Dollar Outlook: Powell uncertainty and retail sales data increase volatility, the US dollar index rebounds
2025-07-18 00:33:51
In the early trading of U.S. stocks on Thursday (July 17), the U.S. dollar index (DXY) rose sharply, breaking through the 50-day moving average of 98.700 for the first time since February, and hitting an intraday high of 98.950.
Despite failing to hold this key technical level, the index remained up for the day and the week. The short-term market direction now depends on whether this rally is a short-lived rebound caused by short covering or the beginning of a sustainable move.
Powell's job status adds uncertainty, exacerbating dollar volatility
Markets reacted immediately after U.S. President Donald Trump rekindled doubts about the stability of Federal Reserve Chairman Jerome Powell's job. Trump denied any plans to fire Powell in the near future but remained critical, raising uncertainty about the Fed's independence.
The dollar initially rose on strong retail sales data but later gave up some of its gains as traders weighed the impact of Powell's possible replacement. Analysts warned that any substantial threat to Powell's position could shake market confidence in U.S. monetary policy and trigger further market volatility.
Retail sales, jobless claims data provide support for the dollar
Economic data helped stabilize the dollar. U.S. retail sales rose 0.6% in June, much higher than the 0.2% expected, while initial jobless claims fell 7,000 to 221,000. These data provided short-term support for U.S. Treasury yields and the dollar.
However, the market reaction was rather muted, with the 10-year Treasury yield falling slightly to 4.433% and the 2-year yield stabilizing at 3.89%.
Traders are closely watching these developments to see if strength in the U.S. consumer can support the dollar's resilience.
Global risks: Japan election, trade deal concerns weigh on yen
(Source of US Dollar Index Daily Chart: Yihuitong)
The yen fell to 148.73 per dollar, close to a one-year low, as political uncertainty intensified ahead of Japan's upper house election.
Prime Minister Shigeru Ishiba's coalition is at risk of losing its majority and trade talks with the United States have yet to make progress.
Japan's exports fell for a second straight month, further fueling concerns about the impact of tariffs.
The weakness of the yen highlights that in the current environment, global investors prefer the US dollar as a relatively safe haven.
Short covering or continued rebound? The outlook for the US dollar index depends on the 98.70 mark
It is crucial for the dollar index to hold its 50-day moving average of 98.700. If this week's gains reflect real buying interest and are supported by solid economic data and rising yields, the dollar index may accelerate towards the resistance range of 99.421.
However, if the rally proves to be driven by short covering, fresh selling could emerge and pull the index back towards the 97.899 pivot. Traders should watch the upcoming international capital flows data (TIC) and US-Japan trade-related news for further directional guidance.
Despite failing to hold this key technical level, the index remained up for the day and the week. The short-term market direction now depends on whether this rally is a short-lived rebound caused by short covering or the beginning of a sustainable move.
Powell's job status adds uncertainty, exacerbating dollar volatility
Markets reacted immediately after U.S. President Donald Trump rekindled doubts about the stability of Federal Reserve Chairman Jerome Powell's job. Trump denied any plans to fire Powell in the near future but remained critical, raising uncertainty about the Fed's independence.
The dollar initially rose on strong retail sales data but later gave up some of its gains as traders weighed the impact of Powell's possible replacement. Analysts warned that any substantial threat to Powell's position could shake market confidence in U.S. monetary policy and trigger further market volatility.
Retail sales, jobless claims data provide support for the dollar
Economic data helped stabilize the dollar. U.S. retail sales rose 0.6% in June, much higher than the 0.2% expected, while initial jobless claims fell 7,000 to 221,000. These data provided short-term support for U.S. Treasury yields and the dollar.
However, the market reaction was rather muted, with the 10-year Treasury yield falling slightly to 4.433% and the 2-year yield stabilizing at 3.89%.
Traders are closely watching these developments to see if strength in the U.S. consumer can support the dollar's resilience.
Global risks: Japan election, trade deal concerns weigh on yen
(Source of US Dollar Index Daily Chart: Yihuitong)
The yen fell to 148.73 per dollar, close to a one-year low, as political uncertainty intensified ahead of Japan's upper house election.
Prime Minister Shigeru Ishiba's coalition is at risk of losing its majority and trade talks with the United States have yet to make progress.
Japan's exports fell for a second straight month, further fueling concerns about the impact of tariffs.
The weakness of the yen highlights that in the current environment, global investors prefer the US dollar as a relatively safe haven.
Short covering or continued rebound? The outlook for the US dollar index depends on the 98.70 mark
It is crucial for the dollar index to hold its 50-day moving average of 98.700. If this week's gains reflect real buying interest and are supported by solid economic data and rising yields, the dollar index may accelerate towards the resistance range of 99.421.
However, if the rally proves to be driven by short covering, fresh selling could emerge and pull the index back towards the 97.899 pivot. Traders should watch the upcoming international capital flows data (TIC) and US-Japan trade-related news for further directional guidance.
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- 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.
