Key Points:
- Dollar index (USDX) trades around 104.3, its highest level in three weeks.
- U.S. services activity rebounds in March, but future business outlook dips.
The U.S. dollar index (USDX) steadied around 104.3 on Tuesday, marking its highest level in three weeks, as stronger-than-expected U.S. services data buoyed the currency. The index peaked at 104.106 before pulling back slightly to 103.976, reflecting renewed confidence in short-term U.S. resilience but also growing caution around future risks.
Monday’s data showed a rebound in U.S. business activity, with service-sector strength offsetting a further contraction in manufacturing output. The improvement helped lift the dollar across the board, particularly against the yen, where the greenback saw its strongest relative gain.
However, expectations for business activity over the next year dropped sharply, now sitting at their second-lowest level since October 2022. According to survey respondents, sentiment was clouded by sluggish demand, uncertainty around trade policy, and the broader impact of a new wave of tariffs expected under the current U.S. administration.
While recent comments from President Donald Trump helped calm some fears—suggesting a more targeted approach to tariffs rather than blanket levies—his renewed pledge to impose tariffs on autos, pharmaceuticals, and more has left markets uneasy. Traders are still pricing in the possibility of sector-specific disruptions, which may influence investment flows and currency positioning in the weeks ahead.
Technical Analysis
The USDX (US Dollar Index) chart shows a breakout attempt above the 104.00 level, briefly hitting a high of 104.106 before consolidating. This comes after a recovery from a recent low of 103.374, where the index found strong support. The price has since been trending upward within a tight range, with the moving averages (5,10,30) converging and flattening—signaling market indecision near resistance.
Picture: USDX stalls near 104.10 resistance as bullish momentum begins to cool, as seen on the VT Markets app
The MACD indicator reflects a loss of bullish momentum, as the histogram fades and the MACD line appears to converge toward the signal line. Unless bulls reclaim strong momentum and push past the 104.10 zone decisively, the index may enter sideways consolidation or see a pullback toward support at 103.80 or 103.61.
Consolidation Ahead of Trade Clarity
As the dollar index consolidates just below resistance, traders may hesitate to push the dollar further without clear updates on tariff implementation timelines or further economic data surprises. The rally could extend if upcoming trade policy proves more measured than feared, but any escalation—particularly on auto imports or medical goods—could dampen sentiment and trigger safe-haven moves.
In the short term, the dollar is likely to trade within the 103.60–104.20 range, with momentum mildly tilted to the upside, pending clarity on U.S. trade policy and broader global risk appetite.
