US Dollar Index softer while US yields sink lower and rate cuts odd increase for the Fed

The US Dollar slides lower as dust settles over last night events. .
China is facing further scrutiny from the Trump administration with more semiconductor restrictions.
The US Dollar Index (DXY) is dipping lower, pressured by softer US yields.

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades weaker ahead of the US trading session and some manufacturing data. Investors are starting to slow down their flight into safe-haven bonds, with US yields dropping lower. Meanwhile, equities are starting to recover in Europe and in the United States (US) after Asian equites closed the day with more than 1% losses.

The rout comes after the US President Donald Trump administration gave more details on its plan to toughen semiconductor restrictions over China. In addition, the United States (US) is asking allied countries to impose tariffs as well on China in order to corner the country. Trump wants to slow down Chinese technological development, Bloomberg reports.

The US economic calendar is starting to bear some interesting data points. The Consumer Confidence for February and the Richmond and Dallas Fed Manufacturing indexes are all leading sentiment indicators that could give some insights about the current US activity. Later in the day, Fed Vice Chair for Supervision Michael Barr, Richmond Fed President Tom Barkin and Dallas Fed President Lorie Logan are set to speak.

Daily digest market movers: Housing data quite okay

The Trump administration plans to expand its limitations on China’s technological developments, including tougher semiconductor restrictions and pressuring allies to install restrictions on China’s chip industry. Trump’s goal is to prevent China from developing a domestic semiconductor industry that could boost its AI and military capabilities, Bloomberg reports.
At 14:00 GMT, the S&P Case Shiller Home Price Index for December came in at 4.7%, coming from 4.5% in November.
At 15:00 GMT, some February data is due:
- The US Richmond Fed Manufacturing Index is expected to come in at -2, from -4 previously.
- The US Consumer Confidence will be released, though no forecast is available.
- The US Dallas Fed Manufacturing Business Index has no forecast and printed 14.1 in January.
At 16:45 GMT, Federal Reserve Vice Chair for Supervision Michael Barr will give a speech on key financial stability issues in New Haven, Connecticut, United States.
Richmond Fed President Tom Barkin will give a speech called “Inflation Then and Now”, followed by a Q&A at an event hosted by the Rotary Club of Richmond, expected around 18:00 GMT.
At 21:15 GMT, President of the Federal Reserve Bank of Dallas Lorie Logan will close off this Tuesday by speaking on the future of the central bank balance sheet at Bank of England’s annual BEAR research conference in London, United Kingdom.
Equities are starting to recover ahead of the US trading session with even European equities starting to turn positive.
The CME FedWatch tool shows an uptick in chances for an interest rate cut by the Federal Reserve (Fed) in June by 25 basis points (bps), growing to 50.0%, while odds for a rate pause have diminished to only 32.6%, backed by the drop in US yields this Tuesday
The US 10-year yield trades around 4.32%, further down from last week’s high at 4.574%.

US Dollar Index Technical Analysis: Follow the yield

The US Dollar Index (DXY) is clearly not included in traders’ decisions on the back of comments from US President Donald Trump or his administration. Moves are seen in equities, Gold, and Bonds, while the DXY has become too much of a risk and has been left aside by traders for now.

On the upside, the 100-day Simple Moving Average (SMA) could limit bulls buying the Greenback near 106.68. From there, the next leg could go up to 107.35, a pivotal support from December 2024 and January 2025. In case US yields recover and head higher again, even 107.97 (55-day SMA) could be tested.

On the downside, the 106.52 (April 16, 2024, high) level has seen a false break for now. However, that does mean quite a few stops might have been triggered in the markets, with a few bulls having been washed out of their long US Dollar positions. Another leg lower might be needed to entice those Dollar bulls to reenter at lower levels, near 105.89 or even 105.33.