The U.S. dollar index (USDX) fell 0.78% to 108.321, retreating as President Donald Trump’s inaugural speech failed to provide clarity on immediate trade tariffs. Market participants had anticipated stronger policy signals, but the absence of concrete trade measures pressured the greenback lower.
According to a note from Schroders, the dollar may experience further fluctuations as market participants await clearer policy direction from the new administration. “The U.S. dollar could see some swings before policy on trade is confirmed,” the asset manager stated, reflecting the cautious sentiment in the market.
Picture: USDX struggles below resistance at 108.500, facing weak recovery attempts amid bearish sentiment, as seen on the VT Markets app.
Looking at the 15-minute chart, we can see that the index closed at 108.321 after opening at 109.176, reflecting a 0.78% decline. The short-term 5-period MA (purple) and 10-period MA (yellow) are below the 30-period MA (gold), indicating bearish sentiment. The price tested a session low of 107.971 before making a modest recovery.
Observing the support and resistance levels, we can see immediate resistance at 108.500, where the price has faced multiple rejections. A break above this level could push the price towards 109.000. On the downside, support is evident at 108.100, with further support at 107.800 if bearish pressure increases.
The recent weakness in the dollar follows a period of strength at the end of 2024, which was driven by expectations of higher U.S. interest rates compared to other major economies. Trades had believed the Federal Reserve would maintain a more aggressive tightening cycle, supporting the greenback.
Additionally, stronger U.S. economic growth relative to other regions fuelled demand for the currency, as traders viewed the dollar as a safe-haven asset amid global uncertainty. However, the lack of immediate trade policy clarity has led to a reassessment of these bullish expectations, introducing fresh uncertainty and downside pressure on the USDX.
Traders remain on their toes, with attention shifting to upcoming economic data and Federal Reserve policy signals. Until greater clarity on trade emerges, the USDX may continue facing pressure and fluctuating within key levels.
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