• The US dollar is gaining in value after Donald Trump imposed tariffs on BRICS.
• Focus on Paris, where this Monday Prime Minister Michel Barnier launched a special article to pass his budget law.
• The US dollar index breaks through critical upward resistance and heads towards 106.70.

The US dollar (USD) is rising strongly this Monday, driven by two main factors that occurred this Monday earlier in the week. The first major cause is President-elect Donald Trump, who tweeted over the weekend that BRICS countries could face tariffs if they consider continuing their de-dollarization process. The tweet, which appeared over the weekend, was enough to start the week in Asian markets with a powerful bid for the US dollar.

The second main factor driving this Monday was the unfolding story in which French Prime Minister Michel Barnier called for Article 49(1). 3, which allows him to overtake the French parliament and adopt the social security law. When Prime Minister Barnier launched the article, both left-wing leader Mathilde Panot and far-right leader Marine Le Pen said they would support a call for a vote of no confidence. A vote could take place on Wednesday at the earliest and a deal already appears to have been finalized, meaning the French government could be toppled as early as this week.

Amid all this, the Institute for Supply Management released November data for the manufacturing sector, which was stuck in a tough situation in October. The unexpected rise in the Purchasing Manager’s Index portion, coupled with a acute decline in the main inflation component, ‘Prices Paid’, generated some positive excitement in the manufacturing sector. The trio pushed the U.S. dollar and the U.S. dollar index to all-time highs on Monday.

Daily summary of market players: ISM’s Goldilocks print

• In a television interview over the weekend, French Finance Minister Antoine Armand told Bloomberg Television that the French government would not be held hostage by Marine Le Pen’s far-right party. By fending off additional demands from the National Rally Party, the French government may fall as a no-confidence vote receives enough votes if Marine Le Pen’s party supports it with a majority.
• Meanwhile, as the story unfolds, Prime Minister Michel Barnier outdid the French Parliament by calling in Article 49(1). 3 to adopt its social security law. This, in turn, sparked calls for a vote of no confidence from both the left and right.
• At 14:45 GMT, S&P Global released the final reading for November of its Manufacturing Purchasing Managers’ Index (PMI). The actual number was 49.7, well above the expected 48.8.
• The Institute for Supply Management (ISM) released November PMI data for the manufacturing sector.
  • The headline PMI rose to 48.4, up from 46.5 and above the estimate of 47.5.
  • The Price Paid Index, a leading indicator of inflation, fell to 50.3 from 54.8.
• At approximately 20:15 GMT, Federal Reserve Governor Christopher Waller delivers a speech on the US economic outlook at the American Institute of Economic Research monetary conference in Washington.
• At 21:30 GMT, Federal Reserve Bank of New York Governor John Williams delivers keynote speeches and participates in a question and answer session at an event hosted by the Queens Chamber of Commerce in New York.
• Stocks turn green after the opening bell in the US, and even European stocks are green.
• The CME FedWatch Tool estimates the Fed’s next 25 basis point (bps) rate cut at its December 18 meeting at 67.1%. The chance of leaving rates unchanged is 32.9%. The Fed’s protocols helped boost the chances of interest rate cuts in December.
• The US benchmark rate for 10-year bonds is 4.23%, which is rather stable at the beginning of the week and above the 4.16% recorded on Friday last week.

Technical analysis of the US dollar index: Confusion already at the beginning of the week

The US dollar index (DXY) is falling across the Atlantic Ocean, and investors are withdrawing some of their investments from Europe to the United States. The potential collapse of the French government could quickly translate into Germany, where Prime Minister Olaf Scholz’s position hangs in the balance before the 2025 elections. All this political uncertainty could block investment opportunities, and investors will favor the capital-backed Trump administration, which is expected to take power in January.

On the other hand, the 106.52 level (April 16 high) is the first level to watch and looks like it will be ready to be tested this Monday. If the dollar bulls regain this level, 107.00 (round level) and 107.35 (October 3, 2023 high) will reach the target level again and a retest will occur.

However, warnings should be issued against knee-jerk reactions. In the event of a downturn, the key level of 105.53 (April 11 high) comes into play before moving into the 104 region. If DXY drops all the way to 104.00, a large number and the 200-day straightforward moving average at 104.03 should catch any descending knife formation.

US Dollar Index: Daily Chart