- The American dollar index extends the fall to around 98.15 in the early European session on Tuesday, lowering 0.17% in the day.
- The negative perspective of the index remains at stake, but no greater consolidation can be ruled out in the midst of the RSI overall condition.
- The first level of support to watch is 97.30; The key resistance level is observed in the round brand of 100.00.
The US dollar index (DXY), an index of the value of the US dollar (USD) measured against a basket of six world coins, extends its fall to about 98.15, the lowest level since March 2022. The USD weakens on all fronts as fears on the independence of the Federal Reserve (Fed) intensify.
Trump criticized the president of the FED, Powell, for continuing to support a way of “waiting and seeing” in monetary policy until there is greater clarity about how the new tariff policy will shape the economic perspectives. Trump warned that the US economy would slower unless Powell decided to cut interest rates immediately. In addition, the uncertainty about Trump’s commercial policies and its wide tariffs has already shaken global markets, undermining the US dollar against its rivals in the short term.
Technically, DXY’s bearish feeling remains intact since the index remains below the exponential mobile (EMA) average of 100 days in the daily chart. The downward impulse is supported by the 14 -day relative force (RSI) index, which is below the midline. However, the RSI overall condition indicates that greater consolidation or temporary recovery cannot be ruled out before positioning for any depreciation of the DXY in the short term.
The lower limit of the Bollinger band at 97.30 acts as an initial support level for the DXY. A rupture of this level could drag the index below 96.55, the minimum of February 25, 2022. Extended losses could see a fall to 95.14, the minimum of February 3, 2022.
On the other hand, the psychological level of 100.00 seems to be a hard obstacle to USD bulls. Any purchase of continuation above the mentioned level could pave the road to 101.54, the minimum of April 4. The rise key barrier for the DXY is observed in 104.45, the 100 -day EMA.
DAILY GRAPH OF THE US DOLLAR INDEX (DXY)
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
