US Dollar Stages Modest Recovery Amid Lingering Stagflation Fears

The US Dollar Index (DXY) saw turbulent trading near the 99 level during Monday’s session, rebounding slightly after touching a three-year low. Despite ongoing concerns over tariff uncertainties, declining consumer confidence, and heightened inflation expectations, the index stabilized around 99.60. These issues continue to weigh heavily on market sentiment. Technically, the outlook remains bearish, with the index unable to surpass key resistance levels between 101.80 and 102.20.

Early in the day, renewed selling pressure on the US dollar drove pairs like EUR/USD and GBP/USD toward multi-month highs. However, the greenback regained some ground as the session progressed, buoyed by broader market dynamics. While expanded exemptions on reciprocal tariffs offered temporary relief from recession fears, persistent anxieties about inflation, faltering consumer sentiment, and global trade frictions kept investors on edge. The DXY’s slight recovery did little to shift the broader downward trend affecting the currency.

Several factors influenced market movements. Consumer confidence plummeted, with a key index falling to 50.8 in April—its lowest since June 2022 and below forecasts. Inflation expectations for the next 12 months spiked to 6.7%, a multi-year high, posing challenges for monetary policy decisions. Additionally, a major trading partner imposed retaliatory tariffs of 125% on US imports in response to recent US actions, further eroding business confidence. Although the euro and pound initially surged, both currencies pared gains as the dollar showed signs of stabilizing by the session’s end. Authorities also confirmed exemptions for electronic imports from reciprocal tariffs, which eased some recession concerns but heightened policy uncertainty.

From a technical standpoint, the DXY remains fragile despite Monday’s modest bounce. The Moving Average Convergence Divergence (MACD) continues to signal bearish momentum, while the Relative Strength Index (RSI) at 24.60 is neutral but nearing oversold conditions. The index traded below all major moving averages, including the 20-day SMA at 103.13, the 100-day SMA at 106.34, and the 200-day SMA at 104.74. Shorter-term indicators, such as the 10-day Exponential Moving Average at 101.83 and the 10-day SMA at 102.23, also slope downward. Resistance is observed at 99.88, with additional barriers at 101.83 and 102.23. As long as the DXY fails to break above these levels, the bearish outlook is expected to persist.