- The US Dollar in the red for a second consecutive day, after softer-than-expected US inflation data.
- The Korean Won gains over the Greenback after the announcement that both countries have discussed Forex markets.
- The US Dollar Index hits support ahead of 100-level and bounces for now.
The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, has dipped in the direction of the 100-marker, near 100.60 on Wednesday. The downside move comes after softer-than-expected inflation in the US and the confirmation that the United States (US) and South Korea have been in talks about currencies, according to Bloomberg. The Greenback is on the backfoot against most major Asian currencies.
The news opened up not-so-old wounds from earlier this month, when the Taiwan Dollar (TWD) appreciated sharply against the US Dollar. In addition, the soft Consumer Price Index (CPI) reading for April released on Tuesday has revamped rate cut bets for the Federal Reserve (Fed) this year, seeing the probability for a rate cut grow bigger compared to last week. This narrows the rate differential between the US and other countries and devalues the Greenback a touch.
Daily digest market movers: Shot across the bow
- US President Donald Trump said that he has good hopes for a breakthrough between Russia and Ukraine on Thursday’s meeting.
- Only two Fed speakers for this Wednesday:
-
- Vice Chair Philip Jefferson commented that the Fed’s policy is well positioned to respond in a timely way on a surprise drop or surge in inflation. Though, the Fed’s Vice Chair went on to say that there is a high uncertainty that inflationary pressures would be temporary.
- Near 21:40 GMT, Federal Reserve Bank of San Francisco President Mary Daly participates in a fireside chat at the California Bankers Association’s 2025 Annual Conference & Directors Forum.
- Equities are trying to brush off the negative tone while US equities see a lift on the back of the several deals US President Trump brings back from his trip to the Middle East.
- The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in June’s meeting at just 8.2%. Further ahead, the July 30 decision sees odds for rates being lower than current levels at 38.6%.
- The US 10-year yields trade around 4.48%, steady as traders mull Tuesday’s inflation numbers and rate cut bets for 2025.
US Dollar Index Technical Analysis: Asian consensus to the Dollar?
A headline on possible currency adjustments appears to be enough to set off some devaluation for the Greenback. The fact that South Korea and the US have been in talks is enough to scaremonger markets in anticipation of the actual event happening. Should more headlines be revealed on the matter, or the actual intervention from the Bank of Korea (BoK) take place, expect to see possibly a revisit of the DXY to the multi-year low at 94.56.
On the upside, 101.90 is the first big resistance again as it already acted as a pivotal level throughout December 2023 and as a base for the inverted head-and-shoulders (H&S) formation during the summer of 2024. In case Dollar bulls push the DXY even higher, the 55-day Simple Moving Average (SMA) at 102.29 comes into play.
On the other hand, the previous resistance at 100.22 is acting as firm support, followed by 97.73, near the low of 2025. Further below, a relatively thin technical support comes in at 96.94 before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.
US Dollar Index: Daily Chart
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
