The US Dollar Index rebounded strongly, breaking through 101.

The US dollar index has recently surged, successfully breaking through critical technical resistance levels amidst the backdrop of the US-China 90-day tariff reduction agreement. The improved market risk sentiment continues to strengthen the bullish momentum for the dollar.

Agreement Boosts Risk Appetite, Dollar in Demand

On Monday, the US and a major Asian nation issued a joint statement announcing a halt to a new round of tariffs, allowing time for negotiations over the next 90 days. This news has alleviated market concerns about a global economic slowdown, triggering a broad rise in global risk assets. The dollar stood out in the risk-aversion and asset repricing environment, showing particularly robust performance.

Rodrigo Catril, a foreign exchange strategist at National Australia Bank, stated: “This agreement far exceeds market expectations, indicating a quick US response to the negative economic impact of high tariffs, which also leads the market to a more optimistic revision of future policies.”

The dollar rose against most major currencies. It surged 2.1% against the yen to 148.29 and gained against the Swiss franc to 0.8448. Although the dollar saw slight adjustments on Tuesday, the upward trend remains solid. The Euro, the British pound, the Australian dollar, and the New Zealand dollar slightly rebounded yet remained at low levels, showing the dollar's relative advantage.

Fed Rate Cut Expectations Lowered, Policy Path Repriced

Another significant driver of the recent dollar rise is the market’s reassessment of the Federal Reserve’s future policy path. With decreased trade uncertainty, there is a general view that the urgency for further rate cuts by the Fed has diminished.

Federal funds futures indicate a roughly 56 basis points rate cut priced in by December this year, a significant narrowing from earlier expectations. David Doyle, head of Macroeconomic Research at Macquarie, noted: “This agreement reduces the downside risks to the economy prompted by high tariffs, suggesting the Fed might proceed more cautiously in the short term.”

Meanwhile, US Treasury yields have also climbed, with the 2-year yield stable at 3.9977% and the 10-year yield rising to 4.4551%, both reaching one-month highs, further supporting the dollar’s momentum.

Technical Breakthrough, 101 Level Becomes Key Support

From a technical perspective, the US dollar index (DXY) has shown a significant breakthrough on the daily chart. The current price has stabilized above the previous 100.80-101.20 consolidation range, indicating strengthening bullish forces in the market.

The index has consecutively closed above the 20-day and 50-day moving averages, which are in a bullish alignment, indicating a positive trend. The MACD indicator has formed a golden cross, with the histogram extending, supporting further upward movement.

If the dollar index can hold the 101 level in the upcoming trading days, the next target may rise to around 102.50; if it falls below 100.80 in the short term, it may trigger short-term adjustment pressure, and attention should be paid to shifts in market sentiment and Fed communication guidance.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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