- The US Dollar Index fluctuates around the mid-104s in Tuesday’s session, easing from earlier strength.
- Optimism around reduced tariffs fades as mixed Fed comments muddy interest rate expectations.
- Momentum improves, but key moving averages still flash warning signs near major resistance zones.
The US Dollar Index (DXY) is experiencing mixed performance on Tuesday, trading around the middle of the 104.00 zone. Earlier in the day, the Greenback found support on stronger services activity and signs that proposed tariffs may be more targeted than feared.
However, uncertainty returned as new headlines from US policymakers tempered the optimism. The evolving rhetoric on inflation and trade created a back-and-forth movement in the DXY, now grappling with nearby resistance. From a technical standpoint, the Moving Average Convergence Divergence (MACD) prints a mild buy signal, while the Relative Strength Index (RSI) is neutral. Despite improving momentum, key Simple Moving Averages (SMAs) suggest the broader setup still leans bearish.
Daily digest market movers: Sentiment weighs on US Dollar after earlier tariff optimism
- The DXY trades in a tight range around the mid-104s, struggling to sustain upside after testing higher early Tuesday.
- President Trump hinted at exemptions for certain countries from April tariffs, raising hopes of limited global trade fallout.
- Trump also reaffirmed upcoming tariffs on aluminum, autos and pharmaceuticals, keeping markets alert for trade-related volatility.
- Fed Governor Adriana Kugler flagged fresh inflation pressures, noting worrying trends in select goods categories.
- The New York Fed’s John Williams said both firms and households are navigating deep uncertainty about economic prospects.
- Despite neutral tones from both Fed officials, traders see inflation fears potentially slowing the pace of rate cuts. This Friday’s Core PCE data remains the key event with markets closely watching the Fed’s preferred inflation indicator.
Technical analysis: DXY hesitates below key barriers despite improving momentum
The US Dollar Index trades with caution near the 104.00 handle, reflecting a balance between softening sentiment and residual optimism from Monday’s gains. The MACD currently prints a mild buy signal at -0.774, supported by a positive 10-day momentum reading. Meanwhile, the Relative Strength Index (RSI) sits at a neutral 40.20, suggesting the pair is not oversold but lacking strong bullish conviction. The combined RSI/Stochastic indicator also reflects hesitation, reading just above 96.
Despite these hints of recovery, the broader outlook remains under pressure. The 20-day, 100-day and 200-day Simple Moving Averages (SMAs) — at 104.53, 106.74, and 104.93 respectively — continue to trend lower. The 30-day Exponential Moving Averages (EMAs) and SMAs (both above 105.00) reinforce a heavy overhead zone.
On the downside, support is seen at 104.02 and 103.76, while resistance lies around 104.30, 104.53 and 104.54. The index may need a strong macro catalyst to break free from this congested range.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to recovery gains below 1.0800
EUR/USD is trading under 1.0800, holding the recovery from three-week lows in European trading on Thursday. The pair holds gains amid renewed US Dollar selling as traders digest latest tariff threats from US President Trump. Traders resort to repositioning ahead of Friday's US PCE inflation data.
GBP/USD holds gains above 1.2900 on US Dollar weakness
GBP/USD trades with positive bias above 1.2900 in Thursday’s European morning. The pair holds the latest uptick amid renewed US Dollar weakness as fresh Trump tariff threats rekindle US economic slowdown concerns. Focus remains on tariff updates and mid-tier US data.
Gold price refreshes weekly top; seems poised to appreciate further amid trade jitters
Gold price regains positive traction on Thursday as rising trade tensions boost safe-haven demand. A modest USD pullback from a multi-week top and Fed rate cut bets also back the XAU/USD pair. Traders look to Thursday’s US macro releases for some impetus ahead of the US PCE data on Friday.
Cardano bulls target double-digit gains as bullish bets increase among traders
Cardano price hovers around $0.74 at the time of writing on Thursday after a recovery of over 4% so far this week. On-chain data hints at a bullish picture as ADA’s stablecoin market cap rises while its bullish bets increase among traders.
Sticky UK services inflation shows signs of tax hike impact
There are tentative signs that the forthcoming rise in employer National Insurance is having an impact on service sector inflation, which came in a tad higher than expected in February. It should still fall back in the second quarter, though, keeping the Bank of England on track for three further rate cuts this year.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.