• Many investors are locking in profits amid continued trade tensions and a holiday in bond markets.
• Early signals from the future US administration suggest a methodical approach to tariffs and fiscal expansion.
• The Federal Reserve’s upcoming data-driven decisions remain in focus, with May seen as crucial for any policy changes.

The US dollar has been volatile following the inauguration of President-elect Donald Trump. US trading floors will remain closed for Martin Luther King Jr. Day, but the US dollar index (DXY) fell towards 108.30 amid uncertainty as markets await further details on Trump’s economic plans.

Daily market movement summary: USD sees red on delayed tariff signals

• Policy changes depend on discussions in Washington: According to multiple sources, the modern administration will establish a task force to study the potential impact of tariffs on Canada, Mexico and China before introducing any sweeping measures.
• In fact, during his inaugural speech, Donald Trump flirted with the concept of a tariff plan for the mentioned countries, but without specific details.
• The holiday shutdown slows down market activity as the U.S. bond market closes. The yield on 10-year bonds remains around 4.60%. On Tuesday, investors will be on the lookout for modern signals about inflation concerns and changes in interest rates.
• The CME FedWatch Tool indicates that stocks are in the price to hold at this month’s Federal Reserve meeting and there is a mighty likelihood of another cut in May.

DXY Technical Outlook: 20-Day SMA Breaks, Downside Risk Increases

The U.S. Dollar Index lost key strength below 109.00 as profit-taking and depressed bond yields took their toll. A break of the 20-day basic moving average (SMA) near 108.50 highlights the increasing sensitivity of the dollar.

If buying interest fails to materialize, the broader DXY uptrend could face a more pronounced pullback. Nevertheless, expectations for continued stronger economic performance in the U.S. could eventually attract modern offerings, keeping markets alert to any policy-driven changes.