At the moment of writing, the US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against six major currencies, has fallen to 99.50 after a failed attempt to break above the 100 level. This drop is partly due to reports of China potentially starting tariff negotiations with the Trump administration. While the market is watching these trade developments closely, they are also eagerly awaiting news of a potential official trade deal.
In other recent news, Bloomberg reported that the US and Ukraine have signed a new mineral deal, which is much smaller in scale compared to previous deals and does not include any military guarantees for Ukraine. On the economic front, the April Nonfarm Payrolls (NFP) release showed 177,000 jobs added, slightly above the highest estimate of 171,000. While this initially gave the US Dollar a boost, it may not have a substantial impact in the long term. Investors are viewing this as the last positive reading, with the next NFP release in June possibly having a more negative outcome.
The US Dollar Index is currently at a crucial technical level after a three-day winning streak. The NFP release on Friday could determine its next move, potentially leading to a continuation of the rally and a break above the 100 level. However, even in this favorable scenario, the DXY could face resistance and fall back to new three-year lows.
On the upside, the first resistance for the DXY is at 100.22, a level that provided support in September 2024. A break above the key 100 level would be seen as bullish. A more significant recovery would send the DXY back to 101.90, a crucial level in December 2023 and the base of an inverted head-and-shoulders formation during the summer of 2024.
If the US Dollar faces significant negative news, it could quickly test the support level of 97.73. Further declines could bring it down to 96.94 before reaching the lower range of 95.25 and 94.56, which would be fresh lows not seen since 2022. This is reflected in the daily chart of the US Dollar Index.