U.S. Dollar Index struggles to recover as market discounts temporary tariff relief
Tariff delay to July 9 triggered a short-term shift in sentiment
The U.S. Dollar Index (DXY) extended its broader downtrend on Monday, sliding to an intraday low of 98.27 before staging a modest recovery in the European session.
The move marks a continuation of the bearish momentum that has defined DXY’s trajectory since mid-May, and aligns with the longer-term bearish structure that has prevailed since President Donald Trump resumed office in January.
- DXY fell to 98.27 before a weak European session bounce
- Tariff delay to July 9 triggered a short-term shift in sentiment
- 98.88 stands as key resistance that could cap any recovery
Last week, the index declined by 1.8%, wiping out early May gains which pushed price to a weekly close at 98.6. The selloff deepened further in early Monday trade, briefly pulling the index below the previous four-week lows. However, buyers stepped in during the European session, lifting DXY back toward 98.6 in a short-lived recovery effort.
U.S. Dollar Index price dynamics (Dec - May 2025). Source: TradingView
The limited bounce appears driven by a shift in market mood after President Trump announced an extension of the tariff deadline on the European Union to July 9. This announcement triggered risk-on sentiment, prompting a pullback in safe-haven demand for the U.S. dollar.
The U.S. Dollar Index short and long-term RSI divergence raises risk of failed breakout
From a 4HR technical perspective, the DXY structure remains heavy. The 20, 50, and 100 exponential moving averages are all trending downward in alignment, reinforcing the broader bearish pressure. The 20 EMA on the 4-hour chart is also approaching the 98.88 mark, now acting as an immediate resistance level.
Momentum indicators offer a split view. While the 4-hour RSI has moved into bullish territory, suggesting that the index could extend today’s recovery towards the 98.88 barrier, the daily RSI stays in bearish terrain. This divergence hints that any move higher could be limited and may serve only as a technical retest before the broader decline resumes.
If the index fails to clear the 98.88 resistance, the larger bearish setup is likely to reassert itself. In that case, further losses could press the dollar index toward the 98.00 psychological handle in the sessions ahead.
In summary, the U.S. Dollar Index is caught between short-term recovery efforts and longer-term downside pressure. Traders will be watching the 98.88 level closely. A rejection from that zone would confirm the prevailing downtrend and potentially set the tone for the rest of the week.
The U.S. Dollar Index dropped after hitting resistance and failing to hold Thursday’s recovery. Fresh fiscal concerns from Trump’s budget bill added pressure and deepened the bearish trend.
