Amid the accelerating volatility in global financial markets, it comes as no surprise that the U.S. Dollar Index (DXY) continues its decline, reaching a new low of 97.15 during recent Asian trading sessions — its lowest level since July 7.
This drop cannot be attributed to a single factor, but rather to a complex accumulation of political, monetary, and trade developments deeply interwoven into both the U.S. and global economic systems.
Although some investors saw the new U.S. trade agreement as a glimmer of hope for a modest rebound in risk appetite, the prevailing uncertainty — spanning Washington, Tokyo, and Stockholm — continues to fuel anxiety and diminish the dollar’s appeal as a haven.
Political developments are leaving a clear mark on the markets, with the Federal Reserve emerging as a central focal point in this dynamic.
Concerns over the Fed’s independence resurfaced following repeated comments by former President Donald Trump, who directly criticised Fed Chair Jerome Powell, even calling for his resignation due to the Fed’s reluctance to lower interest rates in line with the White House agenda.
While this kind of political pressure has become more familiar in recent years, it still poses a direct threat to the credibility of U.S. monetary policy and contributes to investor aversion toward the dollar in favour of more stable currencies in politically neutral environments.
Further complicating the picture is a statement from U.S. Treasury Secretary Scott Bessent regarding a potential change in the Fed’s leadership. The announcement of the intention to appoint a new chair — even if delayed until December or January — adds another layer of uncertainty to an already sensitive economic moment, as the U.S. shows signs of slowing in several key indicators. Although Bessent stressed that “there is no urgency,” markets interpret this delay as cautious hesitation that may conceal internal conflict over future monetary policy directions, thereby deepening selling pressure on the dollar.
In my view, the U.S.-China relationship remains the ultimate balancing factor that governs market sentiment. The upcoming meeting between Bessent and Chinese officials in Stockholm next week comes at a critical time, with an August 1 deadline looming for either concluding a new round of trade talks or returning to an escalation path. Despite both sides attempting to maintain a flexible diplomatic tone, the fragility of past agreements and internal divisions within the U.S. administration regarding its stance on Beijing cast doubt on the sustainability of any real progress. Therefore, any signs of renewed tensions—or even the absence of tangible advancement—will likely be interpreted by markets as early signals of another breakdown, prompting investors to reduce their dollar exposure amid fears of U.S. protectionist policies.
On the other hand, upcoming U.S. economic data scheduled for release later today (Thursday) will play a crucial role in directing market movement. Purchasing Managers’ Index (PMI) figures are expected to show slight improvement, but even if those expectations materialise, their impact may remain limited due to the overwhelming influence of political factors. Positive data may only serve to temporarily slow the dollar’s decline, but are unlikely to reverse the trend unless accompanied by clear signals from the Fed regarding the continuation of its independent monetary policy. Additionally, jobless claims, home sales, and the National Activity Index could provide a broader picture of the U.S. economy’s health, though in my opinion, these figures alone won’t be enough to lift the dollar out of its current downtrend—unless they deliver surprisingly strong upside surprises.
Thus, I believe the U.S. dollar will remain under pressure in the coming weeks. Even if some economic indicators beat expectations, the lack of political and monetary clarity, coupled with trade-related uncertainty, means that any rebound in the DXY will likely be a mere technical correction—not a genuine trend reversal. With the potential change in Fed leadership drawing closer and speculation mounting over the identity of the next chair, markets will become increasingly sensitive to both official and unofficial leaks and statements.
Accordingly, I expect the dollar to continue its gradual downward drift in the short term, potentially testing levels below 97.00 if the upcoming trade negotiations fail or if the U.S. administration continues to send mixed signals regarding its monetary stance. Meanwhile, other currencies—particularly the euro and yen—are likely to benefit from the dollar’s relative weakness, especially if central banks in Europe and Asia maintain a more cautious and independent policy tone.
In short, today’s market is not just seeking data, but also clarity of vision and confidence in institutional stability. Only when the dollar regains one of these two pillars will it be able to break out of its current decline. In their absence, downward pressures will persist, and all eyes will remain fixed on every new development—no matter how small—as it may carry significant implications for the future trajectory of the U.S. currency.
Technical analysis of Dollar Index ( DXY ) prices
Based on the technical chart of the U.S. Dollar Index (DXY) on the 4-hour timeframe, the index is facing clear selling pressure after breaking below the 97.50 support level, reaching 97.15—its lowest point since early July. The index is currently trading below both the 50 and 200 moving averages, reinforcing the continuation of the short-term downtrend. The chart also indicates a potential minor technical rebound toward the 97.60–97.80 zone, which aligns with the 0.236 Fibonacci retracement level; however, this area remains a likely resistance unless it is breached with strong and sustained trading volume.
