U.S. Dollar Index breaks above 101.0 as tariff truce with China fuels price recovery
The index jumped over 1% intraday
The U.S. Dollar Index (DXY) extended its recovery on Monday, May 12, posting a strong upside move during European trading hours.
The rally was triggered by the announcement of a 90-day tariff truce between the U.S. and China, which temporarily lowered tariffs on each other’s goods and eased concerns about a prolonged trade standoff. In response, risk appetite surged across global markets, U.S. yields rose, and demand for the dollar increased.
This fundamental shift fed directly into the DXY’s technical momentum. The index jumped over 1% intraday, briefly reaching a high near 101.38 before pulling back to retest the 101.0 level, which has now flipped from resistance to support. The initial rally marked a significant break above the psychological 100.0 barrier and continued a three-week stretch of bullish closes. The DXY has now rallied from a multiyear low of 97.50 to above the 101.0 threshold—a recovery of over 3.5%.
DXY daily RSI turns bullish for first time in months, confirming trend shift
Short-term technical indicators point to temporary overextension. The 4-hour RSI has entered overbought territory, suggesting that some consolidation or mild retracement could occur in the near term. However, the daily RSI has shifted into bullish territory for the first time in months, reinforcing the broader positive sentiment.
DXY price dynamics (Nov 2024 - May 2025). Source: TradingView
Looking ahead, the 50-day EMA near 101.6 stands as the next key resistance. A successful close above this level would confirm the start of a sustained broader uptrend. Traders are also watching for any policy reversals or remarks from President Trump that could reignite uncertainty.
Unless fresh geopolitical risks resurface, the combination of easing trade tensions and rising U.S. yields could support continued strength in the dollar. The next upside target lies near 102.0, while any pullback below 101.0 could delay further gains.
The U.S. Dollar Index reversed higher after the Fed ruled out rate cuts and trade talk optimism resurfaced. It struggled to stay above 100 as traders paused for clarity from the U.S.-China talks.
