U.S. Dollar Index faces pressure from politics, credit rating and yield curve divergence
U.S. Dollar Index falls below 99.00 as May gains erased amid mounting debt concerns
The U.S. Dollar Index has extended its decline this week, slipping to a low of 98.95 as of the European session on Wednesday.
This marks the third straight daily loss and pushes the weekly decline to 1.4 percent, a move that has erased all gains for May. The index now trades below the month’s opening price at 99.30, signalling a clear shift in directional momentum.
Highlights
- The U.S. Dollar Index breaks key support as May losses deepen
- Moody’s downgrade and debt risks fuel bearish dollar momentum
- RSI nears oversold zone while downside pressure accelerates
Investor sentiment on the U.S. dollar has been weighed down by a series of factors. First is the credit rating downgrade from Moody’s. The agency cited the United States' swelling 36 trillion dollar debt burden as a critical concern, made worse by President Trump’s proposed tax cut plan which could add another 3 to 5 trillion dollars in debt. In addition, stalled trade talks and growing international pressure on Washington to reconsider its tariff stance have increased uncertainty.
The U.S. Dollar Index dips below 99.00 as sentiment sours and trendline support breaks
From a technical view, the breakdown below the bullish trendline that supported the broader recovery since April’s low marks a key shift. Tuesday’s close below this line signalled the end of the broader recovery, and today’s extension lower strengthens that bearish signal. Notably, today’s 0.5 percent loss has already matched the total decline from Tuesday, showing that downward momentum is accelerating.
Despite elevated Treasury yields, including the 30-year bond touching 5 percent during Asian hours, the dollar has failed to attract meaningful support. Instead, traders have rotated into traditional safe haven currencies like the Japanese yen and Swiss franc, reflecting deeper concerns about the fiscal outlook.
The DXY 4-hour RSI is now hovering near 30, close to entering oversold territory. However, price still has room to push lower toward the previous two-week low of 98.75. If there is any rebound, the first level to watch is 99.55, which was the previous day’s low and now acts as resistance.
Overall, the U.S. Dollar Index is facing pressure from both deteriorating fundamentals and weakening technical structure. Market focus will now turn to whether the 98.75 support can hold, or if further risk-off flows into other safe havens continue to weigh on the greenback.
DXY bounce from 99.6 keeps bullish channel intact despite weak sentiment. Geopolitical tensions and debt credibility risks keep directional bias uncertain.
