29 Jan 2025

The Dollar Index is gaining momentum, reaching a new weekly peak exceeding 108.00 as market sentiment weakens. US Durable Goods Orders fell short of expectations, decreasing by 2.2% in December, contrary to the anticipated 0.8% rise.

Treasury Secretary Scott Bessent suggested implementing gradual tariffs; however, President Trump advocated for higher, uniform rates, causing unease among investors.

Consumer Confidence for January dropped to 104.1, down from 109.5 in December, indicating increasing worries regarding the economic outlook.

The US Dollar Index (DXY), which assesses the value of the US Dollar relative to a selection of other currencies, continued to rise on Tuesday, maintaining its position above the significant 108.00 threshold. Market sentiment deteriorated due to fresh worries regarding tariffs and disappointing US economic indicators, such as lower-than-anticipated Durable Goods Orders and a drop in Consumer Confidence. Nevertheless, the DXY succeeded in remaining above its recent lows, indicating a degree of resilience.

Daily digest market movers: US Dollar gains despite weak economic data

• Treasury Secretary Scott Bessent proposed incremental tariffs on all US imports, starting at 2.5%, triggering risk aversion in markets.
• President Trump countered Bessent’s suggestion, demanding significantly higher tariffs, further unsettling global financial markets.
• The Conference Board's Consumer Confidence Index fell to 104.1 in January from 109.5 in December, indicating weaker sentiment.
• Durable Goods Orders decreased by 2.2% in December, led by a 7.4% drop in transportation equipment, marking another economic setback.
• Excluding transportation, new orders rose modestly by 0.3%, offering limited optimism amidst broader declines.
• Concerns over overvalued AI shares contributed to a cautious market mood, limiting risk appetite and favoring the US Dollar.
• Investors now flick their eyes to Wednesday’s Federal Reserve decision, where a hold is already priced in.

DXY technical outlook: Resilience above 108.00, correction risks linger

The Dollar Index demonstrated strength by recovering above the 108.00 mark, supported by a resurgence in safe-haven demand. Nevertheless, technical indicators present a varied outlook. The RSI is currently below 50, suggesting a lack of momentum, while the MACD indicates an increase in flat bars, reflecting ongoing bearish pressure.

Conversely, there is potential for an upward correction if the downward trend becomes excessive. Immediate resistance is identified at 108.50, whereas a failure to hold above 108.00 may result in the DXY index testing support around 107.50.