The US dollar is retreating for now, while Trump remains mute on sources on the upcoming tariff approach

The US dollar is depreciating following the release of the December Producer Price Index.
Traders are concerned about possible comments from President-elect Donald Trump on the above headline.
The US Dollar Index (DXY) is falling below 110.00 and looking for support to rebound.

The U.S. Dollar Index (DXY), which tracks the value of the U.S. dollar against six major currencies, is losing ground after December’s Producer Price Index report was weaker than expected. The main factor influencing Tuesday remains comments from team members in President-elect Donald Trump’s incoming administration, who revealed they are considering implementing tariffs very slowly from month to month to avoid an inflation shock, Bloomberg reported. Meanwhile, markets are concerned about any comments from President-elect Donald Trump himself on the matter.

The U.S. economic calendar gains momentum on Tuesday, with the release of the Producer Price Index (PPI) as a prelude to the more vital Consumer Price Index (CPI) on Wednesday. Every single number in the report, both Headline and Core on a monthly and annual basis, performed significantly worse than expected. This should slightly ease expectations for Wednesday’s CPI release.

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The Producer Price Index (PPI) for December was lower than expected:
- Monthly core PPI rose 0.0%, below the expected 0.3%, compared to 0.2% in November.
- Monthly headline PPI rose to 0.2%, down from the survey’s 0.3% and lower than the previous month’s 0.4%.
- Annual core PPI rose 3.3%, below the 3.4% expected and up from 3.0% in November, while annual core PPI rose to 3.5%, below the survey’s expectation of 3.8% and up from 3.4% in the previous month.
At 15:00 GMT, Federal Reserve Bank of Kansas City President Jeff Schmid delivers a speech on the outlook for US economic and monetary policy during an event organized by The Central Exchange.
At 20:05 GMT, Federal Reserve Bank of New York President John Williams delivers opening remarks at the New York Fed’s “An Economy that Works for All: Housing Affordability” event in New York.
European stocks and US futures welcome a lower-than-expected PPI reading, with all major indexes in green today.
The CME FedWatch Tool predicts a 97.3% chance of interest rates remaining at current levels at the January meeting. The Federal Reserve (Fed) is expected to remain data-dependent, with uncertainty likely to impact the path of inflation once President-elect Donald Trump takes office on January 20.
Yields in the US are falling significantly. At the time of writing, the 10-year benchmark was trading around 4.794% on Tuesday, having seen Monday’s 14-month high of 4.802%.

US Dollar Index Technical Analysis: Inflation and Yields Lead

The US Dollar Index (DXY) will see increased volatility. President-elect Donald Trump’s constant delivery of statements followed by comments from sources on his team will result in some knee-jerk moments and reactions. This means that from this point on your sense of direction may become distorted and foggy.

On the other hand, the key resistance to overcome remains the psychological level of 110.00. Further up, the next huge upside level that needs to be reached before continuing higher remains 110.79. Once above this level, it is quite far from 113.91, the October 2022 double high.

Looking down, DXY will look for a bounce off the December 2023 green uptrend line, which is currently around 109.00 as close support. In case of further declines, the next support will be 107.35. The next level that could stop selling pressure is 106.52, with the 55-day plain moving average (SMA) at 106.92 strengthening ahead of this support area.

US Dollar Index: Daily Chart