U.S. Dollar Index rebound loses steam at 103.2 amid US-China tariff standoff
The U.S.Dollar Index (DXY) is showing signs of hesitation after a brief recovery streak, as escalating trade tensions and renewed recession concerns start to weigh on sentiment. Traders are recalibrating their expectations for monetary policy, leaning towards a rate cut in June, while the greenback battles key resistance levels.
The dollar had started April on the backfoot, falling to 100.9 before staging a rebound supported by an intraday pattern of higher highs and higher lows. This recovery took the DXY to a 3-day peak of 103.2 on Monday. However, that move stalled in Tuesday’s Asian session, blocked by resistance from the 50 EMA on the 4-hour chart. During the European session, the index failed to regain upside momentum and hovered around 102.6 during the North American hours.
U.S. dollar price dynamics (Jan - April 2025). Source: Tradingview
Monetary policy outlook shifts dovish following trade tensions
The hesitation in dollar strength aligns with rising expectations of a Fed rate cut. Market sentiment has shifted dramatically following escalating rhetoric between the United States and China. President Trump’s latest threat to impose a 50% import tariff on Chinese goods, unless Beijing backs down from its planned 34% retaliation, has spurred recession fears. A spokesperson from China’s Ministry of Commerce labelled the US move “a mistake on top of a mistake” and vowed to fight to the end, intensifying market unease.
Against this backdrop, bets on monetary policy easing have grown, capping the dollar’s recent rebound. The outlook for US economic growth has dimmed under the weight of potential trade disruptions, which further justifies traders’ pivot toward a more dovish Fed stance.
From a technical angle, the DXY is trading just above a trendline that has defined its recent uptrend. A bounce off this support may lift the price beyond Monday’s 103.2 high. But failure to hold the line could drag the index toward the 102.0 psychological level. The 4-hour RSI sits at a neutral range, while the 50 EMA continues to present a ceiling for any bullish push. Until a decisive move occurs, the dollar remains trapped between technical indecision and fundamental stress.
The dollar rebounded from oversold levels but failed to break above the 102.8 resistance. It traded indecisively after hitting that ceiling, reflecting ongoing economic uncertainty.
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