The US Dollar Index (DXY) has recently shown resilience, trading above the pivotal 100.00 mark as economic indicators raise concerns about the health of the United States economy. Recently, Treasury Secretary Janet Yellen has sounded the alarm. She’s particularly concerned that the tariffs enacted in the Trump administration could severely impact GDP growth in a catastrophic manner. This warning is being issued amid a wave of large increases in unemployment claims. Heightened recession fears are adding to the unusual market dynamic as traders await key labor data with bated breath.
As it stands, the DXY is trading around the level of 100.00, meaning it is up 0.60% on the day’s trading. The index is rebounding above the key psychological barrier at 100.00. This upward trajectory comes on the heels of a US Dollar rebound against the Japanese Yen. The DXY price action is stuck in a range of 99.61 – 100.08 for now. This marks a time of consolidation as traders and investors alike still await the all-important data releases.
Traders are getting ready for Friday’s Nonfarm Payrolls and inflation guidance. Leading indicators in the form of PMIs, yield curve inversions, and plunging consumer sentiment have all emerged, suggesting worsening headwinds for the economy. That figure beat out an already impressive forecast of 224,000 and the prior-revised 223,000. Finally, the seasonally adjusted insured unemployment rate has shot up, increasing to 1.3%. At the same time, continuing claims have shot up to 1.92 million at the highest since November 2021.
Technically, the DXY has a neutral RSI at 41.44. This indicates that there is not a strong near-term current moving the DXY in either direction. Moving Average Convergence Divergence (MACD) indicator is flashing a weak buy signal. This indicates there might still be some room for upward surprise in the short term. Fears of a recession have made bearish sentiment unusually high. The 20-day, 100-day, and 200-day Simple Moving Averages (SMAs) are in line at 100.37, 105.51, and 104.44, indicating bear continuation formation still in play.
Support levels for the DXY are 99.68, 99.48 and 99.37. As for the resistance levels these are at 100.37, 100.45 and 101.25. These technical indicators will be very important in figuring out where the index is headed as new economic data comes in.
Compounding these challenges are rising anxieties over the prospect of an incoming Trump Administration trade deal with China. Rabobank goes on to argue that the odds of the US opening up in these negotiations are increasing. This transition follows a move in recession odds over 50%. This unpredictable moment in trade policy only deepens the challenges of an already shaky economic picture.