The U.S. Dollar Index (USDX) continues to hover near the 109.00 level, reflecting cautious optimism among traders as Donald Trump returns to the White House.
The index hit an intraday high of 109.294, signalling renewed demand for the greenback as traders anticipate policy measures such as tax cuts, tariffs, and deregulation, all considered bullish for the dollar.
The USDX initially saw some consolidation earlier in the week, dipping to 108.649, but has since rebounded, suggesting a wait-and-see approach from traders ahead of Trump’s formal policy directives.
While Trump’s economic plans support the dollar, the Federal Reserve remains the key force in shaping monetary policy. Fed Chair Jerome Powell has maintained a cautious stance, emphasising inflation control even in the face of fiscal expansion.
Should Trump’s policies introduce inflationary pressures through tariff-driven price hikes, the Fed may be forced to maintain higher interest rates for longer. This interplay between fiscal and monetary policy will be crucial in determining the dollar’s strength going forward.
The chart reflects a steady recovery from recent lows, with price action stabilising around the 108.90 – 109.00 range, a critical support zone.
Picture: USDX tests 109.00 with bullish momentum building, as seen on the VT Markets app.
The MACD indicator shows bullish momentum building, hinting at a potential upside if resistance at 109.30 is breached.
As markets absorb the potential impact of Trump’s policies, the dollar’s trajectory hinges on several factors: the timing and scale of proposed tax reforms and tariffs, Federal Reserve guidance on rate cuts amid inflation concerns, and geopolitical events shaping global risk sentiment. These elements will play a crucial role in determining the greenback’s next moves.
While optimism around Trump’s pro-business stance supports USDX in the near term, traders should remain vigilant for potential volatility as policy details unfold.
USDX remains well-supported around the 109.00 level, with traders eyeing further gains amid fiscal policy optimism and Fed caution. The next key test will be whether bullish momentum can sustain above resistance levels in the coming sessions.
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