- The US dollar has been stable above 97.50 after experiencing a slight dip during Asian trading hours.
- Initial US unemployment claims decreased to 227,000, while ongoing claims rose to the highest since 2021.
- Minutes from the June FOMC meeting indicate most officials support potential interest rate cuts later this year.
- The momentum index shows that the RSI is still below 50, indicating some improvement in MACD but a weak recovery overall.
The US Dollar (USD) has managed to hold its ground on Thursday, despite a weak start to the day, as investors process a recent tariff threat issued by President Trump.
The US Dollar Index (DXY), which gauges the dollar’s value against a group of six major currencies, eased slightly from its peak of 97.92 during US trading hours following stronger-than-expected labor data. At the moment, the index is around 97.65 after facing resistance near the 97.80-98.00 range.
The dollar’s value dipped during Asian session trading, pulling back some profits made earlier in the week. This decline was further pressured by a notable drop in Treasury yields, driven by robust demand seen in Wednesday’s 10-year memo auction, alongside insights from the FOMC’s June meeting suggesting potential interest rate reductions later in the year.
On Wednesday, President Trump intensified his trade agenda by sending out another tariff proposal on his social media platform. This latest letter, targeting seven countries including the Philippines, Brunei, and Algeria, proposed import duties between 20% to 30%. This action has raised fears among investors about a broader global trade conflict, which in turn seems to bolster the dollar.
In addition to that, Trump directed harsh comments towards Brazil, proposing a 50% tariff on its exports and describing the trial of former president Jair Bolsonaro—a Trump ally—as “an international stigma.” His communication to Brazilian President Lula da Silva urged for a swift conclusion to the trial. Analysts observe that while this move may have political motivations, it reflects Trump’s staunch stance on trade.
- In the first week of July, initial unemployment claims in the US dropped by 5,000 to 227,000, outperforming expectations of 235,000. This marks a continuing decline over four weeks and the lowest count in seven weeks. It suggests the US labor market remains robust despite rising interest rates. However, ongoing claims have climbed to 19.65 million, reaching the highest level since 2021. This signals that while fewer people are filing initial claims, those already unemployed might be finding it challenging to return to work, which could slow down hiring momentum.
- President Trump has intensified his criticism of Federal Reserve Chairman Jerome Powell, claiming he’s acted “too late” in a couple of posts on social media. Trump pointed to what he sees as a significant rebound in the US economy, citing record highs in tech and industrial stocks, as well as a surge in crypto markets and strong revenue from tariffs. He believes the US is now “the top credit in the world” and insists that the Fed needs to lower rates quickly.
- The FOMC’s meeting minutes published on Wednesday revealed that a majority of participants believe rate cuts might be necessary later this year. They noted that inflation related to tariffs could be temporary, with inflation expectations remaining stable. However, some members, including likely Waller and Bowman, expressed openness to cutting the target policy rate in upcoming meetings, while others prefer to maintain steady rates for now, which highlights the Fed’s cautious, data-driven approach.
- During its June meeting, the FOMC unanimously decided to keep the federal funds target rate within a range of 4.25% to 4.50%. Following the release of the minutes, market expectations for rate cuts this month dwindled. Current allocations for July rate cuts sit at about 6.7%, a significant dip from the 20-25% just days prior. Attention has now shifted to September, where the likelihood of a 25 basis point cut is around 67.3%, reflecting mounting expectations for easing later this year.
- The Federal Reserve remains cautious and heavily relies on data, although political pressures loom increasingly large. On Wednesday, Trump advocated for an aggressive 3% rate cut, arguing it would markedly reduce refinancing costs for citizens. He emphasized that each percentage point amounts to about $360 billion annually, stating that rates are too high and there’s no inflation.
- The national debt in the US has ballooned to $36.6 trillion, rising almost $370 billion in just a day, per recent financial disclosures. This surge followed the approval of a significant bill that increased the debt ceiling by $5 trillion, paving the way for more government borrowing. Financial authorities are expected to issue a wave of short-term T-Bills to compensate for this widened deficit, potentially pressuring yields and complicating the Fed’s path towards rate cuts.
- President Trump has officially extended the deadline for his tariff campaign until August 1st, delaying the end of the initial 90-day grace period, which was scheduled to conclude on July 9th. Currently, 21 countries have received customs warnings regarding proposed import duties ranging from 20% to 50%. So far, only the UK, Vietnam, and China have reached interim agreements, while others remain at risk of immediate trade penalties. This extended timeline adds to global trade uncertainties and continues to affect market sentiment toward safe-haven flows and riskier assets.
- On Wednesday, Trump reaffirmed his plans to impose a 50% tariff on copper imports starting August 1st due to national security concerns. He stated that copper is crucial for various industries, including defense-related sectors. Trump claimed that high dependence on imported copper jeopardizes US defense preparations, further escalating his trade stance, which may disrupt global copper supplies and industrial chains.
Technical Analysis: DXY Trends in a Falling Wedge
The US Dollar Index (DXY) is currently around 97.65 after encountering resistance near the 97.80-98.00 levels. The index remains within a clearly defined falling wedge pattern, which often suggests the potential for a bullish reversal.
The 97.80-98.00 area, previously a support level, has now transformed into resistance and aligns closely with the wedge’s upper limit, with a 9-day EMA at 97.38 serving as a short-term dynamic support zone.
The momentum indicator displays a temporary recovery—though I’m not entirely convinced about this. The RSI hovers around 41.89, showing signs of a recovery from oversold conditions, but remains below the neutral 50 threshold. Meanwhile, MACD is starting to indicate a bullish crossover, with the histogram slightly positive.
A breakout above 98.00 could signal a trend reversal, whereas sustained trading below 97.50 might lead to a retest of the wedge’s lower boundary near 96.50.
