U.S.Dollar Index stabilises on support as market weighs tariff relief and Fed remarks
The US Dollar Index (DXY) fell below key support at 98.80 on Wednesday
The U.S. Dollar Index (DXY) has shown signs of stabilising this week after recovering from oversold conditions on the daily RSI, where price action last week suggested seller fatigue. Earlier this week, the index found support at 97.65 and climbed to a 3-day high of 99.35, before slipping in Wednesday’s session to around 98.80, a key support level now reinforced by the 100 EMA on the 1-hour chart.
The bullish recovery is closely tied to recent macro developments. President Trump on Tuesday signalled a shift in tone by indicating that tariffs on Chinese goods could be “substantially” reduced and affirmed that he had no intention of removing Federal Reserve Chair Jerome Powell. These remarks helped improve confidence in the Fed independence and reduced anxiety over U.S.-China trade tensions, both of which contributed to the dollar’s short-term rebound.
DXY price dynamics (Jan - April 2025). Source: TradingView
Despite the short-term bounce, a major dollar recovery may not be guaranteed due to the current U.S. administration’s longstanding preference for a weaker currency and Trump's unpredictable policy moves. Such headwinds could limit any sustained upside in the dollar.
Bullish RSI crossover supports dollar bounce amid Trump policy shift
Technically, although the daily RSI is recovering from oversold territory, the 4-hour RSI has moved into bullish territory, suggesting short-term upside potential. The price’s reaction to the 98.80 support level will be critical. A bounce from here could retest the psychological 100 level, particularly if the market sees further reduction in geopolitical pressure or macro surprises in upcoming data.
So far this week, the dollar has posted a modest +33-point gain (+0.33%). While that’s not a major move, it reflects the market’s reassessment of dollar direction following oversold conditions and changing political headlines. For traders, today’s price action around the 98.80 support may determine whether the recent recovery extends or stalls.
Trump’s criticism of Powell reignited concerns over Fed independence, adding to dollar weakness. Technically, DXY broke down to test the 97.5 support, its lowest since February 2022.
