U.S. Dollar Index plunges to 6-month low amid trade tensions and weak services PMI
U.S. Dollar Index hits six-month low amid trade war and weak data.
The U.S. Dollar Index (DXY) has been on a sharp decline since April 1st, down by 2.1%, and is now flirting with a significant support level.
After breaking below 102.8, the DXY reached a fresh 6-month low near 101.50, a level not seen since October 2024. Given DXY oversold RSI conditions across the 1-hour, 4-hour, and daily timeframes, traders are keeping a lid on upcoming key economic data and trade developments that could shape its next move.
The broader macroeconomic landscape has been unfavorable for the dollar. The latest U.S. trade policy changes include nearly 60% tariffs on China, 20% on EU goods, and a universal baseline tariff of 10% in place. These measures, presented as "discounted rates," leave room for escalation, particularly if retaliation from trade partners follows. Markets are watching for potential European retaliation in the services sector, an area where the U.S. maintains a significant surplus. The risk of a prolonged trade conflict has kept investors wary, exerting downward pressure on the dollar.
U.S. dollar price dynamics (Sept 2024 - April 2025). Source: Tradingview
Weaker job data and soft services growth could accelerate dollar selloff
Today's session brings several data releases that could influence DXY's trajectory. Unemployment claim is forecasted at 225K, marginally higher than the previous 224K, while the Final Services PMI is expected at 54.1, down slightly from 54.3. The ISM Services PMI is also projected to soften to 53.0 from 53.5. Any weaker-than-expected data could further dampen sentiment around the dollar.
The 101.50 support level remains a key battleground. If buyers defend this zone, a temporary recovery toward 102.80 could unfold. However, sustained weakness in economic data and further trade tensions could accelerate losses, bringing 99.85 into focus. Market participants will be closely monitoring upcoming developments to gauge whether the dollar can stabilize or if the downtrend has further to run.
The U.S. Dollar Index struggled to break out of its tight consolidation range. Weak economic data kept the dollar in a holding pattern, limiting upward momentum.
