The US Dollar Index (DXY) is around 103 following recent selling pressure that dropped it below 102.00. This slight recovery comes after the Federal Reserve’s March meeting minutes indicated challenges balancing inflation risks with slow growth.
Fed participants expressed concern over persistent inflation and noted potential downside risks for the labour market. President Trump’s announcement of a 90-day suspension on most tariffs—excluding China—bolstered market sentiment, yet the DXY’s technical indicators remain bearish.
Technical Indicators
The index is under pressure while attempting to stabilise near 102. Key moving averages are trending lower, with resistance at 102.62, 103.21, and 103.38. Initial support is at 101.83, with potential for a deeper drop towards 100.00 if this level fails.
Central banks focus on maintaining price stability, with a target inflation rate near 2%. They adjust the benchmark policy rate to influence inflation movements. Board members of central banks, sometimes referred to as ‘hawks’ and ‘doves’, have varying perspectives on managing monetary policies.
Leadership within a central bank typically includes a chairman or president tasked with reaching consensus on policy decisions and communicating the bank’s monetary stance to the public.
Recent developments around the dollar’s performance are giving us a clearer picture of where momentum could shift next, especially with traders grappling between inflation persistence and economic fragility. The US Dollar Index (DXY), hovering around 103 after recovering from a dip below 102, finds itself in a fragile position. The bounce upwards seems more like a pause than a reversal, particularly after the Federal Reserve’s latest communication.
According to the minutes from the March meeting, policymakers remain openly worried about inflation failing to cool at an acceptable pace. There’s also an undercurrent of anxiety regarding potential labour market weakening. That dual concern—persistent inflation with the risk of job losses—has historically confined the Fed to a narrow policymaking path, and this time appears no different. While the comments did little to surprise us, they reaffirm that future moves are likely to stay measured rather than aggressive.
Technical Structure And Market Impact
The short-term technical structure shows the dollar index is still in a corrective downtrend. All the key moving averages—widely tracked signals by both institutional and short-term participants—are losing upward momentum, suggesting that bullish attempts may be capped. Resistance lines at 102.62, 103.21, and 103.38 won’t easily give way unless a shift in either data or rhetoric offers fresh bullish incentive. Should price action break below 101.83, there’s a real risk it slides closer to 100.00, a level last approached during periods of broader risk-on appetite.
Trump’s move to temporarily lift tariffs on imports—with the notable exception of those targeting China—added a short-lived tailwind to the dollar. However, this kind of policy shift, while giving breathing room to certain sectors, has limited longer-term impact on the currency unless it affects the inflation or rate expectations directly. Market participants interpreted it largely as easing some tension without fundamentally altering direction.
From a monetary standpoint, rate expectations remain the dominant driver of currency valuations. Central bank objectives stay largely intact: keep inflation near that 2% sweet spot. That’s been the guiding principle. At the same time, communication from voting members—divided broadly into more hawkish voices favouring tighter conditions and dovish ones prioritising growth and employment—adds nuance. Comments from the head of the institution or senior board members often cause short-term ripples, especially when they diverge from earlier expectations.
In the weeks ahead, derivative players should be prepared for a grind rather than a breakout. Price movements may lack large directional conviction unless incoming data leaves little room for interpretation. Watching both outcome and reaction to upcoming economic releases will be central to anticipating the next wave. As inflation prints and labour figures roll out, any upside surprise could reinforce the case for tighter policy for longer—strengthening the dollar and putting support levels to the test. On the other hand, weaker jobs or soft inflation could open the door for rate cuts later in the year, helping to maintain bearish pressure on the index.
We do not expect clean, linear direction in the near term. Positions should remain light until directional cues become stronger. Bias toward strength or weakness will need to be re-evaluated continuously, particularly as market probabilities beginning to shift around June or July rate decisions. The technical chart, while useful, is unlikely to offer clear answers until volatility picks a side. For now, we remain guided by data flow and central messaging, with broader positioning reflective of that uncertainty.
