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The US Dollar Index (DXY) bounced back and retested the crucial resistance level at $100 after a series of economic data and hopes of a trade deal between the United States and China rose. The index will be in focus this week as the Federal Reserve delivers its interest rate decision amid pressure from President Donald Trump.

US Dollar Index rose after series of mixed data

The US Dollar Index rose from last month’s low of $97.94 to the resistance point at $100 after a series of mixed macro numbers. 

First, a report by the Conference Board noted that the consumer confidence crashed to 86 in April as concerns about inflation, jobs, and Trump’s tariffs rose. The figure has dropped sharply in the past few months, risking a recession in the US.

Second, another figure by ADP showed that the private sector created 61,000 jobs in April, much lower than the expected 114K. This figure was then offset by Friday’s nonfarm payrolls data, which revealed that the economy created 177k jobs during the month.

The NFP figure also showed that the unemployment rate remained unchanged at 4.2%, while wage growth stalled. Still, analysts believe that the labor market will soften in the coming months if tariffs remain. 

Third, a closely-watched report showed that US trade deficit surged to a record high as companies rushed to buy abroad ahead of tariffs. The implication of all this is that the soaring imports led to a contraction of the economy in the first quarter.

Further, the headline and core personal consumption expenditure (PCE) numbers retreated slightly in February. 

Federal Reserve interest rate decision ahead

Looking ahead, the DXY Index will react to the coming Federal Reserve interest rate decision. Economists unanimously say that the bank will not cut interest rates in this meeting. 

Jerome Powell and most officials have hinted that the bank will not cut interest rates until data shows that inflation was moving downwards. 

As such, the Fed will signal that rates will remain at the current level for a while as it observes trends in inflation. Most Fed officials believe that inflation will start going up in the coming weeks because of Trump’s tariffs.

Trump has implemented a 145% tariff on Chinese goods, pushing some sellers like Temu and Shein to hike prices. On the positive side, there are signs that Trump is considering negotiations with China. China has also hinted that it was ready to negotiate.

US Dollar Index technical analysis

(Click on image to enlarge)

DXY Index chart | Source: TradingView

The daily chart reveals that the DXY Index has bounced back after tumbling to a low of $97.94 last month. 

However, there is a risk that the recovery will end soon as the index has already formed a death cross pattern. This pattern forms when the 50-day and 200-day Exponential Moving Averages (EMA) cross each other. 

The index has also formed an inverse cup and handle pattern, a popular continuation sign. This rebound is part of the formation of the handle section. 

Therefore, the US Dollar Index will likely resume the downtrend this month. If this happens, the next point to watch will be at $97.95, the lowest swing on April 22. 

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