As of writing this, the US Dollar Index (DXY), which measures the strength of the US Dollar (USD) against six major currencies, is trending downwards and approaching the 100.30 mark. The decline can be attributed to investor skepticism towards the USD, as we can see in Moody’s recent announcement to downgrade the US’ credit rating. This move had already been predicted by several analysts since President Donald Trump’s implementation of tariffs. This could have an impact on the Federal Reserve’s plans, which will be discussed in upcoming speeches by Fed officials on Monday.
This downgrade from Moody’s may lead to an increase in yields as investors demand a higher risk premium before investing in US debt. This could potentially complicate the Fed’s plans to lower its benchmark interest rate, causing a disconnect between actual monetary policy and market rates.
The US Dollar Index is losing its credibility and status as a safe-haven currency. This downgrade from Moody’s only confirms what analysts have been predicting since the US government started implementing tariffs. The USD is no longer seen as stable and it’s only a matter of time before this reflects in the DXY.
On the upside, the DXY may face resistance at 101.90, a key level that has been observed in the past. The area around this level has previously acted as a pivot point and played a role in forming a head-and-shoulders pattern in 2023. The 55-day Simple Moving Average (SMA) at 101.94 adds to the significance of this resistance level. If USD bulls manage to push the DXY above this level, the next key resistance to watch out for is at 103.18.
On the other hand, the previous resistance at 100.22 is now acting as strong support. This is followed by the year-to-date low of 97.91 and a pivotal level at 97.73. Further down, technical support can be found at 96.94, while the lower end of the trading range stands at 95.25 and 94.56. These levels were last seen in 2022 and represent new lows for the DXY.