US Dollar Forecast: DXY Consolidates as Tariff Fears and Weak PMI Pressure Outlook

Dollar Consolidates After Recent Low

The U.S. Dollar Index (DXY) is trading slightly higher Tuesday, continuing its consolidation phase after bouncing from a multi-month low at 103.197 reached on March 18.

Prices are now testing key resistance levels including 104.683, the 200-day moving average at 104.906, and the 50% retracement at 105.167. A break above this zone could propel DXY toward the 50-day moving average at 106.017. On the downside, support is firm at 103.984 and 103.373.

Trade Tariff Concerns Elevate Risk Sentiment

Investor focus remains on U.S. trade policy, with tariffs from President Trump expected to roll out April 2. The broad scope of the proposed reciprocal duties — potentially targeting nearly all major economies — is raising fears of a global trade confrontation. European Commission President Ursula von der Leyen stated the EU stands ready with countermeasures. U.K. markets remain more optimistic, with Prime Minister Keir Starmer indicating trade talks with the U.S. are “well advanced,” helping to support the British pound.

ISM PMI and JOLTS Reflect Growth Strain

March’s ISM Manufacturing PMI dropped into contraction territory, registering 49.0 versus February’s 50.3 and below the 49.5 consensus estimate. This reinforces concerns over cooling industrial activity. The JOLTS report for February revealed a decline in job openings to 7.57 million, down from 7.76 million in January. While layoffs remained low and quits increased — a typical sign of labor confidence — hiring was subdued, signaling potential cracks in employment stability.

Treasury Yields Fall as Recession Risks Mount

Treasury yields moved lower Tuesday, reflecting risk aversion as traders brace for the economic impact of the tariffs. The 10-year yield fell 6.8 basis points to 4.177%, while the 2-year dipped to 3.885%. Market expectations for economic growth are fading, with CNBC’s economist survey revising Q1 GDP growth to just 0.3%, down sharply from Q4’s 2.3%. Money markets are also pricing in 54 bps of Bank of England cuts by year-end, a slight uptick from prior expectations.

Market Forecast

The DXY is poised to test upper resistance levels amid a fragile macro backdrop. While safe-haven demand could support the dollar if global risk sentiment deteriorates further, U.S. economic softness and trade policy uncertainties temper upside potential. A decisive break above 105.167 would shift near-term momentum bullish, but until then, consolidation between 103.373 and 105.167 remains the base case. Traders should closely monitor Friday’s nonfarm payrolls and potential retaliatory trade announcements for directional cues.

More Information in our Economic Calendar.