The U.S. dollar edged lower on Wednesday as uncertainty surrounding President Donald Trump’s tariff policies kept financial markets in a holding pattern. Trump stated late Tuesday that his administration is considering a 10% tariff on Chinese imports beginning Feb. 1, alongside the previously announced 25% levies on Mexico and Canada. However, the lack of concrete details has left traders cautious.
The U.S. dollar index (USDX) dropped 0.51% to 107.879, reflecting a subdued trading session. Despite Trump’s tariff threats, the greenback struggled to regain traction.
Picture: USDX faces downward pressure, finding support near 107.680 while resistance at 108.100 limits recovery efforts, as seen on the VT Markets app.
Looking at the chart, we can see that the index closed at 107.879, reflecting a 0.51% decline from the opening price of 108.436, with a session high of 107.946 and a low of 107.754, indicating downward pressure throughout the session.
The moving averages (MA 5,10,30) suggest a bearish trend, with the short-term MAs below the 30-period MA, reflecting ongoing selling momentum.
The MACD (12,26,9) shows bearish momentum, but the histogram is turning positive, hinting at a possible recovery. Key resistance is at 108.100, while support is holding at 107.680, making these levels crucial for the next market direction.
The market reaction suggests growing expectations of a more cautious trade approach, which could alleviate inflationary pressures and reduce the likelihood of aggressive Federal Reserve action. Traders are currently pricing in a quarter-point Fed rate cut by July, with an additional reduction by year-end seen as a possibility.
Meanwhile, the Bank of Japan is expected to raise rates by 0.25% on Friday, supporting the yen, which strengthened slightly to 155.40 per dollar (USDJPY).
Across the globe, the euro (EURUSD) slipped 0.07% to $1.0420, while the Chinese yuan (USDCNH) remained steady at 7.2735 per dollar, after reaching a one-month high of 7.2530 on Tuesday.
The dollar’s near-term outlook remains uncertain, with traders closely monitoring Trump’s tariff announcements and the upcoming Bank of Japan rate decision. Any further delay or dilution of tariff measures could lead to continued dollar softness, while concrete policy actions may reignite demand for the greenback.
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