- The American dollar index (DXY) increases near the 99.65 area, when traders respond to contradictory US-Chin trade signals.
- Hopes for relief in the tariff and reduction of the FED rate augment sentiments, despite the refusal of current negotiations.
- The resistance is perceptible at 99.92 and 100.95 for DXY with technical indicators painting a mixed image.
The American dollar (USD) strengthens on Friday, when investors digest conflicting news from the United States and China in relation to potential tariff negotiations. While President Donald Trump suggested that the dialogue was ongoing, Beijing clearly denied any current conversations. This discrepancy injected the variability to the markets, although Greenback maintained the advantage, with an American dollar indicator (DXY) by about 0.37% near the zone 99.65 at the time of writing.
Despite entering the lightweight session before the meeting of the Federal Open Market Committee (FOMC) of May 7, market participants focus on potential catalysts. Reports have appeared that China can suspend certain tariffs on American goods, such as medical equipment, although Chinese officials rejected all formal involvement in tariff discussions. At the same time, President Cleveland Fed Beth Hammack opened the door to a potential rate reduction in June, depending on the upcoming data.
Daily Digest Market Movers: Talk or not talk?
- President Trump repeated that the USA is in communication with China on trade, while China refused any vigorous tariff negotiations.
- Bloomberg announced that China can raise tariffs to selected American goods, but Chinese officials have rejected questions about release.
- The Fed is in a blackout mode before the next meeting; Traders Eye Final APRIL University of Michigan Sentiment and Inflace Waiting.
- Markets remain torn between optimism in the event of a summer reduction of the Fed rate and a lack of specific progress in commercial talks.
- Meanwhile, the remarkable reflection in the US revenues supported the fiscal position of the treasure, but remains insufficient to balance the wider costs associated with the extension of the Act on tax reductions and employment (i.e.).
Technical analysis: DXY eye resistance near 99.92 among the disappearing momentum
The American dollar index trads stronger positions near 99.65, but the technical perspectives remain delicate. Both the relative strength rate (RSI) at 37.10 and the average movable discrepancy (MacD) suggest that the rush of growth is decreasing. While MacD still flashes the sales signal, the average directional index (ADX) at 54.53 indicates a forceful but potentially tiring trend.
Short and long -term average movable strengthen bears. The 10-day interpretation average (EMA) on 99.93 and 30-day EMA on 101.80 both are above the current price levels. 20-day, 100-day and 200-day straight movable medium (SMA) are 101.30, 105.78 and 104.53, respectively, also lower.
Immediate support is 99.55 and 99.49. On the other hand, the resistance is 99.93, with additional obstacles of 100.95 and 101.30. Unless the headlines do not provide a more pronounced direction-especially in the case of tariffs or central bank’s activities-DXY may remain covered near the current levels.
FAQ in American dollars
The American dollar (USD) is the official currency of the United States of America and the “de facto” currency of a significant number of other countries where it is in circulation with local notes. It is most often a commercial currency in the world, which is over 88% of all global currency turnover, i.e. an average of $ 6.6 trillion of transactions per day, according to the data from 2022. After the Second World War, USD took over from the British pound as the reserve currency of the world. For most of its history, the American dollar was supported by gold, up to the Bretton Woods agreement in 1971, when the golden standard disappeared.
The most vital single factor affecting the value of the American dollar is the monetary policy, which is shaped by the Federal Reserve (FED). The Fed has two seats: achieving price stability (control inflation) and supporting full employment. Its main tool to achieve these two goals is to adjust interest rates. When the prices rise too quickly and inflation is above 2% of the Fed target, the FED will augment the rates, which helps USD values. When inflation drops below 2% or the unemployment rate is too high, the Fed may reduce interest rates that are weighing in the green area.
In extreme situations, the Federal Reserve can also print more dollars and introduce quantitative alleviation (QE). QE is a process in which the Fed significantly increases the credit flow in the detained financial system. It is a non -standard policy measure used in the event of a loan desiccated, because the banks will not borrow (for fear of the contractor). This is the last last, when just lowering interest rates is unlikely to achieve the necessary result. The weapon of choosing the Fed was a FED weapon to combat the credit crisis, which took place during the great financial crisis in 2008. This includes FED printing more dollars and using them to buy US government bonds mainly from financial institutions. QE usually leads to a weaker American dollar.
Quantitative twist (QT) is the opposite process in which the federal reserve stops buying bonds from financial institutions and does not reinvest from the bonds that it has in novel purchases. This is usually positive for the American dollar.
