- The US dollar index (DXY) rises near the 99.65 area while operators react to contradictory commercial signals between the US and China.
- The hopes of tariff relief and feat cuts of the Fed raise the feeling even though China denies any current negotiation.
- Resistance is observed at 99.92 and 100.95 for the DXY, with technical indicators painting a mixed overview..
The US dollar (USD) is modestly strengthened on Friday while investors digest contradictory messages from the United States and China on possible tariff negotiations. While President Donald Trump suggests that the dialogue is ongoing, Beijing explicitly denied any current conversation. This divergence injected volatility into the markets, although the US dollar maintained an advantage, with the dollar index (DXY) by rising around 0.37% near the area of 99.65 at the time of writing.
Despite entering a session with few data before the meeting of the Federal Open Market Committee (FOMC) of May 7, market participants remain focused on possible catalysts. Reports arose that China could suspend some tariffs on US products such as medical teams, although Chinese officials dismissed any formal commitment on tariff discussions. At the same time, the president of the Fed of Cleveland, Beth Hammack, opened the door to a possible rate cut in June, depending on the data presented.
Daily summary of market movements: or not to speak?
- President Trump reiterated that the US is in communication with China on trade, while China denied any active tariff negotiation.
- Bloomberg reported that China could raise tariffs on certain American products, but Chinese officials avoided questions about exemptions.
- The Fed is in mode of silence before its next meeting; Operators observe the final feeling of April of the University of Michigan and inflation expectations.
- The markets are still divided by the optimism for a rate cut of Fed in summer and the absence of concrete advances in commercial negotiations.
- Meanwhile, a remarkable recovery in US tariff income has supported the tax position of the treasure, but remains insufficient to compensate for the widest costs associated with the extension of the Tax and Job Cuts Law (TJCA).
Technical analysis: DXY points to resistance about 99.92 in the middle of a decreasing momentum
The American dollar index is quoted in a firmer position about 99.65, but the technical perspectives remain fragile. Both the relative force index (RSI) in 37.10 and the convergence/divergence of mobile socks (MACD) suggest that the bullish momentum is fading. While the MACD continues to show a sales signal, the average directional index (ADX) in 54.53 indicates a strong but potentially fatigued trend.
Short and long term mobile socks reinforce a bearish posture. The 10 -day exponential (EMA) mobile average at 99.93 and the 30 -day EMA in 101.80 are above the current price levels. Simple mobile socks (SMA) of 20 days, 100 days and 200 days are in 101.30, 105.78 and 104.53, respectively, also point down.
The immediate support is marked at 99.55 and 99.49. On the positive side, the resistance looms at 99.93, with additional obstacles in 100.95 and 101.30. Unless the headlines provide a clearer direction – particularly on tariffs or actions of the Central Bank – the DXY could remain within a range near the current levels.
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.
