U.S. Dollar index hits three-week high as services PMI jumps to 54.3
Dollar Index extends gains to three-week high amid PMI divergence.
The Dollar Index (DXY) has extended its bullish streak, rising for four consecutive trading days and reaching a three-week high of 104.07 on Monday.
This move came after breaking out of a two-week range between 103.70 and 102.80, signaling renewed buying pressure. However, the 100-period EMA on the 4-hour chart acted as resistance, halting further gains and leading to consolidation around 103.90 during Tuesday’s Asian session.
The recent strength in the dollar comes as market sentiment shifts in response to strength in the Services PMI and ongoing tariff concerns. The manufacturing PMI fell to 49.8 in March, signaling a contraction in the manufacturing sector as businesses become more cautious about economic conditions. While this might typically weigh on the dollar, strength in the Services PMI rising to 54.3, a three-month-high, indicated that inflationary pressures remain intact, as service providers expect to pass on higher costs to consumers. This divergence supported the dollar by reinforcing expectations that the Federal Reserve may keep rates higher for longer.
Consumer confidence and home sales data in focus as DXY tests EMA resistance
DXY price dynamics (Feb 2025 - March 2025). Source: TradingView.
From a technical perspective, the 4-hour RSI remains in bullish territory, suggesting that the short-term momentum is still favorable for buyers. However, the daily RSI, while rising, remains in bearish territory, indicating that the broader uptrend is not fully confirmed. Price action indicates that the 104.0 level serves as a key resistance zone, with the dollar needing a strong catalyst to break higher.
If DXY sustains a break above 104.0, the next resistance stands at 104.50, which could open the door for further upside. However, failure to clear this level may trigger a retracement toward 103.70. A weaker-than-expected CB Consumer Confidence reading (forecasted at 94.2 vs. previous 98.3) could limit dollar gains, while a strong New Home Sales report (expected at 682K, up from 657K) might provide support. Traders should watch these data releases closely for signs of continued dollar strength or potential pullbacks.
The dollar strengthened after jobless claims data signaled a stable labor market. However, DXY failed to break 103.7 resistance, keeping price action in consolidation.
