U.S. Dollar Index bearish bias strengthens below 100 amid fiscal deficit woes
U.S. Dollar Index slips below 100 after Moody’s downgrade and tax cut fears
The U.S. Dollar Index (DXY) opened the week on a bearish footing, extending its recent slide following a credit rating downgrade from Moody’s.
On Friday, the agency cut the U.S. sovereign credit rating from Aaa to Aa1, citing growing concerns over the nation's expanding debt levels. This downgrade came just as the House panel advanced President Trump’s tax cut proposal, which is expected to further inflate the federal deficit.
These fundamental developments set a negative tone heading into Monday, May 19. DXY opened the session at 100.42 but declined nearly 0.8% during the European hours, touching a low around 99.65. That move broke below key short-term supports, including the 20-day EMA and the psychological 100.00 level. More notably, the decline also took price action beneath last week’s low of 99.80, exposing vulnerability to further downside.
The U.S. Dollar Index risks further losses toward 98.50 on RSI and EMA breakdown
As seen on the 4hr chart, Monday’s breakdown pushed DXY below the 20, 50, and 100 EMAs, reinforcing short-term bearish momentum. Both the 4-hour and daily RSI indicators have now shifted into bearish territory, suggesting broader market alignment behind the downside move.
DXY price dynamics (April - May 2025). Source: TradingView
The recent price action reflects a continuation of last week’s pullback from the peak of 101.50. However, near the 99.65 level lies a rising trendline that has provided consistent support since April’s low. This trendline could offer some temporary relief if buyers step in, but the weight of the downgrade and fiscal outlook may keep pressure intact.
If the current bearish momentum continues, attention could shift to the next major liquidity zone near 98.50, a level where short-side targets and stop orders may be clustered. As long as DXY trades below the 100 level and moving averages continue to slope downward, rallies are likely to be sold into. The market will be watching closely for any shift in fiscal policy or economic data that might restore support for the greenback.
The U.S. Dollar index fell after weaker retail sales triggered a drop in Treasury yields. Price hovered near the 100 support level as momentum slowed
