- The dollar at a disadvantage this Tuesday while the euphoria for the commercial agreement between the US and China fades quickly.
- The operators consider the next publication of the US CPI while the details on the commercial agreement between the US and China remain scarce.
- The US dollar index goes back to 101.60 after failing to recover the level of 102.00.
He US dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, corrects about 101.60 in the middle of the European negotiation session on Tuesday. The partial reduction of Monday’s profits occurs as operators become cautious about the lack of details on the recent commercial agreement between China and the USA (USA.). In addition to cutting tariffs, no dates or future issues have been set, which raises questions about what has been discussed, similar to the commercial agreement between the United Kingdom and the US on Thursday.
Meanwhile, in the front of the economic data, some dark clouds could be formed on the dollar this Tuesday with the publication of the US consumer price index (CPI) for April. The markets expect an increase in the monthly figures of both the nucleus and the total, since the ‘day of the release’ of the US President Donald Trump took place in early April. During the night, the president of the Bank of the Federal Reserve (FED) of Chicago, Austan Goolsbee, warned that even the current levels of tariffs will continue to have an inflationary impulse, the New York Times reported.
Daily summary of market movements: Trump attacks the EU
- On Monday, President Trump lashed out at the European Union (EU), saying that the US has the advantage in his commercial discussions with the EU. “The European Union is in many more unpleasant aspects than China. We have barely started with them. We have all the letters. They treated us very unfairly,” Trump said in the White House.
- At 10:00 GMT, the National Federation of Independent Business (NFIB) published its Business Optimism Index for April. The real number was 95.8 compared to the previous 97.4. The expectation was 94.5.
- At 12:30 GMT, US CPI data will be published for April:
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- The monthly IPC general is expected to increase to 0.3%, from -0.1% deflationary in March. The annual figure is expected to remain stable at 2.4%.
- The underlying monthly CPC is expected to rise to 0.3%, from 0.1% in March. The annual figure is expected to remain unchanged by 2.8%.
- The actions have a very binary image on Tuesday, being Japan the last region where euphoria materialized by the commercial agreement. Chinese actions cut that euphoria and fell almost 2% at the close. European actions are flat and look for direction, while US futures face losses of less than 0.5% before their opening bell.
- The CME Fedwatch tool shows that the probability of an interest rate cut by the Federal Reserve at the June meeting is only 8.2%. Later, the decision of July 30 is likely that the rates are lower than the current levels at 38.6%.
- The yields of 10 years of the US are quoted around 4.45%, approaching levels not seen since the beginning of April, and reducing fees of feat cuts by 2025.
Technical analysis of the dollar index: All very briefly
Warning lights flashing this Tuesday for the US dollar index from a purely technical point of view. The fact that the DXY has not been able to break 102.00 and closed below the important technical level of 101.90 is opening the door to a strong back back to 100.00. The publication of IPC of the USA. Later on Tuesday it could be vital to expand the rejection with a weaker dollar or push it firmly above 102.00.
Upwards, the DXY flirts with a technical rejection against 101.90, which acted as a pivotal level during December 2023 and as a basis for the formation of inverted head and shoulders (H&S) during the summer of 2024. In case the dollar bundles push the even higher dxy, the simple mobile average (SMA) of 55 days in 102.29 will enter into play.
On the other hand, the previous resistance in 100.22 is acting as a firm support, followed by 97.73 near the minimum of 2025. Further down, a relatively thin technical support appears in 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.
