Dollar Outlook: Investors focus on 50-day moving average, waiting for the next breakthrough
2025-07-29 00:53:01
During the U.S. trading session on Monday (July 28), the U.S. dollar index (DXY) climbed to 98.53, up 0.88%, after the United States and the European Union reached a tariff agreement, easing market concerns about a broader trade war.
The rally extended the dollar’s rebound from last week’s low of 97.11, making the July 16 high of 98.95 re-emerge as short-term resistance. The recent U.S. deal with Japan and the resumption of trade talks with China also contributed to the dollar’s strength as markets increasingly expect less risk of trade disruptions.
Tariff easing stimulates dollar buying, what impact will it have on the euro and yen?
The EU-U.S. deal, announced in Scotland on Sunday, slashed planned U.S. import tariffs on EU goods to 15% from 30%, providing short-term relief to exporters and markets.
The euro initially gained ground in early Asian trading but reversed sharply to close down 0.7% at $1.1653, its biggest one-day drop in 10 weeks. The dollar also strengthened against the yen, rising 0.5% to 148.37, while pushing the pound down 0.24% to $1.3413.
The dollar rose 0.74% against the Swiss franc, indicating a retreat in safe-haven demand, further confirming broad buying of the dollar.
With the central bank meeting imminent, will yield differentials return to focus?
While trade easing has driven a rebound in the dollar index, market focus now turns to this week's Federal Reserve and Bank of Japan meetings. Both central banks are widely expected to keep interest rates unchanged, but markets will carefully read post-meeting comments for policy direction.
If the Fed signals a steady rate and overseas markets continue to take a dovish stance, yield differentials, long suppressed by policy uncertainty, could become more important again. Paul Michael of HSBC noted that a recent trade deal could reduce policy risk, giving more weight to traditional foreign exchange drivers such as relative interest rates.
U.S. tech earnings and Trump-Fed tensions add volatility potential
Upcoming earnings reports from companies such as Apple, Microsoft, Amazon and Meta could further boost the dollar's momentum if their performance attracts money back to U.S. assets. Stocks with larger weights in the index often influence the dollar's moves through global portfolio rebalancing.
Meanwhile, markets remain wary of any political risks related to the Federal Reserve following reports that President Trump nearly tried to fire Fed Chairman Jerome Powell last week. While he ultimately backed off, the tension could reintroduce uncertainty based on how the central bank communicates its next moves.
US Dollar Index Outlook: Can bulls reclaim the 50-day moving average?
(Source of US Dollar Index Daily Chart: Yihuitong)
From a technical perspective, the U.S. dollar index is slightly above the 50-day simple moving average of 98.30 during the session. If it can continue to break through this level, it will be expected to retest the high of 98.95, with the next target at 99.42.
Support is now firmly established at 97.66. As trade tensions cool and investors turn their attention back to earnings and Fed policy, short-term momentum favors continued upwards, but a break above the 50-day moving average remains a key confirmation signal for bullish continuation.
At 00:45 Beijing time, the US dollar index was 98.5420/5680, up 0.91%.
The rally extended the dollar’s rebound from last week’s low of 97.11, making the July 16 high of 98.95 re-emerge as short-term resistance. The recent U.S. deal with Japan and the resumption of trade talks with China also contributed to the dollar’s strength as markets increasingly expect less risk of trade disruptions.
Tariff easing stimulates dollar buying, what impact will it have on the euro and yen?
The EU-U.S. deal, announced in Scotland on Sunday, slashed planned U.S. import tariffs on EU goods to 15% from 30%, providing short-term relief to exporters and markets.
The euro initially gained ground in early Asian trading but reversed sharply to close down 0.7% at $1.1653, its biggest one-day drop in 10 weeks. The dollar also strengthened against the yen, rising 0.5% to 148.37, while pushing the pound down 0.24% to $1.3413.
The dollar rose 0.74% against the Swiss franc, indicating a retreat in safe-haven demand, further confirming broad buying of the dollar.
With the central bank meeting imminent, will yield differentials return to focus?
While trade easing has driven a rebound in the dollar index, market focus now turns to this week's Federal Reserve and Bank of Japan meetings. Both central banks are widely expected to keep interest rates unchanged, but markets will carefully read post-meeting comments for policy direction.
If the Fed signals a steady rate and overseas markets continue to take a dovish stance, yield differentials, long suppressed by policy uncertainty, could become more important again. Paul Michael of HSBC noted that a recent trade deal could reduce policy risk, giving more weight to traditional foreign exchange drivers such as relative interest rates.
U.S. tech earnings and Trump-Fed tensions add volatility potential
Upcoming earnings reports from companies such as Apple, Microsoft, Amazon and Meta could further boost the dollar's momentum if their performance attracts money back to U.S. assets. Stocks with larger weights in the index often influence the dollar's moves through global portfolio rebalancing.
Meanwhile, markets remain wary of any political risks related to the Federal Reserve following reports that President Trump nearly tried to fire Fed Chairman Jerome Powell last week. While he ultimately backed off, the tension could reintroduce uncertainty based on how the central bank communicates its next moves.
US Dollar Index Outlook: Can bulls reclaim the 50-day moving average?
(Source of US Dollar Index Daily Chart: Yihuitong)
From a technical perspective, the U.S. dollar index is slightly above the 50-day simple moving average of 98.30 during the session. If it can continue to break through this level, it will be expected to retest the high of 98.95, with the next target at 99.42.
Support is now firmly established at 97.66. As trade tensions cool and investors turn their attention back to earnings and Fed policy, short-term momentum favors continued upwards, but a break above the 50-day moving average remains a key confirmation signal for bullish continuation.
At 00:45 Beijing time, the US dollar index was 98.5420/5680, up 0.91%.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
