US Dollar Focus on Donald Trump’s Inauguration

  • The US dollar is in volatile trading ahead of the inauguration of President-elect Donald Trump.
  • Trading floors in the US will be closed due to Martin Luther King Day.
  • The US Dollar Index (DXY) remains afloat near 109.00 with uncertainty ahead.

The US Dollar Index (DXY), which tracks the value of the Dollar against six major currencies, is trading roughly flat and holding near 109.00 on Monday ahead of the inauguration of President-elect Donald Trump as the 47th president of the United States ( USA.). Several markets in the US will remain closed, such as the Wall Street trading floor and US bond trading, in observance of Martin Luther King Day. This means that erratic movements could occur in a poorly liquid market.

All eyes will be on the consequences of the inauguration, where President-elect Donald Trump has already confirmed at a rally on Sunday that a whole battery of new measures and executive orders will be issued. The main ones are, of course, more tariffs, mass deportations starting in Chicago and the issuance of states of emergency for energy and border security, Bloomberg reported. By issuing these last two, the next President Trump can give the green light to mass drilling and mass deportation of illegal immigrants without having to go through Congress and the House of Representatives.

Daily Market Summary: All eyes on Trump’s first moves

  • At 17:00 GMT, the presidential inauguration will take place, with Donald Trump sworn in as the 47th president of the United States.
  • Due to Martin Luther King Day, several trading floors in the US will be closed throughout the day.
  • Stocks start the day on a positive note, with green numbers from Asia over Europe and US stock futures.
  • The CME FedWatch tool projects a 55.6% probability that interest rates will remain unchanged at current levels at the May meeting, suggesting a rate cut in June. The Federal Reserve (Fed) is expected to continue to rely on data with uncertainties that could influence inflation during President-elect Donald Trump’s term.
  • The US 10-year bond yield is trading around 4.627% and will remain at that level this Monday as US bond trading is closed due to the Martin Luther King Day bank holiday. .

US Dollar Index Technical Analysis: No plan from here

The US Dollar Index (DXY) sees a split between bears and bulls. The new Trump administration is set to unleash a slew of executive orders, making it difficult for markets to assess the impact. With several issues being addressed and communicated in advance, it appears that markets have already priced in a good portion of the inflationary pressure from Trumponomy. The question now will be whether the markets are correct and whether the DXY index will relax further from current levels due to an overestimation of the real impact of the imposed measures.

To the upside, the psychological level of 110.00 remains the key resistance to overcome. Further up, the next big upside level to reach before advancing further remains 110.79 (September 7, 2022 high). Once beyond there, it’s a big jump to 113.91, an October 2022 double top.

To the downside, the DXY is trading next to the ascending trend line coming from December 2023, which currently sits around 109.10 as nearby support. In case of further declines, the next support is 107.35 (October 3, 2023 high). Further down, the 55-day SMA at 107.29 should catch any declines.

US Dollar Index: Daily Chart

US Dollar Index: Daily Chart

US Dollar FAQs


The United States 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 alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.


The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, 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 enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.


Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.

Source: Fx Street

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