US Dollar continues bleeding as Trump fights the Fed
- The US Dollar Index (DXY) trades near the 98.50 area after a sharp decline during Monday’s session.
- Concerns rise after Trump criticizes Powell, sparking fear over Fed's independence and further damaging USD sentiment.
- Technical indicators show sustained bearish momentum with resistance seen around 98.65 and 100.38.
The US Dollar Index (DXY) trades deep in the red on Monday, sliding toward the 98.50 region and marking a new three-year low. The sharp drop follows escalating market concerns over the Federal Reserve’s (Fed) institutional integrity after US President Donald Trump again publicly criticized Fed Chair Jerome Powell and confirmed he is exploring ways to remove him. Trump accused Powell of manipulating interest rates for political purposes in 2024 and described him as “too late” in reacting to economic conditions.
Amid rising global uncertainty and deteriorating confidence in US monetary leadership, Gold surged to a new all-time high near $3,425 per ounce, benefiting from safe-haven demand and a collapsing Greenback. The broader sentiment remains risk-averse with traders reassessing the Dollar’s long-term reserve status amid unpredictable trade and fiscal policies.
Daily digest market movers: Threats to Fed rattle markets
- Gold’s explosive rally above $3,400 underscores the rush to safe-haven assets as political interference fears escalate in the US.
- President Trump’s repeated attacks on Fed Chairman Powell — alongside reports that his administration is examining legal avenues to remove him — have rattled investor confidence.
- The DXY's drop to the 98.00 zone reflects the market’s unease with a potentially politicized central bank. Comments from White House advisor Kevin Hassett and Trump’s Truth Social posts have only deepened the perception of a hostile stance toward monetary independence.
- Analysts at Scotiabank warn that undermining the Fed could weaken inflation-fighting credibility, which might lift inflation expectations and pressure the USD even further.
Technical analysis
The technical backdrop for the DXY remains heavily bearish. The pair trades around 98.50, near the bottom of the daily range (97.92–99.21), showing a strong negative bias. The Relative Strength Index (RSI) has dropped to 24.22, entering deeply oversold territory, while the Moving Average Convergence Divergence (MACD) continues to print a sell signal.
Bearish sentiment is confirmed by the positioning of key moving averages: the 20-day Simple Moving Average (SMA) at 102.26, the 100-day at 106.04, and the 200-day at 104.63 — all trending lower. The 10-day EMA at 100.38 and SMA at 100.69 further reinforce resistance above current levels.
Key resistance levels are noted at 98.65, followed by 100.38 and 100.69. While some short-term oscillators like the Ultimate Oscillator (37.76) and Awesome Oscillator (−3.54) appear neutral, the dominant structure remains clearly negative.
Unless political clarity is restored or risk sentiment shifts, the DXY appears poised for further downside.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Patricio Martín
FXStreet
Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.
