The dollar index has plummeted by nearly 2.5% over the past three days, marking a significant downturn as it reaches a new 2025 low, the lowest in four months. This decline is attributed to a combination of factors, including tariff concerns, a dovish shift in US interest rate policy, and signals of German stimulus. As a result, the index has broken through strong supports at 104.92/81, crucial levels that include the 50% retracement of 99.84/110.00 and the 200-day moving average (200DMA). To confirm this bearish trend, a close below these levels is essential.
The dollar index's steep fall has continued for three consecutive days, with the pressure mounting from various fronts. Tariff concerns have played a substantial role in this decline, as they pose a threat to international trade dynamics. Additionally, US policymakers have adopted a more dovish stance on interest rates, further contributing to the dollar's downward trajectory. Meanwhile, signals of potential German stimulus are also adding to the pressure on the dollar index.
In the context of the dollar's movement, the 200DMA serves as a significant level. Breaking below this mark, along with the 50% retracement level of 99.84/110.00, underscores the severity of the current downturn. Analysts note that while the dollar attempts to rebound, any rise is likely to remain capped under the key level of 106. The bears are now setting their sights on new targets, specifically the Fibo 61.8% level at 103.72 and the November 5 higher low at 103.25.
The combination of tariff concerns, dovish interest rate shifts, and German stimulus signals continues to exert considerable pressure on the dollar index. This multifaceted scenario is driving market analysts to closely monitor these developments and their potential impact on global economic stability.