- After a sharp decline during Monday’s session, the US Dollar Index (DXY) will trade near the 98.50 area.
- After Trump criticizes Powell, concerns rise, causing fear of Fedo’s independence and further damage.
- Technical indicators show sustained bearish momentum with resistance seen around 98.65 and 100.38.
The US Dollar Index (DXY) will take a deep red trading on Monday, sliding towards the 98.50 region, marking its new three-year low. The sudden drop follows market concerns over the institutional integrity of the Federal Reserve once again publicly criticised President Jerome Powell and confirmed he was exploring ways to eliminate him. Trump accused Powell of manipulating interest rates for political purposes in 2024, describing him as “too late” when responding to the economic situation.
Amidst growing global uncertainty and worsening confidence in US financial leadership, gold has surged to a new all-time high of nearly $3,425 per ounce, benefiting from safe demand and collapsed greenback. The broader sentiment remains risk aversion in traders who reassess the long-term reserves of the dollar amid unpredictable trade and fiscal policy.
Daily Digest Market Mover: The Threat to Farm the Rattle Market
- The explosive rallies of over $3,400 gold highlight a rush to safe, home-based assets as the fear of political interference escalates in the United States.
- President Trump’s repeated attacks on Fed Chairman Powell have rattled investors’ trust, along with reports that his administration is considering legal measures to eliminate him.
- The decline in DXY to the 98.00 zone reflects market unrest with potentially politicized central banks. Comments from White House advisers Kevin Hassett and Trump’s Truth Social Post only deepened the recognition of an adversarial attitude towards financial independence.
- Scotiabank analysts warn that damaging the Fed could undermine the reliability of fighting inflation, raising expectations for inflation and putting even more pressure on USD.
Technical Analysis
The technical background of DXY remains very bearish. The pair traded around 98.50 cases near the bottom of the daily range (97.92–99.21) and exhibits a strong negative bias. The relative strength index (RSI) has fallen to 24.22, entering deep, oversold territory, and the Moving Average Convergence Branch (MACD) continues to print sales signals.
Bearish emotion is a 20-day simple moving average (SMA) at 102.26, 100 days at 106.04, 200 days at 104.63 – all trending low. A 10-day EMA at 100.38 and a 100.69 SMA further strengthens resistance beyond current levels.
The main resistance level is observed at 98.65, followed by 100.38 and 100.69. Some short-term oscillators like the ultimate oscillator (37.76) and the great oscillator (-3.54) have some short-term structures that appear neutral, and some of them remain clearly negative.
Unless political clarity is restored or emotional changes are at risk, DXY appears to be poised for even more downsides.
US Dollar FAQ
The US dollar (USD) is the official currency of the United States and is “effectively” currency in a considerable number of other countries in circulation along with local notes. According to data from 2022, it is the most frequently traded currency in the world, accounting for more than 88% of global forex sales, or an average of $6.6 trillion per day. After World War II, the US dollar took over the global reserve currency from the British pound. For much of its history, the US dollar was supported by gold, but in 1971 there was the Bretton Woods Agreement, which lost its gold standard.
The single most important factor affecting the value of the US dollar is monetary policy shaped by the Federal Reserve. The Fed has two tasks: achieving price stability (control inflation) and promoting full employment. The main tool to achieve these two goals is adjusting interest rates. When prices rise rapidly and inflation exceeds the Fed’s 2% target, the Fed will raise interest rates and help the USD value. If inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which is heavier on the greenback.
In extreme circumstances, the Federal Reserve could also print more dollars and enact quantitative easing (QE). QE is a process that dramatically increases the credit flow in the financial system where the Fed has been stuck. This is a non-standard policy measure used when credits run out (due to the fear of counterparty defaults) as banks are not lending to each other. If you’re not likely to achieve the desired outcome simply by lowering your interest rates, this is a last resort. Fed combating the credit crunch that occurred during the 2008 financial crisis was a weapon of choice for the Fed. It involves printing Fed prints in more dollars and using them to buy US government bonds primarily from financial institutions. QE usually weakens the US dollar.
Quantitative tightening (QT) is the reverse process in which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest principal from mature bonds with new purchases. Usually, it’s positive for US dollars.
