Dollar Climbs Amid Trade Talk Confusion and Fed Rate Cut Hopes

The US Dollar gained ground on Friday, with the US Dollar Index (DXY) rising 0.37% to hover near 99.65, as markets grappled with conflicting signals on US-China trade negotiations. Optimism sparked by suggestions of ongoing dialogue and potential tariff relief was quickly tempered by China’s firm denial of any active talks. This push-and-pull narrative injected volatility into financial markets, yet the Greenback held its edge, buoyed by hopes of a Federal Reserve rate cut as early as June, contingent on forthcoming economic data.

Trade developments dominated investor attention, with reports indicating China might consider lifting tariffs on select US goods, such as medical equipment. However, Chinese officials dismissed any formal discussions, leaving markets in limbo. The US, meanwhile, saw a rebound in tariff revenue, bolstering the Treasury’s fiscal stance, though not enough to offset the broader costs of sustaining current tax policies. With the Federal Reserve in blackout mode ahead of its May 7 meeting, traders shifted focus to upcoming data, including the final April University of Michigan Consumer Sentiment and inflation expectations, which could shape the Fed’s next steps.

Despite the Dollar’s modest advance, its technical outlook remains uncertain. The DXY faces resistance at 99.93 and 100.95, with support levels at 99.55 and 99.49. Indicators like the Relative Strength Index at 37.10 and a bearish Moving Average Convergence Divergence signal suggest fading momentum, while moving averages, including the 10-day EMA at 99.93 and 20-day SMA at 101.30, reinforce a cautious stance. As markets await clearer trade developments and key US data, the Dollar’s path remains tethered to tariff headlines and central bank signals, keeping it range-bound for now.