Capital Street FX review: Analysts highlight importance of U.S.-China trade progress for dollar trend
After falling below the key 99.00 mark, the U.S. Dollar Index (DXY) continued its decline on Monday, trading near 98.80. The dollar’s weakness was driven by the growing likelihood of a Federal Reserve rate cut this week following weaker-than-expected inflation data.
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However, despite soft inflation, the dollar’s fall was partially offset by improving sentiment regarding U.S.-China trade relations. U.S. Treasury Secretary Scott Bessent confirmed that “productive discussions” during the ASEAN Summit in Kuala Lumpur helped avert the implementation of 100% tariffs on Chinese imports.
Bessent also hinted that China may delay its export licensing program for rare earth metals by one year — a sign of progress toward a more stable trade environment. Market attention now shifts to Thursday’s meeting between Presidents Donald Trump and Xi Jinping, where both leaders are expected to agree on a framework for a potential trade deal.
Technical outlook
The DXY remains below the key resistance level of 99.00, with immediate support near 98.60. A sustained drop below this level could push the index further down to 98.30, while a recovery above 99.00 might attract renewed buying interest.
Momentum indicators suggest moderate downward pressure in the near term, though improving risk sentiment and trade optimism may limit deeper losses.
Capital Street FX analysts note that traders this week will closely monitor:
- The Federal Reserve’s rate decision on Wednesday (expected -25 bps)
- The Trump–Xi meeting on U.S.-China trade relations
- U.S. labor market data and the Fed’s economic outlook
- Key DXY levels: resistance at 99.00, support at 98.60 and 98.30
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