US Dollar Index Falls 1% as Trump Delays Tariffs on First Day in Office

• The U.S. dollar is down 1% in the U.S. Dollar Index, measured against the six major currencies.
• The WSJ publishes an article that says a task force must first be formed on tariffs.
• The US Dollar Index (DXY) crosses 109.00 and heads towards 108.00

The U.S. Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is falling 1% just hours before President-elect Donald Trump’s inauguration as the 47th president of the United States. Several asset classes in the United States will remain closed, such as the Wall Street trading floor and trading of American bonds, on the occasion of Martin Luther King Day. The first seismic shock in the DXY comes after the Wall Street Journal ran headlines that tariffs are not part of the executive orders that President Donald Trump will issue on his first day in office and need to be discussed in more detail before being implemented.

All eyes will be on the aftermath of the inauguration, where President-elect Donald Trump has already confirmed during a rally on Sunday that a battery of new measures and decrees will be adopted. The main ones are, of course, increased tariffs, mass deportations from Chicago and the establishment of a state of emergency over energy and border security, Bloomberg reported. By issuing these last two measures, the next President Trump can greenlight massive drilling and mass deportation of illegal immigrants without having to go through Congress and the House of Representatives.

Developments in the daily summary market: watch out for the boomerang

• The Wall Street Journal publishes a headline confirming that the Trump administration must first form a working group to discuss the real impacts of tariffs on China, Canada and Mexico before considering imposing them.
• At 17:00 GMT the presidential inauguration will take place, during which Donald Trump will be sworn in as the 47th President of the United States.
• Due to Martin Luther King Day, several trading floors in the United States will remain closed all day.
• Stocks are very happy with the weak US dollar. All European stocks and American futures are off to a good start this week.
• The CME FedWatch tool projects a 55.6% chance that interest rates will remain unchanged at current levels at the May meeting, suggesting a rate cut in June. The Federal Reserve (Fed) is expected to remain data-dependent, with uncertainties that could influence inflation during President-elect Donald Trump’s term.
• The US 10-year yield is trading around 4.627% and will remain at this level this Monday, while bond trading in the United States is closed due to the Martin Luther King holiday.

US Dollar Index Technical Analysis: Look at the Big Picture

The US Dollar Index (DXY) sees a divide between bears and bulls. The new Trump administration is preparing to adopt a large number of executive orders, which will make it difficult for markets to assess their impact. With several topics discussed and communicated in advance, it appears that markets have already priced in much of the inflationary pressures from Trumponomics. The question will now be whether the markets are right and whether the DXY index will fall further from its current levels due to an overestimation of the real impact of the measures imposed.

On the upside, the psychological level of 110.00 remains the main resistance to beat. Higher, the next significant upside level to reach before moving further remains at 110.79 (September 7, 2022 high). Once beyond there, it’s a long way to 113.91, an October 2022 double top.

On the downside, DXY is trading along the ascending trendline dating back to December 2023, which is currently around 109.10 as close support. In case of further decline, the next support is 107.35 (October 3, 2023 high). Further down, the 55-day simple moving average (SMA) at 107.29 should make up for any sharp decline.

US Dollar Index: Daily Chart