The US Dollar (USD) rose slightly as the deadline for reciprocal tariffs on 2 April approaches. The DXY index was reported at 104, with some countries expected to be excluded from these tariffs.
The Trump administration plans to impose tariffs only on nations that already have tariffs on US goods and where a trade surplus exists. Potentially exempt countries include Australia, Singapore, Hong Kong, and the UK, while China, the EU, South Korea, Japan, India, and Thailand may be impacted.
Market Sentiment And Tariff Impact
Tariffs might negatively affect market sentiment, with other currencies like KRW, JPY, CNH, MYR, and IDR likely to weaken. Ongoing concerns about emerging market contagion risks could further impact the market.
The USD is expected to maintain its strength temporarily as market momentum appears mildly bullish. Resistance levels stand at 104, 104.40, and 105, while support is noted at 103.10 and 102.50.
This modest uptick in the US Dollar comes as markets weigh the upcoming tariff measures and their potential outcomes. With the DXY index at 104, traders are watching how these trade policies might influence currency flows. Some nations may receive exemptions, while others face possible disruptions in trade. The exclusions suggest a targeted approach, sparing economies that hold trade agreements deemed compatible with US interests.
For derivative traders, clarity on tariffs is beneficial. If tariffs take effect, currencies like the South Korean won, Japanese yen, Chinese yuan, Malaysian ringgit, and Indonesian rupiah could see downward pressure. A knock-on effect on emerging market sentiment remains likely, with investors wary of secondary market tremors. The tariff scenario might invite defensive positioning in US assets, underpinning the dollar’s recent rise.
Short Term Dollar Outlook
With short-term momentum favouring the USD, it remains above key support levels at 103.10 and 102.50, while traders eye resistance at 104.40 and 105. Should trade tensions escalate, interruptions in capital flows could reinforce dollar strength, particularly if further exemptions fail to materialise. Market participants would need to adjust accordingly, tracking any policy shifts that could open unexpected currency moves.
A cautiously bullish dollar stance appears intact for now. Until a more definitive response from affected countries emerges, volatility may be somewhat restrained. However, risk sentiment remains a key factor—if emerging market concerns deepen, positioning could shift abruptly, with traders re-evaluating exposure to currencies facing potential downside pressure.
