US Dollar dips while Gold hits fresh record amid tariff tensions
- DXY was seen trading near the 99.50 area, weakening despite solid US Retail Sales.
- Trump’s probe into mineral tariffs and China’s export curbs weighed on sentiment.
- Key resistance remains around the 101.15–101.85 region; support sits near 98.93.
The US Dollar Index (DXY) is under pressure on Wednesday, seen around the 99.50 zone as risk aversion keeps investors tilted toward safe-haven assets like Gold. This comes despite the release of better-than-expected US Retail Sales, which rose 1.4% month-over-month in March to $734.9 billion, above the forecasted 1.3%. Annual growth stood at 4.6%, pointing to resilient consumer activity. Still, market focus remained squarely on trade tensions, after US President Trump launched a new probe into tariffs on critical mineral imports—seen as retaliation to China’s escalating non-tariff measures and export controls.
The trade spat intensified as the US maintained its 145% levies on Chinese imports while Beijing kept its 125% reciprocal tariffs. Meanwhile, Gold prices surged to a record high near $3,333 per troy ounce, fueled by fears that rising input costs from restricted mineral flows could choke key sectors like defense and tech. Global stocks dipped as investors weighed the risk of prolonged economic decoupling between the US and China.
Daily digest market movers: Gold price surges while US Dollar slumps
- Retail Sales in the US rose 1.4% in March, beating expectations and showing 4.6% YoY growth.
- President Trump ordered a probe into potential tariffs on all imports of critical minerals, raising supply concerns.
- China imposed licensing requirements on key rare earth exports, deepening the trade rift with the US.
- Despite slight diplomatic signals, China reiterated that talks would require mutual respect and cessation of threats.
- The Gold price reached a record above $3,330 per ounce, benefiting from weak USD and lower US yields.
- The US Dollar remained pressured as uncertainty over trade and inflation expectations kept demand for USD assets subdued.
- Global equities softened after the US announced Nvidia chip export restrictions and possible mineral tariffs.
- China’s Q1 GDP surprised to the upside at 5.4% YoY, along with better-than-expected industrial production and retail sales.
- The DXY’s technical backdrop remains weak, with momentum tilted to the downside despite solid economic data.
Technical analysis: DXY pressured below key averages
The US Dollar Index paints a bearish outlook as it drifts near the 99.50 zone on Wednesday. The Relative Strength Index (RSI) stands at 26.96, firmly within oversold territory, while the Moving Average Convergence Divergence (MACD) maintains a sell signal with fresh red histogram bars. The Commodity Channel Index (CCI) at -147.57 suggests a potential buy signal, though broader momentum remains negative.
All major moving averages reinforce the bearish trend. The 20-day Simple Moving Average (SMA) sits at 102.77, while the 100-day and 200-day SMAs at 106.19 and 104.69 respectively, also slope downward. The 10-day Exponential Moving Average (EMA) and SMA at 101.15 and 101.40 add to the resistance overhead. On the downside, the next meaningful support lies around 98.93, while resistance levels stand at 101.15, 101.40, and 101.85.
The overall technical structure suggests that unless the DXY rebounds above the 101.00 area with strong conviction, the risk remains tilted to the downside amid softening yield differentials and macroeconomic uncertainty.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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