U.S. Dollar Index stalls near 99.20 as investors brace for Fed policy guidance
U.S. Dollar Index Opens Higher at 99.10 Ahead of Fed Decision, U.S.-China Trade Talks.
The U.S. Dollar Index opened today, Wednesday, May 7, with a gap higher at 99.10, reflecting shifting sentiment across currency markets as investors position for two key events; today’s Federal Reserve decision and upcoming U.S.-China trade talks scheduled for Saturday.
The move marked a partial rebound from Tuesday’s close at 98.85, though early gains lost momentum after price hit resistance at the 99.20 zone during the Asian session.
That 99.20 area carries technical significance. It aligns with a death cross formation on the 4-hour chart between the 20 and 50 EMA, an early sign that the bearish pressure could extend unless price decisively breaks above it. The rejection from this resistance led to an intraday pullback, pushing DXY back near the 99.00 psychological level during the European session.
DXY price dynamics (April - May 2025). Source: TradingView
Technically, the broader trend remains bearish. The dollar has declined for three consecutive trading days, extending losses from last week’s rejection near the 100.00 mark. Tuesday’s session alone saw the index fall to 98.75, its lowest level in five days. The RSI on both daily and 4-hour charts continues to sit in bearish territory, adding to the case for another potential leg lower in today’s session. If that plays out, a move toward 98.45, last week’s low, is a likely next stop.
U.S. Dollar Index pressured as Asian funds trim U.S. exposure before U.S.-China talks
On the fundamental side, market attention is split between the Fed's rate announcement and ongoing trade developments. The dollar edged higher earlier today against safe-haven currencies like the yen and Swiss franc, although it held steady versus the euro. This reflects investor positioning ahead of the Fed’s decision later today, where policymakers are expected to hold rates steady. However, what matters most to the dollar’s direction is forward guidance, any signal regarding future rate moves could set the tone for the next leg.
Investor sentiment is also being shaped by news that the U.S. and China will resume trade discussions on Saturday. This development has slightly reduced concerns of an escalating trade conflict, although uncertainty still lingers as major institutional investors across Asia are reported to be reducing their U.S. asset exposure, which could place further structural pressure on the greenback in the medium term.
Overall, DXY is trading at a technical inflection point. A reclaim of the 99.20 resistance level could open a path back toward the 100.00 threshold, while failure to do so, especially in the absence of a hawkish Fed tone, could reinforce the ongoing bearish sequence.
The U.S. Dollar Index fell for a third straight day as short-term Treasury yields eased despite strong ISM data. DXY stayed trapped between 99 and 100, signalling market indecision.
