The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is currently flat to slightly higher near 104.50 at the time of writing on Friday. Traders are not really looking at the Greenback but rather at an exodus from Equities and Cryptocurrencies into the precious metals’ market, where Gold has hit another all-time high this Friday at $3,086. The reciprocal tariff deadline is approaching fast, April 2, and clearly has struck a nerve amongst traders and market participants.
On the economic data front, all eyes are on the Federal Reserve (Fed) preferred inflation gauge, the US Personal Consumption Expenditures (PCE) data for February. The core and headline monthly PCE readings are both expected to grow steadily by 0.3%.
The US Dollar Index (DXY) has been roughly consolidating since that seismic drop at the start of March. Slowly but surely, some small unwinding of that big move lower is starting to unfold. Look for a synchronized move, with Gold paring back gains and the rate differential between the US and other countries widening again, for a comeback of the DXY to 105.00/106.00.
With the weekly close above 104.00 last week, a return to the 105.00 round level could still occur in the coming days, with the 200-day Simple Moving Average (SMA) converging at that point and reinforcing this area as a strong resistance at 104.95. Once broken through that zone, a string of pivotal levels, such as 105.53 and 105.89, could limit the upward momentum.
On the downside, the 104.00 round level is the first nearby support after a successful bounce on Tuesday. If that level does not hold, the DXY risks falling back into that March range between 104.00 and 103.00. Once the lower end at 103.00 gives way, watch out for 101.90 on the downside.
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.