DXY fell more than 0.5% on Wednesday, drifting into session lows around 99.30 after opening close to 99.90. The index has been under steady selling pressure all session, carving a series of lower highs on the intraday chart as the ceasefire narrative gained traction. Wednesday’s slide extends Tuesday’s break through the 100.00 handle and has now unwound a significant portion of March’s 2.3% safe-haven rally from the January lows near 95.55.
The session’s tone was set early after President Trump posted on Truth Social that Iran’s president had requested a ceasefire, adding that the US would only consider the offer once the Strait of Hormuz is “open, free, and clear.” This follows Trump’s late-Tuesday remarks that he expects US military forces to leave Iran within two to three weeks. Iran’s foreign minister pushed back against what he described as threats and deadlines, but the market read the exchange as an incremental step toward de-escalation, triggering a broad rotation out of safe-haven assets. With Trump set to deliver a national address later Wednesday evening, traders remain on edge; without a definitive all-clear, near-term volatility is expected to persist.
On the data front, the Automatic Data Processing (ADP) employment change for March printed 62K against a 40K consensus, February retail sales rose 0.6% MoM versus 0.5% expected, and the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) edged to 52.7 for a third consecutive month of expansion.
The ISM Prices Paid subindex jumped to 78.3 from 70.5, well above the 73 consensus, pointing to intensifying input cost pressures that could complicate the Federal Reserve’s rate path. Despite the broadly supportive data, the ceasefire narrative overwhelmed fundamentals; Friday’s Non-Farm Payrolls (NFP) report, with a 60K consensus against a prior negative 92K print, looms as the week’s marquee release.
DXY 5-minute chart
Technical Analysis
In the 5-minute chart, Dollar Index Spot trades at 99.34. Price remains capped well below the 200-period EMA near 99.60, keeping the near-term bias mildly bearish despite the latest stabilization. The sequence of lower closes from the session open and the inability to challenge the descending average highlight persistent downside pressure. Stochastic RSI has rolled over from overbought territory and is now easing toward mid-range, indicating fading upside momentum rather than outright exhaustion, which aligns with a corrective drift lower rather than a decisive trend reversal.
Initial resistance emerges at 99.45, where recent intrabar highs clustered ahead of the firmer cap at the 99.60 area marked by the 200-period EMA. A break above 99.60 would be needed to neutralize the current downside bias and open the way toward 99.75. On the downside, immediate support is seen around 99.30, guarding the path toward a deeper slide toward 99.20 if selling pressure extends. As long as price trades below 99.45–99.60, rallies are likely to face supply, keeping the intraday risk skewed to the downside.
In the daily chart, Dollar Index Spot trades at 99.34. The near-term bias is mildly bullish as price holds above the rising 50-day exponential moving average near 98.90 and remains anchored over the 200-day average around 99.10, keeping the broader uptrend intact despite the recent pullback from the 100.50 area. Stochastic RSI has eased from overbought extremes but stays above oversold territory, indicating fading upside momentum rather than a confirmed reversal, which favors consolidation or a shallow correction within an ongoing bullish structure.
Initial support emerges at the 99.00–98.90 zone, where the 200-day and 50-day exponential moving averages converge, and a break below this area would expose the next downside level toward 98.50. On the topside, immediate resistance aligns near 99.90, ahead of the recent swing high at 100.50, and a daily close above this latter barrier would reopen the path toward the 101.00 region.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
