Key Points:
- Dollar index retreats to 103.99 after peaking at 104.29.
- Trump’s 25% auto tariff announcement sparks trade concerns and hits sentiment.
The U.S. dollar index (USDX) fell to 103.99 on Thursday, pulling back from a session high of 104.29, as traders digested a wave of negative sentiment following fresh trade policy announcements and softer-than-expected U.S. data. The index closed lower despite earlier gains, reflecting rising caution across FX markets.
Late Wednesday, President Trump confirmed a 25% tariff on all imported cars and light trucks, effective April 2, alongside reciprocal tariffs on nations that tax U.S. goods. The announcement escalated trade war concerns, with Trump pledging to maintain the measures throughout a potential second presidential term.
Markets reacted with unease, as the proposed tariffs are expected to slow economic growth, particularly in consumer and manufacturing sectors. The renewed inflation risks, coupled with weaker consumer sentiment, have added fresh uncertainty.
Confidence and Investment Indicators Weaken
Further adding to the dollar’s pullback, U.S. consumer confidence dropped to its lowest level in over four years, pointing to growing household unease about inflation and economic stability.
Moreover, new orders for non-defense capital goods excluding aircraft—a key indicator of business investment—declined unexpectedly after three straight months of growth. The reading raises concerns about the resilience of corporate spending amid rising input costs and uncertain trade conditions.
Technical Analysis
The USDX (US Dollar Index) chart on the 15-minute timeframe shows a steady uptrend that peaked around the 104.296 level before pulling back slightly. After a minor dip to the 103.579 support, price gradually climbed higher, supported by rising moving averages (MA 5,10,30), which indicate bullish momentum.
Picture: USDX retreats from 104.296 after strong rally, with MACD signaling a potential pullback, as seen on the VT Markets app
However, recent price action shows some consolidation near the upper resistance band, followed by a slight downturn. The MACD histogram has started to print red bars, with the MACD line crossing below the signal line — an early signal that bullish momentum is weakening. If price slips below 103.994, the next key support lies near 103.614.
Eyes on Friday’s PCE Report
With risk sentiment softening and macro headwinds growing, traders now turn to Friday’s release of the PCE price index, the Federal Reserve’s preferred inflation gauge, for confirmation on the direction of interest rates.
In the near term, the dollar may trade within a 103.60–104.30 range, with downward pressure likely to build if the PCE report confirms cooling inflation. Conversely, an upside surprise in core inflation could see the greenback rebound back toward 104.50.
Until then, tariff anxiety and weak domestic data are likely to cap upside momentum, keeping traders cautious and FX flows defensive.
