- The US Dollar Index turns positive amid Fed’s cautiousness.
- Geopolitical concerns keep the gains capped.
- US-China trade talks pose a temporary optimism.
The US Dollar Index (DXY) hovers around the 100.00 area during the early European session on Thursday. The recent upside stems from the Fed’s cautious stance and wait-and-watch approach. Moreover, market participants are looking for coming up US-China trade negotiations.
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The Fed’s post-meeting statement on Wednesday admitted inflation and unemployment risk as Jerome Powell cautioned about tariffs disrupting global trade. According to CME FedWatch Tool, markets are pricing in 25 bps rate cut by July. Powell also indicated that the Fed’s future path would be driven by the economic data, and ongoing trade tension may force the central bank to stay cautious.
Geopolitical concerns are also weighing on the dollar. The tension between Russia and Ukraine and the Middle East crisis have soured the risk sentiment, pushing investors to seek safe-haven assets like gold, yen, and Swiss franc. However, the dollar managed to post modest gains for the second consecutive session.
Market participants eye US-China trade talks set on May 10 in Switzerland. The US Treasury Secretary will meet China’s top officials in the first formal dialogue related to the tariffs. Though the announcement boosted the sentiment, the expectations have been tempered, calling the meeting a preliminary step.
However, President Trump came with a bold teaser on social media, promising a major trade deal announcement on Thursday. Analysts remain skeptical of the long-term impacts of tariffs even if there’s a relief in the short run.
US Dollar Index (DXY) Technical Analysis: Bulls break 30-SMA
The 4-hour chart of the US dollar shows a surge above the 30-period SMA which is a bullish sign for the index. The price bounced off the trendline support and is looking to test the 1004.0 area, which is the previous peak. If the level is broken, the index may eye the 101.00 area.
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On the flip side, the DXY staying below 100.00 can urge sellers to pounce at 99.50. Further sell-off can lead to testing the psychological mark at 99.00.
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