The US Dollar (USD) continued its upward momentum for a second consecutive day on Friday, buoyed by positive economic data and improved trade sentiment. However, despite this short-term strength, the dollar is poised to end the week lower as markets brace for next week’s pivotal Federal Reserve interest rate decision and the August 1 tariff deadline.
The US Dollar Index (DXY) hovered near 97.77 during afternoon trading, recovering from a two-week low but struggling to surpass the key 98.00 resistance level. The index has found solid support at the 97.00 psychological mark, triggering a modest bullish correction.
Attention now turns to the Federal Reserve’s upcoming policy announcement on Wednesday, with markets expecting the central bank to hold interest rates steady at 4.25%–4.50%. According to a Reuters poll, 100% of surveyed economists predict no change in July, with potential cuts projected for September and December.
US President Donald Trump added to the anticipation this week with a surprise visit to the Fed’s Washington headquarters — the first by a sitting president in nearly 20 years. Trump criticized the Fed’s $2.5 billion renovation project, alleging cost overruns, which Fed Chair Jerome Powell promptly refuted. Trump reiterated calls for lower interest rates, asserting that the Fed is "moving too slowly" but confirmed he has no intention of removing Powell from his post.
On Friday, Trump said he had a "good meeting" with Powell and hinted that the Fed Chair "might be ready to cut rates," intensifying speculation over possible easing.
New economic data shows US durable goods orders dropped by 9.3% in June to $311.84 billion, a smaller decline than the 10.8% forecast. The fall was largely attributed to a sharp drop in commercial aircraft bookings. Excluding transportation, orders rose 0.2%, signaling underlying resilience, although core capital goods orders fell 0.7%, suggesting cautious business investment.
The 10-year US Treasury yield held steady at 4.39% on Friday, reflecting market uncertainty ahead of the Fed’s decision and the impact of impending tariffs. Futures markets are currently pricing in 43 basis points of rate cuts by year-end.
On the trade front, President Trump indicated that most deals are finalized, including formalized tariff agreements with Japan, the UK, Indonesia, Vietnam, and the Philippines. He also signaled a potential deal with the European Union, which may be reached as soon as this weekend. EU Commission President Ursula von der Leyen confirmed she would meet Trump in Scotland on Sunday to discuss transatlantic trade.
However, progress with Canada remains limited. Trump said, "I haven’t had a lot of luck with Canada," and hinted at the possibility of unilateral tariffs.
Talks also continue with South Korea and India, with Seoul offering a $100 billion investment package from firms like Samsung and Hyundai to avoid 25% tariffs on exports.
Trump further announced that future US tariffs would range from 15% to 50%, depending on each country’s market openness to American goods. Countries unwilling to commit to reciprocal trade terms face the full punitive rates.
Fed policymakers remain split on rate policy. Dovish voices, such as Governor Christopher Waller and Vice Chair Michelle Bowman, support a 25 bps cut in July, citing temporary inflation due to tariffs. Others, including Chair Jerome Powell, prefer to hold steady, warning that premature cuts could stoke inflation.
Technically, the DXY found firm support near 97.00, confirming the upper boundary of a recently broken falling wedge pattern. The index is now testing resistance at the 97.80–98.00 zone, in line with the 21-day EMA.
Immediate resistance: 98.00, followed by the 50-day EMA at 98.52 and last week's high of 98.93.
Support: A daily close below 97.00 could trigger a drop toward the July 1 low of 96.38.
RSI: The 14-day Relative Strength Index sits at 47 and is rising, suggesting early bullish momentum, though still below the neutral 50 threshold.
