Pressure on US dollar amid trade and political issues

The US Dollar Index (DXY), which tracks the US dollar against six major currencies, failed to surpass the 104.50 level in previous attempts. The index is trading at just above 104.00 at the time of writing on Tuesday, while markets are evaluating two major events.

The first driver of the market comes from US President Donald Trump, who has imposed a 25% “secondary tariff” on all goods from countries that still buy oil from Venezuela. Trump has eased the size and scope of tit-for-tat tariffs scheduled to take effect on April 2, and has commented on adding more targeted tariffs on cars, aluminum, medicines, chips and timber.

Meanwhile, markets await comments from the European bloc after a US news editor mistakenly joined a chat group on Signal with several Trump administration officials, including Vice President J.D. Vance, National Security Adviser Michael Waltz, Defense Secretary Pete Higeseth, Secretary of State Marco Rubio, and others.

The Financial Times reports that J.D. Vance’s comments about Europe outlined his goals to target the EU with tariffs and described how he plans to fund U.S. military operations against the Houthis. The case raises questions about the U.S. attitude toward Europe and also highlights concerns about security, as a third-party chat app has facilitated discussions on U.S. military operations, weapons stockpiles, and tactical plans.

The US dollar index (DXY) faces some selling pressure on Tuesday after a very early test to surpass the 104.50 level. The shift comes after U.S. President Donald Trump expressed further concerns and tariff restrictions ahead of the April 2 deadline. Leaked messages from U.S. Vice President J.D. Vance on Europe and other trading partners are worrying markets.

Expectations of consumer confidence and its impact on the dollar

Today US consumer confidence data, is expected to show further deterioration. We are slightly more pessimistic than the forecast of 93.0, and we mainly expect a decline in the dollar today. In another context, today we expect a statement from Russia and the United States on ceasefire talks in Ukraine, while Trump may reveal details of the car tariffs.

US Dollar: Greater deterioration in the consumer situation

US PMIs yesterday made a surprise rally in the US, while jumping less than expected in the Eurozone, helping the US dollar index (DXY), which relies heavily on the euro, find support in the range of 104.0-104.50. However, surveys highlighted the widening gap between the contraction of the manufacturing sector and the recovery of the services sector in the United States. Markets are waiting with interest clearer clues on how to place US dollar bets linked to economic activity.

The Conference Board’s consumer confidence surveys released today are the most important release of the week in the Forex market. Much of the market’s pessimism about the US macroeconomic stemmed from weak consumer figures, and the 14.5-point decline in the Conference Board confidence index between November and February contributed to the significant shift from US to European equities, boosting the EUR/USD rise. The consensus is minimal, but overall centered around another significant decline, from 98.3 to 94.0. Our economic forecast is 93.0.

Even if the decline is less severe than expected, markets may have a hard time seeing a glimmer of hope for the dollar.

(Details of auto tariffs will be revealed this week), and that the core inflation rate of personal consumption spending at 0.3%m/m (Friday) may maintain a cap on the Fed’s dovish bets. But today, we mostly see downside risks for the dollar.

Dollar and Euro Moves Amid Mixed Economic Data

With last week’s close above 104.00, a sharp rally towards 105.00 is still possible, with the 200-day SMA approaching at that point, consolidating this area as a strong resistance at 104.97. Once this area breaches, a series of pivot levels, such as 105.53 and 105.89, could limit the bullish momentum.

On the downside, 104.00 can be considered the first support nearby. If this does not hold, the US Dollar Index (DXY) risks falling to the March range between 104.00 and 103.00. Once the lower band at 103.00 is pulled, pay attention to 101.90 on the downside.

The US calendar includes new home sales for February, expected to be very strong, and the Richmond Federal Manufacturing Index, which might fall into negative territory due to PMI indices.

Euro: Eyes on Ukrainian-Russian developments

Our initial assumption for the week was that the euro still manages to extract some data-related optimism from the German fiscal bazooka. But yesterday’s PMIs were disappointing considering previous indices from the ZEW. On the flip side, markets may not expect any significant results from today’s IFO surveys, leaving room for a positive surprise that will raise the value of the euro.

However, perhaps more important for the euro is any news coming out of Saudi Arabia, where a US delegation met with its Russian counterparts yesterday following Monday’s talks with the Ukrainians. Russia and the United States will issue a statement today on the progress of the negotiations. Signs of a full ceasefire deal in the process would support European sentiment and the euro.

The EURUSD pair returned below 1.080 yesterday. Today we expect a currency appreciation due to the US consumer confidence index, but we prefer currency depreciation.