- The US Dollar trades flat after Ukraine and Russian delegates ended meeting in Turkey without any resolution.
- Traders remain unsensitive to the dip in Michigan Consumer Sentiment Index for May.
- The US Dollar Index trades below 101.00, trying to find a floor.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is trading flat around 100.80. The DXY is for now able to avoid a weekly loss while market participants are starting to raise questions over the stability of the Greenback. With United States (US) President Donald Trump flip-flopping on its tariff approach and how ill-conceived the first trade deals are, traders are starting to challenge the viability of the grand scheme from the Trump administration and its meaning towards the Greenback.
The US Dollar retreated on Thursday after a slew of economic data pointed that price pressures and consumer spending are cooling. The Producer Price Index (PPI) data unexpectedly showed prices fell in April compared with the previous month, while Retail Sales grew by a marginal 0.1% after March’s 1.5% surge.
President Trump said the U.S. will unilaterally set tariffs for many countries soon. Speaking on his Middle East tour, the president said 150 countries were seeking to making a deal, "but you're not able to see that many countries." Trump said Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick would tell countries what import duties the U.S. plans to impose. "So at a certain point over the next two to three weeks, I think Scott and Howard will be sending letters out, essentially telling people- it will be very fair but we will be telling people what they will be paying to do business in the United States," Trump said, Bloomberg reports.
Daily digest market movers: Not much market moving
- Both Ukraine and Russian delegations entered in talks in Istanbul, but did not deliver any fruitful outcome with talks being concluded this Friday, Bloomberg reports.
- The US economic calendar meanwhile saw some data come out:
- April’s monthly Housing Starts fell to 1.361 million, coming from 1.37 million in March.
- April’s Import-Export Price Indexes came out as well. Export prices came in at 0.1% from 0.1% previously where -0.5% was expected. Import prices came in higher at 0.1%, missing the contraction of -0.4%, and up from the previous -0.4% contraction.
- The University of Michigan published its preliminary report for May:
- The Consumer Sentiment Index fell to 50.8, missing the 53.4 estimated and down from 52.2 in April's final reading.
- The 5-year inflation expectation jumped to 4.6%, missing the 4.4% previous reading.
- Equities are struggling and are falling flat on the day looking for direction, after the drop in Consumer Sentiment in the May's Michigan reading.
- The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 8.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 38.6%.
- The US 10-year yields trade around 4.41%, softening from its peak performance on early Thursday at 4.54%
US Dollar Index Technical Analysis: Going Nowhere
The US Dollar Index could be on the verge of a crisis as an increasing number of financial market participants start to question the stability status of the Greenback, given the unstable policies of the Trump administration. The “Trump put” is becoming an actual theme, and in this scenario it isn’t likely that the US Dollar revisits levels such as 107.00 or 110.00 for a long time. Add in the fear of a joint Asian currency intervention, where local currencies are appreciated against the Greenback, and US exceptionalism might be over for an extended period of time.
On the upside, 101.90 is the first big resistance again. It already acted as a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 55-day Simple Moving Average (SMA) at 102.06 comes into play.
On the other hand, the previous resistance at 100.22 is now acting as firm support, followed by the year-to-date low of 97.91 and the pivotal level of 97.73. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
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.
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
EUR/USD moves in a consolidative theme near 1.1570
Following multi-year highs north of the 1.1600 barrier, EUR/USD now looks range bound around the 1.1570 zone as the NA session draws to a close on Thursday. The strong upside in the pair came on the back of broad-based decline in the US Dollar, which was particularly sponsored by lower US inflation data, further cooling of the labour market, and prospects of further rate cuts by the Fed.
GBP/USD looks bullish just below 1.3600
GBP/USD maintains its constructive stance in place in the latter part of Thursday’s session, hovering just below 1.3600 the figure on the back of heightened losses in the Greenback. In the meantime, investors continue to pencil in two potential rate cuts by the Fed for the remainder of the year.
Gold consolidates its gains near $3,380
Gold maintains its weekly rebound well in place, now trading in the sub-$3,400 region per troy ounce in response to the persistent selling bias in the US Dollar, declining US yields across the curve and growing geopolitical tensions.
Cardano Price Forecast: Whales acquire 310 million ADA amid potential triangle breakout
Cardano (ADA) shows weakness as it reverses from an overhead trendline of a triangle pattern. The altcoin edges lower by over 1% at press time on Thursday, fueling a steeper correction in its Open Interest. Amid weakness, Cardano whales have acquired 310 million ADA tokens so far this month, projecting increased confidence as the triangle pattern nears resolution.
US tariffs here to stay, trade deals ‘largely symbolic’
Despite legal challenges to IEEPA tariffs, US trade policy remains firm. Tariffs on steel and aluminium have doubled, and new sectoral tariffs are expected. Trade deals may emerge, but most will be symbolic. Effective tariff rates will stay high throughout 2025.
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.