The is caught between trade tensions and signals from the as summer approaches. The greenback has been moving within a narrow range but remains close to its lowest level in three years. Last week, it climbed from 96.38 to above 97.40, but it still lacks a clear direction. This uncertainty is mainly due to President Donald Trump’s tariffs and the unclear outlook for future Fed interest rate moves.
Trump’s Tariff Messages Stir Market Jitters Over Trade War Revival
Trump’s recent comments on Truth Social have raised fears of a new wave of tariffs. He suggested that the US may impose an extra 10% tariff on countries that work closely with BRICS nations, hinting at a more aggressive trade stance.
Trump also said that tariff letters had already been sent to some countries starting Monday. While the tariffs were originally set to begin on July 9, they have now been pushed to August 1. However, the lack of clear details around this move is keeping markets cautious.
Talks with major trade partners like Japan and the EU are progressing slowly, which could lead to further tensions. For now, these developments have supported the dollar in the short term, but trade disputes in the coming months could weaken it.
Strong Jobs Signal Limits Room for Fed Easing
In the US, last week’s came in much stronger than expected. This reduced the chances of the Federal Reserve cutting interest rates three times this year. No rate change is expected at the July meeting. While this supports the dollar in the short term, the market is now reacting more to Trump’s trade-related comments.
The Fed’s meeting minutes, due this week, are not expected to shift market direction. Fed officials have already made their views clear in recent speeches, so the minutes are unlikely to reveal anything new about future rate changes.
Meanwhile, volatility in the remains very low. Option market signals suggest that investors believe the potential impact of new tariffs is already priced in. But this also means any unexpected tariff decision could hit markets harder than usual.
On the other hand, since many of the targeted countries have limited trade volume outside the BRICS group, the market impact of the new tariffs may be small. However, Trump’s strong rhetoric is putting pressure on emerging market currencies.
This week, the global economic calendar is relatively quiet. In the Eurozone, data and comments from ECB President Christine Lagarde will be in focus. In Asia, China’s , due Wednesday, could influence market direction.
In the US, a lack of major economic data puts more attention on Trump’s trade moves as the key factor shaping the dollar’s path.
Separately, Trump’s planned meeting with the Israeli Prime Minister over the Gaza situation could introduce new geopolitical risks and affect market sentiment.
Crucial Catalysts Could Shape the Path for US Dollar
The dollar index is currently finding support around the 96.6 level and shows signs of a possible recovery. However, for this rebound to hold, markets need clearer policy signals. The tone of Trump’s tariff messaging and details on how and when they will be enforced will play a key role in shaping the dollar’s direction.
With the Fed minutes unlikely to shift sentiment and little new economic data expected, trade and geopolitical developments will be the main drivers of the dollar this week. On the technical side, 96.6 remains a key support level, while the 97.8 to 98.5 range serves as important resistance to watch.
The DXY is trading near the upper edge of the downward channel it has followed since May, but the broader trend remains weak. This week, the index is once again testing the 98 resistance level. A break above this could signal the start of a trend reversal. Still, for a more decisive shift, the DXY would need to hold above the 99.75–100.50 range.
If the index fails to move into the 98 range, it would suggest that demand for the dollar is still weak. In that case, selling pressure could build, potentially pushing the index down toward the 95 level in the short term.
In summary, the outlook remains volatile for now. Unless uncertainties—especially around trade and policy—are resolved, the dollar index risks sliding back into a weakening trend.
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