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Navigating the US Dollar (DXY): Tariffs, Data, and Technicals
- The US Dollar Index (DXY) rose to a three-week high due to positive US business activity data and improved sentiment.
- US Services PMI showed growth, driving the overall positive economic data.
- Market focus shifts to Friday’s PCE data and developments around the proposed tariffs due on April 2nd.
Most Read: Markets Weekly Outlook – US Dollar, Inflation & PMI Data Analysis
The US Dollar Index (DXY) rose to a three-week high earlier in the US session. The Dollar stretched its gains into a fourth consecutive day thanks to an uptick in US Business activity and tariff chatter.
The tariff chatter came in the form of a report that President Trump will be flexible with his upcoming ‘universal tariff’ proposal. It appears as though markets are now expecting tariffs to be less severe on April 2nd.
Risk sentiment as a whole improved on the news with risk assets across the board benefitting.
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US DATA Surprises
S&P Global’s flash U.S. Composite PMI Output Index, which measures activity in manufacturing and services, rose to 53.5 in March from 51.6 in February, signaling growth in the private sector (anything above 50 shows expansion).
S&P Global Services PMI
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Source: LSEG
The increase was driven by the services sector, helped by warmer spring weather. Meanwhile, manufacturing slipped back into contraction after two months of growth.
The fact that the services sector was a driving force is key as the US is primarily a service driven economy, something the Trump administration is looking to change. Whether or not it is achieved will be interesting to observe at the least.
Looking Ahead
Looking ahead to the rest of the week, attention will shift to Friday’s PCE data release.
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For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
I however expect markets and the Dollar will largely be taking their cues from developments, reports and any chatter around the proposed tariffs due on April 2nd. If markets perceive the comments as a sign that severe tariffs are on the way, risk sentiment could take a hit and so could the US Dollar.
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Technical Analysis – US Dollar Index
From a technical standpoint, the US Dollar Index (DXY) closed above a key resistance level on Friday.
This set the stage for a move higher to start the week with a clear run ahead toward the 105.00 handle. However, market sentiment has been shifting pretty quickly of late and I would not rule out a retest of immediate support at the 104.00 handle.
If the DXY is able to reach the 105.00 handle which houses the 200 day MA, a break above this level will bring the 105.63 handle into focus.
Meanwhile, on the downside a break of 104.00 support may bring the 103.65 handle into focus.
The RSI period-14 may prove useful as well. Monitor its behavior as it approaches the neutral 50 level with a break above a good sign that momentum may potentially have shifted. A rejection may mean a retest of recent lows.
US Dollar Index Chart, March 24, 2025
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Source: TradingView (click to enlarge)
Support
- 104.00
- 103.65
- 103.17
Resistance
- 105.00 (200-day MA)
- 105.63
- 106.13
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