US Dollar weakens further as tariffs and soft data sink sentiment
- DXY tumbles toward the 102 zone in Thursday’s session after Trump’s sweeping tariff plan fuels recession fears.
- Weaker ISM Services PMI and jobless claims add to economic concerns, undermining USD momentum.
- Bearish signals strengthen with price below key moving averages; resistance seen near 103.70.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against a basket of major currencies, is dropping significantly on Thursday, moving near the 102.00 zone during the North American session. The Greenback continues to slide following US President Trump’s “Liberation Day” tariff announcement, triggering investor worries about a potential slowdown in economic activity. Technical indicators add to the pressure, with several key moving averages pointing to a further downside.
Daily digest market movers: US Dollar loses altitude as growth outlook dims
- The US ISM Services PMI dropped sharply in March to 50.8, falling short of the expected 53.0 and signaling a services sector slowdown.
- New Unemployment Claims ticked lower to 219K, missing forecasts and dropping from a previously revised 225K, while continuing claims climbed to nearly 1.9 million.
- The Employment Index within the ISM survey slid to 46.2 from 53.9, raising labor market concerns.
- Price pressures also eased, with the ISM’s Prices Paid Index falling to 60.9 from 62.6.
- Trump’s tariff package included a 10% base import duty and additional levies on Chinese goods, spooking markets with fears of stagflation.
- US stocks opened sharply lower, as investors feared importers will shoulder the rising costs, potentially squeezing margins.
- The Fed may be forced to rethink its policy stance, with dovish speculation rising amid slower growth and tariff-linked inflation risks.
- The 34% duty on Chinese imports may hit Asia-Pacific economies hard if China retaliates or slows its purchasing activity.
- Markets remain jittery, with the DXY now back to levels last seen in October 2024, with volatility likely ahead of Friday’s NFP report.
Technical analysis
The US Dollar Index continues to face heavy selling pressure, now trading around the 102.00 zone. The Moving Average Convergence Divergence (MACD) is signaling a potential buy, but this is outweighed by a broader bearish structure. The Relative Strength Index (RSI) sits near 26.47, hovering just above oversold territory.
Most key moving averages, including the 20-day, 100-day, and 200-day Simple Moving Averages (SMA), as well as the 10-day Exponential Moving Average (EMA), all flash strong sell signals. Resistance is noted at 103.26, 103.69, and 103.79, while support levels to watch include 101.26 and the 101.00 psychological threshold. Without a strong bullish catalyst, the DXY may continue trending lower.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.