Dollar Rebounds on Trade Optimism as Trump Signals Softer Stance Toward Fed

Key Takeaways:

• Positive momentum returned after the U.S. finalized a trade deal with Japan, cutting tariffs to 15%, while talks with the European Union appear to be nearing a resolution.

• The President‘s planned visit to the Fed’s Washington headquarters is being seen as a potential olive branch to Chair Jerome Powell, amid speculation that Trump may be seeking to temper his prior criticisms.

Market Summary:

The U.S. dollar snapped a four-day losing streak, rising 0.3% in the previous session and partially reversing a broader 1.4% decline this week. The rebound came as sentiment improved on the back of favorable developments in U.S. trade policy under President Donald Trump.

The greenback found support after Japan finalized a trade agreement with the U.S., which included a reduction of tariffs to 15%. Reports also indicate that the European Union is nearing a similar deal, further easing global trade tensions. The trade optimism helped lift both the dollar and risk assets, with the S&P 500 and Nasdaq reaching fresh record highs.

Adding to the market's cautious optimism, President Trump is expected to visit the Federal Reserve's headquarters in Washington—a move interpreted by some as a conciliatory gesture toward Fed Chair Jerome Powell, following months of public criticism. However, markets remain wary, as any unexpected remarks from the president following the visit could quickly alter sentiment.

Investors are also closely watching for any signs that Trump may seek to influence the Federal Reserves upcoming interest rate decision, scheduled for Wednesday, July 30, which could ultimately determine the near-term direction of the dollar.

Technical Analysis

DXY, H4:

The U.S. Dollar Index snapped a four-day losing streak, gaining 0.3% in the previous session and extending its advance in todays Asian trading hours. The rebound suggests a potential bullish trend reversal, though key resistance looms near the 97.85 level — a critical area that also coincides with the 38.2% Fibonacci retracement from the recent downtrend.

A decisive break above this level could confirm a stronger bullish signal for the greenback. From a technical standpoint, momentum indicators are showing signs of recovery: the Relative Strength Index (RSI) is rebounding from oversold territory, while the MACD is turning upward and appears poised for a bullish crossover near the bottom. Both developments indicate that bearish momentum may be fading, leaving room for further upside if buying pressure sustains.

Resistance Levels: 98.12, 99.20

Support Levels: 97.17, 96.35