- US Dollar Index Stages Minor Recovery but Fails to Breach 100.23 Resistance Level.
- President Trump Unveils UK Trade Accord, but Tariffs Persist.
- Market Participants Continue to Analyze Wednesday’s Federal Reserve Decision.
The US Dollar Index (DXY), a benchmark gauging the US 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 sustained expectations of widening yield differentials. Initial market optimism surrounding the announcement of a US-UK trade agreement was tempered as details emerged confirming the continuation of existing tariff structures.
Daily Market Summary: US Dollar Stabilizes Following Subdued UK Trade Announcement
- US President Donald Trump announced what he termed a “major” trade agreement with the United Kingdom; however, the retention of key tariffs at 10% dampened the initial positive market reaction.
- Investor sentiment remains cautious regarding progress on US-China trade relations, as President Trump has not indicated any intention to reduce the existing 145% duties, and China has reportedly postponed further negotiation rounds.
- Market observers are awaiting preliminary US-China trade discussions scheduled for this weekend in Switzerland, although both participating parties have lowered expectations for any immediate or substantial breakthroughs.
- The July 9 deadline for the Trump administration’s review of existing tariffs is approaching, with a limited number of new trade agreements finalized to date. This raises concerns about potential further trade escalations.
- US jobless claims registered a decrease, falling to 228,000, surpassing market forecasts and signaling continued robustness in the labor market. This positive data point provided some support for the US Dollar.
- The Bank of England (BoE) opted to reduce its policy rate by 25 basis points, bringing it to 4.25%. This monetary policy divergence, widening the interest rate gap between the UK and the US, has contributed to increased demand for the USD.
- US Treasury yields maintain their upward trajectory, with the 10-year note currently yielding 4.345%. This comes ahead of a $39 billion Treasury auction and anticipated communications from the Federal Open Market Committee (FOMC) next week, where analysts expect further insights into the Fed’s monetary policy outlook.
- Risk appetite improved across global markets, evidenced by a rally in equities. The Dow Jones Industrial Average climbed by over 1.6% as investors grew more optimistic about potential clarity in trade negotiations.
- Gold prices surged to $3,400 per ounce as investors sought safe-haven assets amidst persistent trade uncertainties and limited upside potential for the US Dollar, despite the divergence in central bank policies.
- President Trump suggested that further trade-related 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 Chair Jerome Powell will be closely scrutinized by market participants. The central bank is widely expected to maintain current interest rates, given ongoing concerns about inflationary pressures.
- Financial markets continue to factor in the likelihood of two Federal Reserve rate cuts before the end of the year, with the first reduction anticipated in July, contingent upon the absence of significant upward surprises in inflation data.
- Asian currencies are exhibiting resilience, as countries such as Singapore and Malaysia are allowing for stronger exchange rates to mitigate trade tensions with the United States.
US Dollar Index Technical Analysis: Bullish Momentum Remains Uncertain
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 constrained within a narrow trading range of 99.61 to 100.21. The Relative Strength Index (RSI), currently at 45, and the Average Directional Index (ADX), at 48, both indicate a neutral momentum profile for the index.
The Moving Average Convergence Divergence (MACD) indicator, however, is generating a buy signal, suggesting potential upward momentum. The Ultimate Oscillator is also trending in neutral territory, currently registering at 61.24. Conflicting signals from various moving averages underscore the prevailing market indecision. The 20-day Simple Moving Average (SMA), positioned at 99.64, is providing support to buyers, while the 100-day SMA (105.17) and the 200-day SMA (104.33) continue to reflect broader bearish pressures on the 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. A break above the 100.23 resistance would be needed to confirm a bullish reversal.
