- The US dollar index with stalls because the markets weigh Trump’s tariff threats and feed independence.
- The US dollar depends on bank earnings and US economic data on Tuesday.
- The price action for DXY remains under pressure with psychological resistance reinforcing at 98.00.
US dollar index (DXY), which measures the power of the US dollar (USD) against the basket of main currencies, remains under pressure at the beginning of the week and is traded below 98.00 on Monday.
Fresh geopolitical risks occurred after the announcement of US President Donald Trump about tariff threats against the European Union (EU) and Mexico at the weekend.
At the same time, he reports that President Trump is pushing the Federal reserve chairman (Fed) Jerome Powell Resignation was ruled by concerns about the independence of the central bank, a factor that can affect the confidence of investors and sentiment to the US dollar in the coming weeks.
On Tuesday, the June Consumer Price Index (CPI) will be issued and will provide an updated view of the US inflation. Whether the data suggest that inflationary pressures persist or easy will probably have a significant impact on the expectations of the federal reserve policy and in the extension to the DXY trajectory.
Meanwhile, several major US financial institutions will start the earnings season in the second quarter, with JPMorgan Chase, Citigroup, Wells Fargo and Blackrock to prepare for reporting. These results could offer important information about the health of the US financial system, which is a key driving force of the risk sentiment.
Daily Graph US Index Us Dollar Index (DXY)
DXY organized a modest reflection from its minimum 1. The price action is currently testing a 20 -day simple gliding average (SMA) to 97.70, while a 50 -day SMA at 98.84 remains intact as a key level of resistance.
Both movable diameters trending down and underline wider bear view.
The relative force index (RSI) is 49, reflecting neutral momentum. Although it is not yet on the releared territory, this reading RSI suggests that the dollar is currently lacking the power to mount the decisive bull conversion.
US DOLLAR FAQS
The US dollar (USD) is the official currency of the United States of America and “de facto” currency of a large number of other countries where it is in circulation beside local notes. It is the most traded currency in the world, which represents more than 88% of all global foreign exchange fluctuations, or on average $ 6.6 trillion in transactions daily, according to 2022. For most of its history, the US dollar was supported by gold until Bretton Woods in 1971, when the gold standard disappeared.
The most important single factor that affects the value of the US dollar is the monetary policy that is formed by a federal reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and support full job. Its primary tool to achieve these two goals is to adjust the interest rates. When prices are rising too fast and inflation is above 2% Fed’s goal, the Fed will increase rates, which helps USD. When inflation falls below 2% or the unemployment rate is too high, the Fed can reduce interest rates that weigh green.
In extreme situations, the federal reserve system can also print more dollars and enable quantitative release (QE). QE is a process by which the Fed significantly increases the flow of the loan in the stuck financial system. This is a non -standard political measure used when the credit has dried up because banks do not borrow each other (for fear of extending the default). This is the last possibility where the interest rates are unlikely to achieve the necessary result. The Fed’s weapon was an election in the fight against the credit crisis that occurred during the major financial crisis in 2008. This includes the printing of more dollars and their use to buy US government bonds mainly from financial institutions. QE usually leads to a weaker US dollar.
Quantitative tightening (QT) is a reverse process where the federal reserve system stops buying bonds from financial institutions and does not represent the principal of the bonds it brings in new purchases. It is usually positive for the US dollar.
