23 Jan 2025

• Conflicting White House statements regarding additional levies on Chinese imports create choppy market conditions.
• Investors expect no immediate rate cuts in the first half of the year, aligning with the robust performance of the US economy despite limited Fed official remarks.
• Analysts still attribute the US Dollar’s underlying strength to the US’ enduring economic advantage relative to global peers.
• The US Dollar remains stable on Wednesday following two consecutive days of declines, as the correction appears to persist. Market participants are assessing the implications of the 10% tariff on Chinese imports that President Trump revealed on Tuesday. The US Dollar Index (DXY) is currently approaching the 108.00 threshold and is likely to trend towards the lower range of 107.00. Meanwhile, the Federal Reserve is in a media blackout period, and with the absence of significant economic reports, market players lack direction regarding the forthcoming actions of the data-driven Fed.
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• President Trump announced a possible 10% tariff on imports from China, associating it with ongoing concerns regarding the flow of fentanyl and emphasizing that other countries may also be subject to tariffs. This announcement comes in the wake of previous speculation that the US administration might delay immediate actions, highlighting the inconsistent messaging surrounding trade policy.
  
  The strong performance of the US Dollar is largely attributed to the exceptional growth of the US economy, despite the ongoing discussions regarding trade. Analysts indicate that once the uncertainty surrounding tariffs dissipates, the US Dollar is likely to regain its strength.
  
  In the lead-up to Chair Powell’s press conference following the decision on January 29, there has been a media blackout from the Federal Reserve. The market anticipates a rate cut in July, aligning with the positive economic data from the US.
  
  The ambiguity surrounding tariffs is contributing to increased market volatility; however, currency strategists recommend that traders focus on the underlying economic trends rather than the daily political developments, as the long-term momentum of the US economy continues to support the strength of the Dollar.

• DXY technical outlook: Persistent selling pressure weighs, key levels in play

  Following the bears' breach of the 20-day Simple Moving Average (SMA), the sentiment has shifted to a more bearish stance, leaving the DXY susceptible to further declines. For the DXY to regain its upward momentum, it must decisively surpass the 109.30 level.
  
  Conversely, an inability to maintain the immediate support levels between 107.50 and 108.00 may trigger further downward movement. Nevertheless, the fundamental outlook for the Greenback remains relatively positive, supported by robust economic performance and prudent expectations regarding Federal Reserve policy.