USD started the week in a hole! This increase follows a period in which new bilateral agreements between the United States and the European Union have dampened global trade tensions. The US Dollar Index (DXY) is around 98.25 today. It continues to hold firm above the 21-day Exponential Moving Average (EMA) of 97.63 and important support area of 97.80 – 98.00. This positive trend is indicative of increased confidence in the market and a return of bullish sentiment for the currency.
The DXY pushes higher for a third consecutive day. Yet during American trading hours, it has spiked almost 0.50%, hitting highs not seen in almost a week. The index’s dramatic increase in recent months is directly associated with the adoption of a landmark trade agreement. This deal was reached moments after US President Donald Trump’s handshake agreement with European Commission President Ursula von der Leyen at Trump’s Turnberry golf course in Scotland on Sunday.
The deal eliminates the tariffs on EU imports that were most at risk of being raised. Now, there’s only a 15% column on things such as cars, semiconductors, and pharmaceuticals. This new rate is much lower than the 30% tariff originally proposed. It gives European buyers relief that they so badly need from high US import exposure to tariffs.
So, market optimism is through the roof! The DXY has confirmed a successful retest of the upper boundary of a falling wedge pattern, a bullish structure it broke out of earlier this month. Analysts suggest that a successful break above this dynamic level could facilitate a retest of the psychological 99.00 mark, further enhancing the dollar’s standing in global markets.
The Relative Strength Index (RSI) on the daily chart is up to 53. This surge signals the return of bullish US Dollar momentum. Eco-fin traders are watching these moves closely as they gauge possible future advances in both US and EU economic policy.
“The biggest deal ever made.” – US President Donald Trump
The EU has officially adopted a new policy framework. They are committing $600 billion to buy or invest in strategic sectors such as clean energy, defense equipment and manufacturing here in the United States. As we reported earlier this year, officials have suggested that future negotiations could consider some sort of quota-based system. For the time being, steel and aluminum tariffs would continue at the current 50% level.
Such is the market sentiment that has been shored up by this trade agreement. Along the way, it has calmed anxiety over a potential transatlantic trade war, which had rocked investor sentiment. With high-level US-China trade talks set to resume this week in Stockholm, officials are aiming to extend the current tariff truce ahead of an impending August 12 deadline.
US Commerce Secretary Howard Lutnick has emphasized the urgency of these negotiations:
“The rules are clear — tariffs kick in August 1 unless there’s a deal. Period.”
The market appears to be holding its breath on these moves. So too are analysts, because they might portend significant changes to global trade realities. The United States – European Union bilateral agreement has enormous stakes for the future of US-EU relations. Second, it rattles international markets, demonstrating just how intertwined the current global economic climate is.