (USD) compared to a basket of main currencies, remains under pressure at the beginning of the week, operating below the level of 98.00 on Monday.
New geopolitical risks have emerged after the announcement of US President Donald Trump on tariff threats against the European Union (EU) and Mexico during the weekend.
At the same time, the reports that President Trump is pressing the president of the Federal Reserve (Fed), Jerome Powell, to resign have revived concerns about the independence of the Central Bank, a factor that could influence the confidence of investors and the feeling of the US dollar in the coming weeks.
On Tuesday, the June consumer price (CPI) index will be published, providing an update on inflation in the US regardless of whether the data indicates that inflationary pressures persist or decrease, they are likely to have a significant impact on the policy expectations of the Federal Reserve and, by extension, in the DXY trajectory.
Meanwhile, several important US financial institutions will begin the profit season of the second quarter, with JPMorgan Chase, Citigroup, Wells Fargo and Blackrock ready to inform. These results could offer important information about the health of the US financial system, a key engine of the feeling of risk.
DAILY GRAPH OF THE US DOLLAR INDEX (DXY)
The DXY has starred in a modest rebound since its minimum of July 1 in 96.38, but continues to operate below the level of psychological resistance of 98.00. The price action is currently testing the simple mobile average (SMA) of 97.70, while the 50 -day SMA in 98.84 remains intact as a key level of resistance.
Both mobile socks are in downward trend, underlining the broader bassist perspective.
The relative force index (RSI) is 49, reflecting a neutral impulse. Although it is not yet in overall territory, this RSI reading suggests that the dollar currently lacks force to set up a decisive upward reversal.
US Dollar – Frequently Questions
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.
