USD Weakens Amid Trade Tensions and Fed Policy Uncertainty

Market Overview

The US Dollar (USD) opened the week under pressure, declining against major currencies as investors reacted to escalating trade tensions ahead of the August 1 tariff deadline. Despite recent positive economic data, the Greenback faces headwinds from political pressure on the Federal Reserve and renewed tariff threats from the Trump administration.

Key Market Drivers

US Treasury yields fell to 4.40% amid safe-haven demand, marking the fourth consecutive daily decline. Trade tensions intensified with the EU facing potential tariff increases from 10% to 15-20%, and auto/pharmaceutical tariffs could reach 30% if no agreement is reached by August 1. Commerce Secretary Howard Lutnick confirmed the deadline remains firm.

Policy Developments

President Trump signed the GENIUS Act into law, establishing clear regulations for stablecoin issuers requiring 1:1 dollar reserves and regular audits. Meanwhile, Trump criticized the BRICS alliance, threatening 10% tariffs on member nations and maintaining pressure on Fed Chair Powell regarding interest rates.

Technical Analysis

The US Dollar Index (DXY) broke out of a falling wedge pattern but stalled below the critical 99.00 resistance level. Currently trading near 98.05, the index shows fading momentum with key support at 97.80-98.00. The Relative Strength Index (RSI) remains neutral while MACD indicates weakening bullish momentum.