- The US Dollar experiences a slight decline as President Trump’s first actions make headlines.
- The Wall Street Journal reports that tariffs require further discussion before implementation.
- The US Dollar Index (DXY) drops below 109.00, moving towards 108.00.
The US Dollar Index (DXY), which tracks the Greenback against six major currencies, drops 1% just hours ahead of President-elect Donald Trump’s inauguration as the 47th President of the United States. Several US asset classes, including Wall Street trading and US bond markets, remain closed for Martin Luther King Jr. Day. The initial dip in the DXY follows a Wall Street Journal report stating that tariffs will not be part of the executive orders Trump plans to sign on his first day in office and will require further discussion before being implemented.
Attention now shifts to the aftermath of the inauguration, with Trump confirming in a Sunday rally that a series of new measures and executive orders will be rolled out, including additional tariffs, mass deportations starting in Chicago, and declaring states of emergency for energy and border security. These actions could pave the way for extensive drilling and the mass deportation of illegal immigrants without requiring Congressional approval.
Daily Digest Market Movers: Softer Tariff Outlook
- The Wall Street Journal reports that the Trump administration will first form a task group to assess the impacts of tariffs on China, Canada, and Mexico before moving forward with any tariff imposition.
- Donald Trump will be sworn in as the 47th President of the United States at 17:00 GMT.
- Due to Martin Luther King Jr. Day, several US trading floors, including bond markets, remain closed.
- European equities and US futures are off to a strong start, buoyed by the softer US Dollar.
- The CME FedWatch tool suggests a 55.6% probability that the Federal Reserve will keep interest rates unchanged in the May meeting, with a potential rate cut in June, as the Fed remains data-dependent amid uncertainties surrounding inflation during Trump’s term.
- The US 10-year yield remains steady at around 4.627%, with bond markets closed in observance of the holiday.
US Dollar Index Technical Analysis: A New Phase Begins
The US Dollar Index (DXY) is experiencing a divide between bulls and bears as the new Trump administration prepares to introduce a series of executive orders. While markets have already priced in significant inflationary pressures from Trumponomics, it remains uncertain whether these expectations are accurate, and whether the DXY will ease further based on an overestimation of the measures’ impact.
On the upside, the 110.00 psychological level serves as a key resistance point, with the next major hurdle at 110.79 (the high from September 7, 2022). Beyond that, the next significant target is 113.91, a double top formed in October 2022.
On the downside, the DXY is supported by an ascending trendline from December 2023, currently around 109.10. If the index falls further, the next support level is at 107.35 (from the high of October 3, 2023). Should the decline continue, the 55-day Simple Moving Average (SMA) at 107.29 is likely to provide additional support.
