Insights 
VT 
Key Points:
- Dollar Index (USDX) fell 0.2% to 99.606 after reaching 99.983 on Wednesday.
- Trump warns of 50% tariffs on Brazil and copper, casting uncertainty over trade talks.
The U.S. dollar retreated slightly on Thursday, cooling after a strong rally that pushed the Dollar Index (USDX) to a two-month high of 99.983 the day before. The index pulled back by 0.2% to settle at 99.606 as trader focus moved from monetary policy to renewed global risk.
The initial surge came after stronger-than-expected U.S. economic data, including robust private payrolls and a better-than-forecast GDP print. This bolstered the dollar midweek, reinforced by Federal Reserve Chair Jerome Powell’s neutral stance at the latest policy meeting. While the Fed left rates unchanged, Powell offered little guidance on potential cuts, leaving traders guessing on September’s direction.
However, Thursday’s tone was shaped by President Trump’s trade remarks. He warned that Friday’s trade deadline would not see another extension, and announced fresh 50% tariffs on Brazil and on copper-related products.
In addition, Trump said Canada’s stance on recognising a Palestinian state may jeopardise trade talks—injecting further uncertainty into North American economic relations.
Technical Analysis
After bouncing from the 98.40 support zone on 30 July, the USDX staged a steady climb, building a bullish structure supported by successive higher lows. The price broke decisively above 99.20 in the early hours of 31 July, triggering a sharp rally that peaked at 99.714. However, the breakout lacked follow-through above that resistance, leading to a mild pullback toward the 99.35 region.
Picture: USDX rally stalls below 99.75 as momentum eases, as seen on the VT Markets app
The moving averages (5, 10, 30) began to narrow and curl downward following the peak, with the 5- and 10-period MAs beginning to cross below the 30, signalling an early trend reversal. Price currently hovers near the short-term MA cluster, attempting to find a new footing.
The MACD histogram shows a clear fade in bullish momentum, with green bars shrinking and the MACD line approaching a bearish crossover below the signal line. If this crossover completes, it would reinforce downside pressure in the near term.
For now, 99.20 serves as the first key support level to watch, followed by 98.90 if sellers regain control. A close above 99.60 would be required to invalidate the pullback and suggest a retest of 99.71 or even a move toward the 100.00 psychological level.
Cautious Forecast
If USDX breaks below 99.30, the next support sits near 99.00. However, a bounce above 99.60 could keep bulls eyeing the 100.00 level again. The dollar’s near-term path hinges on the outcome of trade negotiations due Friday, and any additional geopolitical shocks triggered by White House policy shifts.
