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The US dollar is in a period of uncertainty, with markets awaiting key economic data and policy updates that could decide whether it regains strength or continues to weaken.
Dollar index struggles to find direction
The US dollar index (USDX) continued its downward trend, slipping to 98.02, down 0.05% during the day following a 0.4% decline last week.
Since reaching a peak near 110 in February, the index has dropped more than 10%, hitting a low of 95.97 in June.
An attempted rebound in late July lost momentum, with the index now consolidating within a range bounded by support at 97.50 and resistance at 99.50.
The 30-day moving average is currently acting as a ceiling, limiting any upward movement.
Picture: USDX retreats to 98.021, testing key support levels after extended decline from 109+ highs, with MACD showing mixed signals on the VT Markets app.
The daily MACD indicator has flattened close to the zero line, signalling that downward pressure is easing but with no clear signs of a bullish reversal yet.
Market participants seem hesitant to commit to large directional trades ahead of the US July Consumer Price Index (CPI) report on Tuesday.
Should inflation data surprise to the upside, a rally towards the key 100.00 psychological level could follow, whereas a softer reading may lead to a test of the June lows once more.
Markets await key data and policy developments
This week’s economic and geopolitical developments are set to shape the dollar’s near-term direction.
The upcoming US CPI figures will influence expectations around the Federal Reserve’s monetary policy decisions, while the August 12 deadline for US-China tariff talks adds pressure to global trade relations.
Recent news that Nvidia (NVDA) and AMD (AMD) have agreed to contribute 15% of their China revenue to the US government might ease tensions and increase the likelihood of a 90-day extension on tariffs.
On the geopolitical scene, a Russia-US summit planned for Friday introduces further uncertainty.
In parallel, the cryptocurrency market surged after President Trump’s executive order allowed cryptocurrency holdings in US retirement accounts, with Bitcoin rising 3% to $121,909 and Ether gaining 2.1% to $4,307.
A cautious market outlook
With the USDX hovering near multi-month lows and heightened volatility risk, short-term price action will largely depend on inflation data and trade-related announcements.
A daily close above 99.50 would mark the first break above the 30-day moving average since May, potentially signalling a momentum shift.
Conversely, failure to maintain support at 97.50 could intensify selling pressure, pushing the index back down towards the June low of 95.97.
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