The dollar index is on a recent climb to heights last seen during the second half of Donald Trump’s presidency. This trend is reminiscent of the patterns between 2018 and early 2020 before the pandemic hit in full force. This continuous drop is a cause of concern for traders and analysts alike. Now, they say, they’re especially worried by how Trump’s tariff policy and incendiary public statements are tanking trader sentiment in a jittery market.
As things stand now, the dollar index has blasted through 105 and 107 resistance. In doing so, it dramatically pierced the 161.8% extension of its first impulse from the highs registered earlier this year. This movement represents an important change, especially as the index has moved beyond a clear pause that was seen in early March. The lack of infrastructure support in the 99-100 stretch has only compounded this issue. As we’ve noted, this threshold has been a surefire reverse for the past two cycles.
Meanwhile technical indicators like the Relative Strength Index (RSI) indicate the dollar is reaching extreme oversold levels. The RSI depicts the most extreme oversold condition on daily charts since July 2020. On weekly charts, it shows a similar TSX oversold condition not seen since 2017. These are all bearish technical signals indicating a possible continuation of bearish momentum in the days ahead.
Historical patterns from the 1980s and 2000s indicate a concerning possibility for the dollar index: a potential move below the 70 mark, which could take years to fully materialize. A reduction of that magnitude would be devastating to domestic markets. It might transmit through a second channel, affecting international trade and finance.
As the dollar ponders its demise, crypto currencies like Bitcoin (BTC), Ethereum (ETH) and XRP are all experiencing a newfound boom. These digital assets are continuing their rallies from last week, with each building on continued positive momentum Monday. The latest rift between fiat currencies and cryptocurrencies only adds to the rapidly changing financial market environment, against the backdrop of unprecedented market uncertainties.
Market analysts are closely monitoring these developments. Bullish traders are building a take-profit target. They will be looking for a potential pullback in the 90 area on the dollar index. This target is a sign of very skittish sentiment in which traders are driving through the fog of political and economic headwinds.