US Dollar Forecast: Trade Tariffs Pressure DXY as 10-Year Yields Test Key Support, EUR/USD Outlook

Market Overview

The US dollar index (DXY) remains under pressure, trading around $108, as market participants digest trade tariff concerns and softer economic data. President Trump’s remarks on potential 25% tariffs on Canada and Mexico, along with a 10% tariff on Chinese imports, have weighed on sentiment.

US Treasury yields have dipped below 4.6%, limiting dollar strength. Traders are closely watching upcoming economic releases, including initial jobless claims and S&P Global Flash PMIs, for further direction which are due on Thursday.

With the dollar retreating from a two-year high, the market focus remains on Federal Reserve policy expectations and geopolitical developments.

US Dollar Index (DXY) – Technical Analysis

The Dollar Index (DXY) is trading at $108.156, up 0.07%, holding above the crucial pivot point of $108.048. This level acts as a key support, and staying above it keeps the bullish momentum intact.

Immediate resistance stands at $108.777, with a stronger hurdle at $109.759. The 50-day EMA at $108.877 suggests near-term pressure, while the 200-day EMA at $108.040 provides longer-term support.

A sustained move above $108.777 could accelerate gains, while a break below $108.048 might signal selling pressure. The dollar’s uptrend is supported by an upward trendline, reflecting a broader bullish sentiment.

US 10-year Bond Yields

The U.S. 10-year bond yield is currently at 4.58%, facing resistance near 4.62% after a recent decline from highs above 4.75%. The yield has found support around the 200-day EMA at 4.53%, indicating potential stabilization.

A further drop below this level could signal lower inflation expectations or increased demand for safe-haven assets. Rising yields generally support the U.S. dollar, as higher returns attract capital inflows, strengthening the Dollar Index (DXY).

Conversely, a sustained decline in yields could weaken the dollar, boosting demand for gold and other non-yielding assets.

EUR Weakens After Disappointing German ZEW Data

The euro (EUR) faced downward pressure after Germany’s ZEW Economic Sentiment fell to 10.3, missing the 15.2 forecast and down from 15.7 previously. However, the broader Eurozone ZEW sentiment came in stronger at 18.0, exceeding expectations.

Investors remain cautious ahead of the German Buba Monthly Report and ECB President Lagarde’s speech, which could offer further insights into the eurozone’s economic outlook.

EUR/USD Technical Forecast

EUR/USD is trading at $1.04089, down 0.15%, struggling to maintain momentum below the key pivot point at $1.04342. This level is crucial—holding below it signals continued bearish sentiment, with immediate support at $1.03447 and further downside potential toward $1.02656.

The 50-day EMA at $1.03352 acts as dynamic support, while the 200-day EMA at $1.04030 suggests a broader consolidation range. Resistance lies at $1.05115, and a sustained break above this could shift momentum in favor of the bulls. For now, sellers remain in control, and a break below $1.03447 may accelerate losses.