• The US Dollar in the green on Friday, with traders buying into President Trump’s comments. 
• Meanwhile, China came out pushing back against comments as trade talks are underway between the two countries. 
• The US Dollar Index remains capped below the 100.00 round level. 

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades slightly higher and turns positive for the week on Friday. Traders are divided, though, after the US and China left contradictory comments on whether trade deal negotiations are taking place. United States (US) President Donald Trump said on Thursday that the US is talking to China, propping up the equity markets higher, and favoring the Greenback’s return. 

Additionally, citing sources familiar with the matter, Bloomberg reported on Friday that China is mulling suspending its 125% tariff on some US imports, including medical equipment, ethane and plane leasing. However, China's Foreign Ministry clarified that “China and the US are not having any consultations or negotiations on tariffs.” When asked about tariff exemptions on some US goods, the Foreign Ministry spokesperson said, “I'm not familiar with specifics, I refer you to competent authorities.”

On the economic calendar front, there is a very light calendar ahead. The Federal Reserve (Fed) has entered its blackout period ahead of its upcoming Federal Open Market Committee (FOMC) meeting on May 7. Meanwhile, this Friday, traders can look at the final April reading for the University of Michigan Consumer Sentiment numbers and inflation expectations. 
 

Daily digest market movers: Trump says talks are there

• Ahead of the US trading session, US President Trump confirmed the US and China are in talks, even confirming to Reuters that Chinese President Xi Jinping has been on the phone with the US president. Trump did not disclose with whom trade talks are taking place. The rumor meanwhile got confirmed by United States Secretary of the Treasury Scott Bessent. Details on the content or when a deal is expected remain sketchy.
• China from their end are still denying talks and demand these unfounded rumors end. In addition, China asks first to see all imposed tariffs being lifted before talks could be considered.
• At 14:00 GMT, the University of Michigan will release its final reading for April.
• • The Consumer Sentiment Index is expected to remain unchanged at 50.8 as in the preliminary reading.
  • The 5-year Consumer Inflation Expectations  are expected to come in at 4.4%.
• Equities are starting to doubt on the Trump comment as there is no reason why China would deny the news this firmly. European equities are marginally higher, while US futures are turning negative.
• The CME FedWatch tool shows the chance of an interest rate cut by the Federal Reserve in May’s meeting stands at 6.1% against a 95.3% probability of no change. The June meeting still has around a 61.4% chance of a rate cut. 
• The US 10-year yields trade around 4.27%, looking for direction as markets face some knee-jerk reactions on the Trump comments. 
   

US Dollar Index Technical Analysis: Minor move on big headline

The US Dollar Index (DXY) might look bullish and set to jump higher once headlines emerge of a possible trade deal between China and the US, as rumors are building up now towards that possibility. However, a big downside risk comes with a potential peace deal between Russia and Ukraine, which would boost the Euro (EUR) and weigh on the DXY. So, there are a lot of moving parts that could outweigh the upside or downside for the US Dollar Index.

On the upside, the DXY’s first resistance comes in at 99.58,  where a false break occurred Wednesday and Thursday. Should the US Dollar extend recovery, look for 100.22, which supported the DXY in September 2024, with a break back above the 100.00 round level as a bullish signal of their return. A firm recovery would be a return to 101.90.

On the other hand, the 97.73 support could quickly be tested on any substantial bearish headline. Further below, a relatively thin technical support comes in at 96.94, before looking at the lower levels of this new price range. These would be at 95.25 and 94.56, meaning fresh lows not seen since 2022.

(Click on image to enlarge)

US Dollar Index: Daily Chart

More By This Author:

Gold Edges Down Amid Clash Over Status Of US-China Trade Talks
US Dollar As Session's Low On Thursday With China Saying Trump's Comments Are Fake News
Gold Price Snaps Selling Off After Fresh Trump Comments On Tariffs