- The US dollar has risen by over 1% against most major currencies following recent trading news with China.
- After two days of discussions in Switzerland, both nations have agreed to suspend tariffs for 90 days.
- The US dollar index now stands at 101.65, benefiting from reduced tensions between the US and China.
The USD Index (DXY), which measures the performance of the US dollar against six key currencies, experienced an increase of more than 1% on Monday, both in China and the US. Following a weekend of negotiations, US Treasury Secretary Scott Bescent announced an agreement to pause the trade conflict for three months. China is set to lower tariffs on US goods from 125% down to 10%, while the US will reduce tariffs on Chinese imports from 145% to 30% for the next 90 days. This development has propelled the US dollar to its highest value in a month.
In the backdrop of this agreement, various correlations have surfaced again, pushing the US Treasury benchmark up to 4.45%, levels not seen since 2010. It suggests that the interest rate differential between the US and nations with lower yields is becoming increasingly significant. This correlation might influence how the Federal Reserve’s rate cuts in 2025 are perceived.
Daily Digest Market Mover: Roll with the Punch
- At a press conference in Switzerland, Treasury Secretary Scott Bescent announced that the breakthrough in US-China relations has led to a 90-day pause in tariffs. Bescent emphasized that both countries are looking to ease tensions, with potential for China to engage in purchasing agreements.
- Federal Reserve Bank Governor Adriana Kugler is scheduled to speak about the economic outlook at an event hosted by the National Economics Association and the Central Bank of Ireland in Dublin, at 14:25 GMT.
- The deadline for the first quarter Loans Survey (SLOOS) is set for around 6pm GMT. This report typically offers insights into lending conditions in the US for households and small businesses.
- In the stock market, US futures are outpacing other indices, with European stocks up around 1.5% and US futures rising by 3% to 4%.
- The CME FedWatch tool shows a 7.9% likelihood of a rate cut by the Federal Reserve at its June meeting. Given the upcoming decision on July 30, the chances for a rate cut appear lower than the current 44.1% prediction.
- The US decade yield has risen to approximately 4.45%, reaching levels not recorded since early April, which may lessen rate cut expectations for 2025.
US Dollar Index Technical Analysis: Don’t Get in the Way
Bulls are reasserting themselves in the US Dollar Index (DXY), pushing it towards a critical level of 101.90. This could allow for a bounce above 1% and a return to moving averages, depending on whether the US session prompts another wave of dollar purchases.
On the flip side, the first resistance level for DXY is 101.90, a key position observed throughout December 2023 and during an inverted head and shoulder formation in summer 2024. If Dollar bulls prevail, DXY could climb even higher, eyeing the 55-day Simple Moving Average, which sits at 102.37.
At the same time, yesterday’s resistance at 100.22 has transformed into a reliable support level; however, a bearish trend may test support at 97.73. Further down, before reaching a lower range, weak technical support might appear at 96.94. Below that, levels of 95.25 and 94.56 could indicate fresh lows not seen since 2022.
