US Dollar Index outlook: Falls almost 2% in atypical reaction on US tariffs

Slobodan Drvenica Windsor Brokers

US Dollar Index

The dollar was sharply down across the board on Thursday, smashed by the latest large package of import tariffs that President Trump announced on Wednesday.

The dollar index fell to a six-month low following strong acceleration lower, in which the currency lost nearly 2% of its value, in the biggest daily fall in years.

Although the reaction was atypical as risk aversion should be likely scenario in such circumstances and inflate the greenback, fresh weakness helped in boosting the effect of tariffs for the US and make life much more complicated to US trading partners.

Technical picture has weakened further on daily chart (MA’s are in full bearish setup, 14-d momentum remains in a steep decline deeper into negative territory and the latest drop cracked the support line of bear channel) signaled continuation of larger downtrend, with loss of last significant support at 102.24 (Fibo 76.4% of 99.84/110.00 rally) opening way towards targets at 100.00 (psychological) and 99.84 (2024 low of Sep 27).

Partial profit taking should be anticipated after heavy losses, but strong negative sentiment is expected to keep dollar under increased pressure and limit upticks.

Broken Fibo level reverted to resistance (102.24) which should ideally cap and keep broader bears fully in play.

Res: 101.79; 102.24; 102.82; 103.07.
Sup: 100.94; 100.40; 100.00; 99.84.

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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