Key Points:
- USDX fell 0.82%, closing at 105.551, marking its lowest level in nearly a week.
- Tariff tensions failed to drive dollar demand, as traders weighed economic risks from new US trade policies.
The US Dollar Index (USDX) extended its slide on Wednesday, dropping 0.82% to 105.551, as investors reassessed the impact of US tariffs on China, Mexico, and Canada. The dollar weakened despite ongoing trade war threats, with broad-based selling pressure seen across major currencies.
The greenback dropped from an intraday high of 106.424 to a low of 105.454, marking its steepest decline since late February. This contrasts with initial expectations that US tariff escalation would trigger safe-haven demand for the dollar.
Tariff Uncertainty Weighs on the Dollar
US President Donald Trump reaffirmed his plans for reciprocal tariffs in a speech to Congress, vowing a further escalation by April 2 if trade partners do not comply with new US policies. However, the market reaction was mixed.
Traders moved away from the dollar as concerns about slower US growth and inflation risks took precedence. China’s immediate retaliation and Canada’s planned countermeasures added uncertainty, raising the risk of weaker global trade flows.
Instead of strengthening, USDX saw broad selling pressure, pushing it near 105.45 support. This suggests that traders are pricing in economic risks rather than seeking the dollar as a safe-haven asset.
Beyond tariff concerns, the dollar was also pressured by soft economic data. US factory gate prices surged to a three-year high, increasing inflation worries. Supply chain disruptions from tariffs could further pressure production costs, limiting Fed flexibility.
The weaker dollar reflects growing expectations for Fed rate cuts, with traders now pricing in a 60% chance of easing by July.
More Downside for USDX?
The US Dollar Index (USDX) extended its decline, falling below 106.00, confirming a bearish trend. With 105.45 now acting as key support, traders are closely watching whether the dollar can stabilize or if further downside is ahead. A break below 105.45 could open the door for a deeper drop toward 105.00, reinforcing the current downtrend.
Picture: USDX shows a marked downtrend, with moving averages suggesting bearish momentum, as seen on the VT Markets app
Technical indicators support this bearish outlook, as the MACD signals strong downside momentum, suggesting that sellers remain in control. Unless a shift in sentiment emerges, the dollar may continue facing pressure, with traders awaiting upcoming economic data for potential market catalysts.
For now, the US dollar is struggling to find support as investors weigh the impact of trade policies and shifting Fed expectations. If tariff tensions fail to boost safe-haven flows, USDX may continue its downward trajectory in the coming sessions.
