US Dollar edges lower as traders await clarity on tariffs
- DXY dips under the 104.00 zone as equities slide and bond yields decline.
- Upbeat ADP employment data clashes with market anxiety over looming US tariffs.
- Key resistance stands near 104.10, while bearish pressure builds below 103.90.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, is trading below the 104.00 area during Wednesday’s session amid heightened caution ahead of the White House’s official tariff announcement. Despite stronger than expected ADP Employment Change data for March, the Greenback remains under pressure. Technical signals are mixed with some indicators suggesting a bullish attempt, while longer-term moving averages tilt bearish.
Daily digest market movers: US Dollar stuck in limbo before tariff wave
- The ADP Employment Change report showed 155K new private-sector jobs were added in March, beating forecasts of 105K.
- ADP’s chief economist noted the reading reflected resilience in hiring despite policy uncertainty and cautious consumer sentiment.
- Market participants are bracing for Trump’s 20:00 GMT announcement on “Liberation Day” tariffs.
- Speculation swirls around potential 20% blanket tariffs with no exemptions currently confirmed.
- A heavy tariff package could weigh on growth and fuel inflation, risking stagflation concerns and Fed policy shifts.
- Markets may react more strongly on Thursday once tariff details and exemptions are confirmed.
- Stocks and Crude Oil are under pressure, while Gold climbs as traders seek safety.
- Fed rate cut odds for May remain low, but volatility may rise depending on incoming data and trade signals.
- Broader USD sentiment is soft, reflected in falling demand for bullish option positions.
- The DXY’s direction is increasingly tied to global growth fears and safe-haven flows.
- ADP data often serves as a precursor to Friday’s Nonfarm Payrolls (NFP), which may carry more weight for Fed watchers.
- Bonds rose across the curve as traders reposition ahead of potential growth-impacting measures.
- The Greenback struggles to break out despite support from better labor figures.
Technical analysis
The US Dollar Index (DXY) is under moderate downside pressure as it trades near the 104.00 threshold. The Moving Average Convergence Divergence (MACD) still issues a buy signal, but the Relative Strength Index (RSI) remains neutral at 39.40, reflecting lack of momentum.
Most moving averages suggest a bearish bias: the 20-day, 100-day and 200-day Simple Moving Averages (SMA) along with the 10-day Exponential Moving Average (EMA) all point lower. The Williams Percent Range and Awesome Oscillator are both neutral.
Immediate resistance lies near 104.022 and 104.105, while downside support is seen around 104.169, 104.128 and the key 103.90 area. A sustained drop below this level may unlock further losses toward the 103.00 handle.
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.