US Dollar Forecast: DXY Rebounds After Multi-Month Lows as Tariff Fears Drive Safe-Haven Flows

Dollar Rebounds From Multi-Month Lows

The U.S. Dollar Index is posting its second consecutive rebound session after reaching a multi-month low of 101.267 on April 3. Market participants are closely monitoring the 61.8% retracement level at 103.984 as a potential extension target, with additional resistance at 104.683, followed by the 200-day moving average at 104.847 and 50-day moving average at 105.718.

Technical momentum indicators suggest the dollar could test these upper resistance levels in the near term, though significant hurdles remain before a full trend reversal can be confirmed.

$6 Trillion Market Wipeout Triggers Global Response

Trump’s sweeping tariff announcements triggered a massive $6 trillion wipeout in U.S. stocks last week, prompting a global market rout. Over 50 nations have approached the White House to begin trade talks, while China has already implemented countermeasures including 34% levies on all U.S. goods. European Union countries are preparing a united response with targeted countermeasures on up to $28 billion of U.S. imports.

Yen & Franc Surge As Recession Fears Intensify

Investors are flocking to traditional safe havens as recession fears intensify. The dollar gained against risk-sensitive currencies including the Australian and New Zealand dollars, but simultaneously weakened against other safe havens.

The USD fell 0.41% against the Japanese yen to 146.255, extending its 2% slide from last week, and hit a six-month low against the Swiss franc, dropping 0.7% to 0.8545.

Markets Price 100+ Bps Of Fed Cuts By December

Market sentiment has shifted dramatically toward expectations of more aggressive Fed easing. Traders now see approximately 55% probability of a May rate cut, with futures pricing in more than 100 basis points of cuts by December.

This represents a significant shift from previous expectations that rates would remain on hold next month. Fed Chair Powell cautioned it was “too soon to know” the appropriate central bank response.

Dollar Outlook: Crosscurrents Ahead

The dollar appears caught between competing forces as safe-haven demand battles with rate cut prospects. While dollar weakness persists against traditional safe havens like the yen and Swiss franc, many analysts expect traders will eventually return to the greenback as global uncertainties mount.

The euro’s recent strength (largely flat at $1.096) may stem from the eurozone’s current account position or investor uncertainty about alternatives to U.S. assets. Sterling remains vulnerable, hitting a one-month low at $1.28125, down 0.7% against the dollar.

Technical indicators suggest sustained resistance at the 200-day moving average (104.847) will be critical in determining whether the current rebound develops into a meaningful trend reversal or merely represents a temporary correction in a broader downtrend.

More Information in our Economic Calendar.