$BTC The U.S. Dollar Index (DXY) rose to a two-week high near 99.75 (you can check out the Bear's take on DXY & the conditions for an alt season 😀)
The USD has appreciated for the third consecutive day thanks to hopes of a trade deal between the U.S. and China.
Signs indicate that the U.S. economy is weakening and the Fed's decision to aggressively cut interest rates will help mitigate the situation.
Traders are currently looking towards U.S. macroeconomic data for direction ahead of the U.S. NFP report due on Friday.
The U.S. Dollar Index (DXY), which tracks the U.S. dollar against 6 other currencies, attracted some buyers for the third consecutive day and rose to a two-week high, around 99.70-99.75 during Asian trading on Thursday. The day's bullish move of the U.S. dollar (USD) was supported by statements from U.S. President Donald Trump, which further boosted optimism about the potential easing of trade tensions between the U.S. and China.
In fact, Trump has stated that there is a "very high chance that we will reach an agreement with China." He also added that we have potential trade agreements with India, South Korea, and Japan. However, Trump's top trade official said on Wednesday that trade negotiations with China have yet to take place. Moreover, Trump's rapidly changing stance on trade policies and the prospect of stronger easing policies from the Federal Reserve (Fed) may deter USD speculators from placing new bets.
Investors now seem to believe that the U.S. central bank will continue its interest rate cut cycle in June and lower borrowing costs by 100 basis points (bps) by the end of this year. This expectation has been reaffirmed by the disappointing announcement of U.S. GDP, which showed the economy unexpectedly shrinking by 0.3% on an annualized basis in the first quarter of 2025. Additionally, the ADP report on private sector employment indicates that the U.S. labor market is cooling down.
Furthermore, the Consumer Price Index and Personal Consumption Expenditures (PCE) indicate signs of easing inflationary pressures in the U.S., giving the Fed more room to cut interest rates amid uncertainties regarding Trump's economic agenda. Therefore, it would be wise to wait for strong buying action before confirming that the USD has formed a short-term bottom and is positioned to extend the recent good recovery from the multi-year lows reached last week.
Traders are now anticipating the U.S. economic agenda on Thursday - including the release of weekly initial unemployment claims and ISM manufacturing PMI. Additionally, the U.S. Non-Farm Payrolls (NFP) report on Friday will be examined for clues regarding the Fed's interest rate cut trajectory. In turn, this will play a crucial role in influencing USD price dynamics and determining the short-term trajectory.
