Insights 
VT 
The US dollar saw a sharp decline on Tuesday before stabilising early on Wednesday, as weaker-than-anticipated inflation figures fuelled speculation of interest rates cut by the Federal Reserve later this year. The USDX index closed at 100.716 after falling significantly from Monday’s one-month high of 101.791, its worst daily performance since mid-April.
The retreat followed data from the US Labour Department, which revealed that consumer prices rose by just 0.2% in April on a monthly basis. This figure came in below the 0.3% forecast by Reuters, lending further support to market expectations of a more accommodative monetary stance. It follows an unusual 0.1% monthly decline in March.
That said, inflationary pressures may re-emerge, particularly as tariffs risk driving up costs in the months ahead. Although President Trump’s trade delegation recently agreed to a 90-day tariff ceasefire with China, the future of negotiations remains uncertain. The President has also hinted at possible trade arrangements with India, Japan, and South Korea, though the absence of concrete frameworks continues to unsettle investors.
Despite Tuesday’s drop, analysts at TD Securities and the Commonwealth Bank of Australia still foresee short-term strength in the dollar before a more sustained downturn later in the year. TD projects the greenback could depreciate by as much as 5% in the second half of 2025, as global investors seek to reduce exposure to US assets amidst ongoing policy uncertainty.
Technical Analysis
The US Dollar Index (USDX) briefly pushed above the 101.70 mark early on 13 May, reaching a high of 101.79 before retreating in a steady decline. The index subsequently dropped below its 10-, 20-, and 30-period moving averages, confirming a bearish crossover and signalling further downside momentum. By 14 May, the index hovered near 100.71, aligning with previous support at 100.45.
Momentum indicators further confirm the bearish bias. The MACD histogram remains negative, and the signal lines have diverged bearishly, indicating sustained selling pressure. Unless the bulls can reclaim the 101.00 threshold, the path of least resistance remains downward, with 100.45 and potentially 100.20 acting as the next areas of interest.
Cautious Outlook
While the dollar may enjoy a short-term rebound as markets reassess the latest inflation data and broader global conditions, the overall trajectory remains uncertain. Futures markets currently suggest at least 50 basis points of rate cuts from the Fed this year, which could limit any lasting recovery in the greenback. A meaningful turnaround in the USDX would likely require stronger US economic data and greater clarity on the country’s trade agenda.
