U.S. Dollar Index recovery stalls despite Trump policy softening and trade rhetoric
Dollar Index rebounds 2% to 99.55 as Trump softens Fed and China stance.
The U.S. Dollar Index (DXY) gained 2% this week, rebounding off a key support level at 97.50 to reach a 4-day high of 99.55.
This sharp move higher followed a mix of technical recovery and a shift in fundamental tone from U.S. officials that helped the dollar gain ground temporarily.
Fueling the midweek advance, President Donald Trump backed away from threats to dismiss the Federal Reserve Chair and softened his position on China. His remarks boosted risk sentiment and contributed to dollar strength as traders interpreted the shift as a step away from aggressive policy conflict. Further support came when Treasury Secretary Scott Bessent stated that the ongoing U.S.-China trade stalemate is unsustainable.
DXY price dynamics (Nov 2024 - April 2025). Source: TradingView
The shift in rhetoric eased some of the pressure on the dollar from prior weeks, where it had been moving in a broader downtrend. The 97.50 level acted as a strong base, leading to a short-term technical breakout above the 20-period moving average on the 1-hour chart.
U.S. Dollar Index RSI on 4-hour chart drops to neutral from bullish territory
However, Thursday brought a reversal in sentiment. DXY began to slip during the Asian and European sessions. As of the European session, the index is trading at 98.94, recording a 0.6% decline for the day. Price action has fallen back below the 1-hour 20-period moving average, suggesting weakening near-term momentum.
The next technical level to watch is 98.70, which could act as intraday support. Meanwhile, the 4-hour Relative Strength Index has cooled from bullish territory and now sits at a neutral reading of 50, further reflecting the loss of momentum after the earlier surge.
The dollar’s short-term trajectory hinges on whether it can find support above 98.70 or if profit-taking and mixed policy signals will trigger a deeper retracement. Traders will be watching for follow-through in tone from U.S. policymakers and fresh developments on trade discussions to gauge whether this week’s bounce was sustainable or temporary.
The dollar rebounded after Trump hinted at tariff relief and backed the Fed chair. Technically, it found support at 97.65 and bounced to 99.35 before pulling back to 98.80.
