US Dollar falls as tariffs and Fed concerns fuel bearish mood
- The US Dollar Index remains under pressure on Thursday, seen around the 101 area after earlier attempts to rebound faded.
- Fresh tariff hikes and dovish-leaning Fed commentary added to recession and inflation worries, weighing on the Greenback.
- Technical indicators remain broadly bearish, with strong resistance seen near 102.30 and no clear support below the current zone.
The US Dollar Index (DXY) trades near the 101 area in Thursday’s session, falling further after failing to hold recovery momentum from earlier in the week. The move comes as new tariff measures confirmed by the White House send the effective rate on Chinese imports to a staggering 145%. Federal Reserve (Fed) officials, including Presidents Jeff Schmid and Lorie Logan, warned that these trade actions risk worsening inflation and labor market dynamics.
On the technical side, the MACD continues to signal selling pressure, while the Relative Strength Index hovers just above oversold territory. With downside momentum intensifying, the DXY remains vulnerable.
Daily digest market movers: US Dollar slips as Fed flags inflation risks
- The White House confirmed the escalation of tariffs on Chinese goods, lifting the effective rate to 145% while maintaining a 10% baseline for others.
- Fed officials issued strong warnings, highlighting how the surprise tariff surge could drive consumer prices higher and complicate monetary policy decisions.
- Dallas Fed’s Logan said unexpected trade measures could trigger job losses and stoke inflation, forcing the central bank into a defensive posture.
- The latest jobless claims rose slightly to 223K, while continuing claims dropped to 1.85M, offering mixed signals on the labor front.
- Despite recent volatility, Fed policymakers avoided direct mention of March CPI in their latest comments, though markets remain sensitive to inflation prints.
Technical analysis
The US Dollar Index paints a bearish picture as it continues to slide near the lower edge of its daily range around the 101 area. The Moving Average Convergence Divergence (MACD) confirms downward momentum with a sell signal, and the Relative Strength Index (RSI) sits around 29, indicating weak price strength but not yet in deep oversold territory. While the Awesome Oscillator is neutral, Momentum (10) indicates further downside pressure. The bearish tone is reinforced by several downward-sloping moving averages: the 20-day SMA at 103.52, 100-day SMA at 106.48, and 200-day SMA at 104.79. An additional downside could materialize if the index breaks below current levels, while resistance is seen at 102.29, 102.72, and 102.89.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
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