The US Dollar Index (DXY) continued its overnight ascent after comments on tariffs from United States President Donald Trump yesterday. The DXY didn’t seem to feel particularly fazed one way or another by last week’s tariff chatter. Last week saw prices close above 104.00. That thus paints a bullish picture for a bigger run toward the 105.00 figure. The 200-day Simple Moving Average (SMA) converges at the 105.00 psychological level. This adds context to the importance of the area around 104.96 as a strong resistance barrier. Even with these advances, the DXY pulled back its earlier gains and closed negative on Thursday.
European equities fell by almost 1% on the day with US equities averaging down about 0.50%. The Kansas Fed Manufacturing Activity data for March is set to be released at 15:00 GMT. On the forex market, the EUR/USD exchange rate was performing positively around 1.0800 in the American session on Thursday. The US Dollar struggled to find any appeal after news broke of US auto tariffs being announced. Otherwise, it risks breaking back below into the March range of 104.00 to 103.00.
Tariff Talks and Their Impact on DXY
President Donald Trump’s recent comments on tariffs should have been enough to pull up the US Dollar Index (DXY). The index reacted with more than mild excitement to his speech. Specifically, the DXY tracks the US Dollar’s performance against six major developed market currencies. Its rise was on the backfoot overnight after failing to hold the advance as concerns grew in the market over just how impactful any tariff talk would be.
The index’s performance shows the nuanced relationship between political proclamations and economic measures. Tariff discussions tend to move currency markets. With today’s market environment, we see that plenty of other factors are driving the DXY in addition to robustly counterbalancing or outright softening the immediate DXY impact of these big announcements.
Market Resistance and Support Levels
The DXY looks to be moving toward the 105.00 figure, but it will meet heavy headwinds on the trip north. The 200-day Simple Moving Average (SMA) is converging as well at this key juncture. This convergence further emphasizes the robustness of resistance at 104.96, a key level for traders and investors watching for further upward breakout. If the DXY does break through this zone, it could be at risk of running out of steam. Significant resistance possible at important levels such as 105.53 and 105.89.
If the DXY loses ground again setting it back into its March downward range of 104.00 to 103.00, dollar traders should watch carefully. Once the downside floor at 103.00 gives way, look for support to form near 101.90. With a recent bounce back to 104.00 providing an immediate support line, the dollar has found temporary support with ongoing market volatility.
Broader Market Movements
The more important influence on the DXY’s rise was the broader market environment. From 3/27 to 4/1, European equities declined close to 1%, while US equities were an average of 0.50% lower. These sharp declines point to a fundamental shift in investor sentiment in the face of persistent economic and geopolitical risks. On top of that, next Tuesday’s release of the Kansas Fed Manufacturing Activity data for March is likely to tilt market expectations even more.
The EUR/USD currency pair traded positively during the Thursday American session around the 1.0800 zone. Through this exercise we reveal the differing trends and causal effects impacting the pairs against the dollar. The US Dollar’s inability to attract haven demand after the auto tariff announcement highlights the confusing and indecisive sentiment dominating currency markets.