US Dollar Forecast: Price Action Tightens Around 200-Day MA as Kashkari Signals Patience

Dollar Eyes Key Resistance as Tariff Concerns and Fed Uncertainty Anchor Sentiment

The U.S. Dollar Index (DXY) traded higher late Wednesday, with price action tightening around critical technical levels as traders assessed tariff risks and Fed guidance. The greenback is now testing the 200-day moving average at 104.931, with the 50% short-term pivot at 105.167 just above. These levels form a decisive zone that could define the near-term structure of the DXY, which has been consolidating following a recent downtrend.

At 18:42 GMT, the U.S. Dollar Index (DXY) is trading 104.525, up 0.310 or +0.30%.

Tariff Risk Keeps Market Guarded

Dollar strength was reinforced by tariff uncertainty, with traders weighing the possibility that new levies set for announcement next week may either escalate or soften U.S. trade tensions. President Donald Trump indicated that automobile tariffs are imminent, but also suggested some flexibility in their implementation. Standard Chartered’s Steve Englander flagged potential hawkish surprises, noting markets may be underpricing the eventual tariff scope.

The euro extended its losing streak, closing lower for the sixth straight session at $1.0766, its weakest since March 6. Traders showed little appetite to support the euro even as EU trade commissioner Maros Sefcovic met with U.S. officials to defuse tariff threats. Meanwhile, Bank of America reported stepped-up official sector euro selling, highlighting skepticism about a near-term shift away from dollar strength.

Durable Goods and BOJ Contrast Bolster Greenback

The dollar also drew modest support from an unexpected rise in U.S. durable goods orders, adding to a theme of resilience in core economic indicators. In contrast, dovish tones from the Bank of Japan underscored policy divergence. BOJ Governor Kazuo Ueda and board member Junko Koeda acknowledged persistent inflation risks, but emphasized that real interest rates remain extremely low. The yen slipped to 150.48 per dollar as rate hike expectations remain capped by soft underlying inflation.

Kashkari Urges Patience on Policy Moves

Minneapolis Fed President Neel Kashkari struck a cautious tone, arguing that ongoing policy uncertainty surrounding tariffs complicates the central bank’s outlook.

Speaking in Detroit Lakes, Kashkari noted conflicting risks: tariffs could spur inflation or suppress growth, neutralizing each other and justifying a prolonged rate hold. He warned that sliding business and consumer sentiment could do more economic damage than the tariffs themselves, though he remained firm that the Fed must “finish the job” on inflation.

Market Forecast: Bullish Break or Another Rejection?

With the DXY pressing against the 200-day moving average and 105.167 pivot, price action over the next sessions is pivotal. A break above this zone could open the path to the 50-day moving average at 106.369, signaling renewed upside momentum. However, failure here may invite another wave of selling toward the recent low at 103.197. Traders will be watching tariff developments and Fed communication closely, as both continue to steer positioning across the majors.

More Information in our Economic Calendar.