- US Dollar Index stages a slight recovery but struggles to overcome resistance at 100.23.
- President Trump unveils a UK trade agreement, but existing tariffs remain a sticking point.
- Market participants continue to analyze the implications of Wednesday’s Federal Reserve policy announcement.
The US Dollar Index (DXY), a benchmark measuring the dollar’s strength against a basket of major currencies, is trading near the 100.00 level on Thursday. This modest upward movement is supported by encouraging US economic data and persistent expectations of widening yield differentials between the United States and other major economies. Initial market optimism surrounding the announcement of a US-UK trade deal was tempered as details emerged confirming that existing tariffs would remain in effect, limiting the scope of the agreement’s immediate impact.
Daily Market Summary: US Dollar Stabilizes After Subdued Reaction to UK Trade Deal
- US President Donald Trump announced what he described as a “major” trade agreement with the United Kingdom; however, the retention of key tariffs at 10% has dampened overall market enthusiasm.
- Investors remain cautious regarding the potential for progress on US-China trade relations, as President Trump has not signaled any intention to reduce the existing 145% duties, and China has reportedly delayed further negotiations.
- Markets are anticipating preliminary US-China trade discussions scheduled to take place in Switzerland this weekend, although both sides have downplayed expectations for any swift or significant breakthroughs.
- The July 9 deadline for the Trump administration’s tariff review is fast approaching, with a limited number of new trade agreements having been finalized to date.
- US jobless claims registered a decrease to 228,000, surpassing market forecasts and providing further evidence of a robust labor market.
- The Bank of England’s decision to reduce its policy rate by 25 basis points to 4.25% has widened the interest rate differential between the UK and the US, thereby bolstering demand for the US Dollar.
- US Treasury yields are maintaining support, with the 10-year note currently yielding 4.345%, ahead of a planned $39 billion auction and upcoming communications from the Federal Open Market Committee (FOMC) expected next week.
- Risk appetite has improved following a rally in equity markets, with the Dow Jones Industrial Average rising by over 1.6% amid growing hopes for increased clarity on trade-related issues.
- Gold prices have surged to $3,400 per ounce as investors seek safe-haven assets in response to persistent trade tensions and limited upside potential for the US Dollar, despite divergence in central bank policies.
- President Trump has suggested that further trade announcements could be forthcoming in the “weeks” ahead, but he did not provide a specific timeline for the formal signing of any agreements.
- The upcoming speech by Federal Reserve Chairman Jerome Powell will be closely scrutinized by market participants, with the central bank widely expected to maintain current interest rate levels while closely monitoring inflation trends.
- Market forecasts continue to incorporate the expectation of two Federal Reserve rate cuts before the end of the year, with the first reduction projected to occur in July, unless there are significant upward surprises in inflation data.
- Asian currencies are exhibiting resilience, as countries such as Singapore and Malaysia are tolerating stronger exchange rates in an effort to mitigate trade frictions with the United States.
US Dollar Index Technical Analysis: Bullish Momentum Remains Elusive
The US Dollar Index (DXY) is currently trading around the 100.00 mark, reflecting a modest daily gain of approximately 0.25%. Price action remains confined within a relatively narrow range of 99.61 to 100.21. The Relative Strength Index (RSI) reading of 45 and the Average Directional Index (ADX) at 48 both indicate neutral momentum in the current market environment.
The Moving Average Convergence Divergence (MACD) indicator, however, is signaling a potential buying opportunity, while the Ultimate Oscillator is also trending neutral at a level of 61.24. Conflicting signals from various moving averages highlight the current state of market indecision. The 20-day Simple Moving Average (SMA) at 99.64 is providing support to buyers, but the 100-day SMA (105.17) and the 200-day SMA (104.33) continue to reflect broader bearish pressure on the US Dollar Index. Key resistance levels are identified at 100.23, 100.86, and 100.91, while support levels are situated at 99.83, 99.81, and 99.67. These levels will be critical to watch in determining the near-term direction of the US Dollar.
