- The US Dollar slides 1% in the US Dollar Index, measured against six major currencies.
- The WSJ issues a piece that first a task force needs to be formed on tariffs.
- The US Dollar Index (DXY) snaps 109.00 and heads towards 108.00
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is sinking 1% just hours ahead of President-elect Donald Trump’s inauguration as the 47th President of the United States (US). Several asset classes in the US will remain closed, such as the Wall Street trading floor and US bond trading, in observance of Martin Luther King’s Day. The first seismic shock in the DXY comes after headlines emerged form the Wall Street Journal that tariffs are not a part of the executive orders that President Donald Trump will issue on his first day in office, and need to be discussed further before being implemented.
All eyes will be on the aftermath of the inauguration, where President-elect Donald Trump has already confirmed in 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 deportation starting in Chicago, and issuing state of emergencies for energy and border security, Bloomberg reported. By issuing those last two, the upcoming President Trump can give the green light for massive drilling and mass deporting illegal immigrants without having to pass through Congress and the House of Representatives.
Daily digest market movers: Watch out for the boomerang
- The Wall Street Journal issues a headline that confirms the Trump administration to form a task group first to discuss proper impacts from tariffs on China, Canada and Mexico before considering to issue them.
- At 17:00 GMT, the Presidential Inauguration will take place, with Donald Trump being sworn in as the 47th President of the United States.
- Due to Martin Luther King’s Day, several trading floors in the US will remain closed throughout the day.
- Equities are very happy with the softer US Dollar. All European equities and US futures are off to a good start for this week.
- The CME FedWatch tool projects a 55.6% chance that interest rates will remain unchanged at current levels in the May meeting, suggesting a rate cut in June. Expectations are that the Federal Reserve (Fed) will remain data-dependent with uncertainties that could influence inflation during President-elect Donald Trump’s term.
- The US 10-year yield is trading around 4.627% and will remain at that level this Monday, as bond trading in the US is closed due to the Martin Luther King’s bank holiday.
US Dollar Index Technical Analysis: Look at the bigger picture
The US Dollar Index (DXY) sees a split division between bears and bulls. The new Trump administration is set to unleash a large number of executive orders, making it hard for markets to assess the impact. With several topics being addressed and communicated in advance, it looks like markets have already priced in a fair bit of inflationary pressure from Trumponomics. The question now will be if the markets are correct and if the DXY index will ease further from current levels on the back of an overestimation of the actual impact of the measures being imposed.
On the upside, the 110.00 psychological level remains the key resistance to beat. Further up, the next big upside level to hit before advancing any further remains at 110.79 (September 7, 2022, high). Once beyond there, it is quite a stretch to 113.91, a double top from October 2022.
On the downside, the DXY is trading alongside the ascending trend line coming from December 2023, which currently comes in around 109.10 as nearby support. In case of more downside, the next support is 107.35 (October 3, 2023, high). Further down, the 55-day Simple Moving Average (SMA) at 107.29 should catch any falling knives.
US Dollar Index: Daily Chart
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD consolidates near two-week high, looks to US NFP for fresh impetus
AUD/USD holds steady around the 0.6335 area during the Asian session on Friday as traders now await the US NFP report. Bets that the Fed will cut rates further amid concerns over failing US economic growth keep the USD depressed near a multi-month low and act as a tailwind for spot prices, though tariff jitters warrant caution for bulls.
USD/JPY seems vulnerable amid divergent Fed-BoJ expectations; US NFP awaited
USD/JPY languishes near its lowest level since October touched on Thursday amid a bearish USD, led by bets that the Fed could cut rates multiple times in 2025 amid slowing US economic growth. Moreover, the hawkish sentiment surrounding the BoJ's policy outlook underpins the JPY and validates the negative bias for the pair.
Gold price remains depressed ahead of US NFP; trade jitters to limit losses
Gold price trades with negative bias for the second straight day, though a combination of factors continues to act as a tailwind ahead of the crucial US NFP report later this Friday. Rising trade tensions continue to weigh on investors' sentiment.
Crypto AI Tokens: Why FET, NEAR and RNDR could outperform BTC after White House Summit
The White House Crypto Summit is scheduled to hold on Friday. Rather than double-down on BTC, sector-wide price trends show that investors are leaning towards Crypto AI altcoins.
Make Europe great again? Germany’s fiscal shift is redefining the European investment playbook
For years, Europe has been synonymous with slow growth, fiscal austerity, and an overreliance on monetary policy to keep its economic engine running. But a major shift is now underway. Germany, long the poster child of fiscal discipline, is cracking open the purse strings, and the ripple effects could be huge.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.