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9 Apr 2025
US Dollar recovers modestly after Fed minutes hint at tough road ahead
- The DXY hovers near the 103 zone during Wednesday’s session after briefly dipping on dovish Fed commentary.
- The release of the Fed minutes and Trump’s surprise tariff pause lifted short-term sentiment but underscored long-term inflation concerns.
- Price action remains below key moving averages; resistance builds near 103.20 while immediate support lies around 101.80.
The US Dollar Index (DXY) trades around the 103 area during Wednesday’s session, stabilizing slightly after recent selling pressure, which took it below 102.00. The minor bounce follows the release of the Federal Reserve’s (Fed) March meeting minutes, where policymakers flagged “difficult tradeoffs” ahead, citing risks of higher inflation paired with slower growth.
President Donald Trump’s abrupt announcement of a 90-day suspension on most tariffs added fuel to the market rally, sending the Dow Jones sharply higher. However, the DXY’s bearish technical profile suggests the recovery may face headwinds, with multiple indicators still flashing warning signs.
Daily digest market movers: US Dollar clings to recovery after Fed signals caution
- The FOMC minutes revealed a broad consensus to hold rates steady due to persistent inflation risks and mounting uncertainty over trade and growth dynamics.
- Participants noted inflation could be stickier than anticipated, with downside risks emerging for the labor market and broader economic activity.
- Fed officials warned that navigating between inflation control and supporting employment may prove increasingly complex if tariffs continue to distort the outlook.
- President Trump announced an immediate suspension of reciprocal and 10% tariffs for 90 days—excluding China—boosting risk appetite across equities.
- Despite optimism, policymakers flagged weakening GDP projections for 2025 and 2026, with the Fed’s baseline outlook still pointing to eventual rate cuts.
Technical analysis
The US Dollar Index remains under pressure even as it attempts to build a floor near the 102 zone. The Moving Average Convergence Divergence (MACD) shows a sell signal, while the Relative Strength Index (RSI) hovers around 40, reflecting a neutral tone. Supporting the bearish case, key moving averages such as the 20-day (103.63), 100-day (106.53), and 200-day (104.81) Simple Moving Averages continue to trend lower. The 10-day Exponential Moving Average and 10-day SMA, both around 103.20–103.38, also reinforce downward pressure. Resistance is found at 102.62, 103.21, and 103.38, while initial support is seen around 101.83. Should this floor break, a deeper retracement toward the psychological 100.00 level could unfold.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.