The US Dollar is holding strong, with the Dollar Index reaching new weekly highs above 108.00, as market sentiment turns increasingly negative. Recent reports show US Durable Goods Orders falling by 2.2% in December, far below the anticipated 0.8% increase, adding to the economic uncertainty. Meanwhile, Treasury Secretary Scott Bessent recommended a gradual approach to tariffs, but President Trump’s insistence on implementing much higher rates has added to investor concerns. Consumer confidence took a dip in January, dropping from 109.5 in December to 104.1, signaling growing worries about the economy.
The US Dollar Index, which tracks the dollar’s strength against major currencies, gained momentum on Tuesday, maintaining its position above the critical 108.00 mark. The uptick followed renewed jitters over tariffs and disappointing US economic indicators, including a fall in Durable Goods Orders and a slump in Consumer Confidence. Still, the index’s ability to stay afloat suggests some underlying resilience.
In headline market moves, Treasury Secretary Scott Bessent’s plan for incremental tariffs on imports, starting modestly at 2.5%, has stirred risk aversion. While Bessent aimed for a cautious approach, President Trump’s push for much steeper tariffs created turbulence across global markets. Further unsettling news came from the Conference Board, with its Consumer Confidence Index sliding to 104.1 in January from December’s 109.5. Meanwhile, December’s Durable Goods Orders took a 2.2% hit, significantly influenced by a 7.4% fall in transportation equipment. Excluding transportation, however, there was a modest 0.3% climb, offering a glimmer of hope amid the broader slump. Additionally, concerns over overpriced AI stocks contributed to a cautious market mood, constraining risk appetite and boosting the US Dollar. All eyes now turn to the Federal Reserve’s decision on Wednesday, with expectations already banking on a hold.
Looking at the Dollar Index from a technical standpoint, it has shown commendable strength, staying above 108.00 thanks to safe-haven allure. The technical charts, however, are mixed; with RSI still under 50, indicating slightly weak momentum, the MACD exhibits consistent bearish pressure with flat bars. There’s a possibility for an upward correction if the current downward motion stretches too far. Resistance is at 108.50, with potential support dipping back to around 107.50, should the index fail to stay above 108.00.
Turning to the US-China trade context, a trade war typically arises from economic clashes over severe protectionism, often involving retaliatory tariffs and escalating costs of imports and living. The economic tensions between the US and China kicked off in 2018, following President Trump’s imposition of trade barriers on China over alleged unfair practices and intellectual property issues. China responded with its own set of tariffs on US products, such as cars and soybeans. These tensions persisted until the two nations formalized the US-China Phase One trade deal in January 2020, aiming to stabilize the situation, though the COVID-19 pandemic shifted focus away from the conflict. Notably, President Biden has maintained most tariffs and even introduced additional ones. The return of Donald Trump as the 47th US President has reignited tensions, with Trump campaigning on and later imposing a 60% tariff on China after taking office in January 2025. This re-escalation could further disrupt global supply chains, reduce spending, and continue to influence inflation, impacting the broader economic landscape.
