On Monday (May 19), the U.S. dollar index fell to 100.81, gold rose to $3,246, and Bitcoin rebounded to around $106,600 after a sharp decline. Moody's downgraded the U.S. rating, further putting downward pressure on the dollar. The panic over the U.S.-China trade war returns as President Trump criticizes Walmart for raising prices due to tariffs.
Black Swan Event: Moody's downgrades U.S. rating, dollar buying pressure frustrated.
Investors will face yet another rocky start to trading this week, but this time, the volatility may be triggered by growing concerns about U.S. debt rather than tariffs.
Asian financial markets reopened on Monday after Moody's rating agency announced on Friday night that it had downgraded the U.S. government's credit rating from Aaa to Aa1. Moody's rating lagged behind competitors, blaming the growing U.S. budget deficit on past presidents and congress members, stating there are almost no signs of narrowing.
As the U.S. Congress discusses more unfunded tax cuts, and due to Trump's disruption of long-established business partnerships and renegotiation of trade agreements, the economy seems set to slow down, and this downgrade could heighten Wall Street's concerns about the U.S. sovereign bond market.
Some signs may emerge on Monday, with the 10-year U.S. Treasury yield rising to 4.49% on Friday amid low trading volume, while the exchange-traded fund (ETF) tracking the S&P 500 index fell 0.6% in after-hours trading.
Max Gokhman, Deputy Chief Investment Officer at Franklin Templeton Investment Solutions, stated: 'Given the ongoing, cash-strapped fiscal generosity, the downgrade of U.S. debt rating is not surprising. As sovereign and large institutional investors gradually begin to swap U.S. Treasuries for other safe-haven assets, debt repayment costs will continue to rise. Unfortunately, this could lead to a dangerous bear market spiral in U.S. bond yields, further putting downward pressure on the dollar and reducing the attractiveness of U.S. equities.'
Wells Fargo strategists Michael Schumacher and Angelo Manolatos told clients in a report that they expect 'yields on 10-year and 30-year U.S. Treasuries to rise another 5-10 basis points as a result of the Moody's downgrade.'
A 10 basis point rise in the 30-year Treasury yield is enough to push it above 5%, reaching the highest level since November 2023 and nearing the peak for that year when rates hit the highest level since mid-2007.
While rising yields usually boost currencies, debt concerns may exacerbate skepticism about the dollar. The Bloomberg Dollar Index is nearing April's lows, and options traders' sentiment is at its most pessimistic level in five years.
Trump: Walmart must bear the tariff warning not to raise prices.
Trump stated last weekend that Walmart should bear its import tariffs and warned the retail giant not to raise its product prices, while the company indicated it would raise product prices due to the taxes.
U.S. Treasury Secretary Scott Bessent reiterated Trump's warning in an NBC interview on Sunday.
Trump posted on social media that Walmart should 'stop trying to blame rising prices throughout the supply chain on tariffs... Walmart and China should, as people say, 'carry the tariffs' and not charge any fees to their VIP customers. I will be watching, and so will your customers.'
Just days before Trump issued his warning, Walmart warned during its earnings call that it would raise prices due to the impact of high U.S. import tariffs (especially those on China).
Walmart Senior Vice President Stephanie Schiller Wissink stated during last week's earnings call: 'Given the scale of the tariffs, we cannot absorb all the pressure, even at the levels announced this week.'
Other retailers, including shoe manufacturer Birkenstock, also announced that product prices would rise due to Trump's tariffs, while Nintendo warned that its upcoming video game console, Switch 2, could see a significant price increase in the U.S. due to import tariffs.
The United States and China announced last week a significant reduction in the intense trade war, with the U.S. cutting tariffs on China from 145% to 30%, and China lowering tariffs on the U.S. from 125% to 10%, effective at least for the next 90 days.
Bitcoin Technical Analysis
CoinTelegraph noted that Bitcoin remains within a certain range, but bulls are trying to overcome the upper resistance level of $105,820.
Both moving averages are trending upward, and the Relative Strength Index (RSI) is in the overbought zone, indicating that bulls are dominant. A breakout and close above $105,820 will increase the likelihood of testing the $109,588 level again.
Bears will attempt to hold the resistance level at $109,588, but if bulls gain the upper hand, Bitcoin could soar to $130,000.
Alternatively, if prices fall significantly below $100,000, it indicates that bears are in control. This could tempt some short-term bulls to take profits, pushing the currency pair down towards the 50-day simple moving average of $91,447.
Bitcoin has broken out of the symmetrical triangle pattern on the 4-hour chart, indicating that bulls are in control. The resistance level is at $105,820, but a breakthrough is very likely. If it breaks, Bitcoin could move towards the historical high of $109,588, then further approach the pattern target of $110,922.
Sellers may have other plans, attempting to pull prices back into the triangle. If this happens, aggressive bulls could get trapped, driving prices up to $100,000. If that level also falls, the decline could expand to the target price of $95,616.
