U.S. Dollar Index struggles to hold 100 as traders await U.S.-China trade outcome
The dollar gained 0.75%, rising from 99.50 to close at 100.25
The U.S. Dollar Index (DXY) had a trend reversal this week, shifting from bearish to bullish after the Fed signalled no rate cuts and optimism grew around trade talks between the U.S. and China. These two developments injected fresh support into the dollar and lifted DXY above key resistance.
On Thursday, the dollar gained 0.75%, rising from 99.50 to close at 100.25. That breakout reclaimed both the 20-day EMA and the 100 psychological level, which also marked the previous week’s high. The move pointed to a shift in sentiment, especially as the dollar had spent much of the prior weeks below these levels.
The U.S. dollar index’s RSI rejection below 50 hints at short-term upside exhaustion
However, today's price action tells a different story. Despite briefly extending gains to 100.45 during Asia’s session—boosted by news of a U.S.–UK trade deal—the dollar struggled to hold those highs. DXY retraced and is now testing 100.0 as support in the European session.
DXY price dynamics (April - May 2025). Source: TradingView
The pause in momentum reflects weakening technical signals. The daily RSI remains below the 50-neutral line and has turned lower again after testing it. Declining volume on the 4-hour chart since Thursday also suggests that market participants are in a wait-and-see approach pending Saturday’s U.S.–China trade discussions.
Therefore, the dollar’s near-term direction hinges on the outcome of Saturday’s U.S.–China trade discussions. A break below 100 would expose support at 99.88 (20-day EMA) and 99.70. If the index can hold above 100 and trade deal expectations are met, a push toward 101.0 is possible. Right now, the market appears indecisive, caught between overhanging technical weakness and the potential for fresh fundamental catalysts this weekend.
The U.S. dollar index rebounded after the Fed dismissed rate cuts and Trump hinted at a new trade deal. Price climbed to 99.80 after bouncing from lows and targeted the 100 resistance level.
