The US dollar faces more selling pressure as no one is protected from tariffs

The US dollar will stabilize on Wednesday after two days of losses as the correction is expected to continue.
Traders are considering the 10% tax on Chinese goods announced by President Trump on Tuesday.
The US Dollar Index (DXY) is testing the 108.00 level and heading towards the lower limit of 107.00

The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, stabilized just below 108.00 during Wednesday’s European session. However, selling pressure remains after US President Donald Trump released more comments on Tuesday about a possible 10% tariff on all Chinese imports. Even Europe has come under attack, although tariff debates appear to still be ongoing.

Meanwhile, the US economic calendar remains very glowing. While Federal Reserve (Fed) officials remain on pause ahead of the January 29 policy decision, investors have turned their attention to Mortgage Bankers Association (MBA) applications for the week ending Wednesday, January 17. Last week’s 33.3% gain was astonishing to say the least, and investors are intrigued to see whether the Trump effect is playing out in the mortgage market as well.

Daily summary of market players: Still silent

The Mortgage Bankers Association released its weekly mortgage survey on Wednesday, which reported a very slight raise in applications of 0.1% for the week ending January 17 compared to the previous week’s printout of 33.3%.
Stocks traded higher on Wednesday. European stocks are flat, while US futures are up nearly 0.50%.
CME’s FedWatch tool estimates that interest rates will remain unchanged at 55.7% at the May meeting, suggesting a rate cut in June. The Federal Reserve (Fed) is expected to remain data-dependent and uncertainties could impact inflation under US President Donald Trump.
The yield on US 10-year bonds is hovering around 4.58% on Wednesday and has a long way to go if it wants to return to last week’s peak near 4.75%.

US Dollar Index Technical Analysis: It Won’t Be Easy

The US Dollar Index (DXY) falls further as selling pressure continues. It’s not that tariffs cause the US dollar to correct. Instead, we have very vague and vague communication, with many balloons hanging in the air, although no concrete solutions have been put in place yet.

If the DXY recovery wants to continue higher, the key level to take control is 109.29 (July 14, 2022, high and rising trend line). Further up, the next huge upside level that needs to be reached before moving higher remains at 110.79 (September 7, 2022 high). Once above this level, it is already quite far to 113.91, which would represent a double top from October 2022.

On the other hand, the first area worth attention is 107.80-107.90, where this week’s correction took place. Going forward, the convergence of the October 3, 2023 high and the 55-day straightforward moving average (SMA) around 107.40 should act as a double hedge to catch falling knives.

US Dollar Index: Daily Chart