US Dollar Forecast: Bullish Outlook After 90-Day U.S.-China Tariff Pause

U.S. Dollar Index Rallies as U.S.-China Tariff Deal Boosts Risk Appetite

The U.S. Dollar Index (DXY) climbed sharply Monday, extending its recent rebound as markets digested a significant breakthrough in U.S.-China trade negotiations. A 90-day truce to slash reciprocal tariffs has revived confidence in the global growth outlook, fueling demand for the dollar and sending Treasury yields higher.

At 10:39 GMT, the U.S. Dollar Index is trading 101.862, up 1.438 or +1.43%.

Dollar Breaks Key Resistance as Trade Deal Spurs Buying

The dollar index surged above its short-term pivot of 101.302, signaling bullish momentum and setting the stage for a potential test of the 50-day moving average near 102.10. A sustained push through that level could open the path toward the 200-day moving average at 104.297. The greenback strengthened broadly, gaining 1.7% against the yen to 147.835 and 1.5% versus the Swiss franc at 0.84405, as traders rotated out of safe-haven assets.

Tariff Reduction Agreement Shifts Market Sentiment

Monday’s rally followed the announcement that the U.S. and China had agreed to reduce tariffs significantly for a 90-day period. U.S. duties on Chinese imports will fall from 145% to 30%, while Chinese tariffs on U.S. goods will decline from 125% to 10%. The agreement, brokered in Geneva, alleviated fears of a prolonged economic standoff. U.S. Treasury Secretary Scott Bessent said the deal avoids “the equivalent of an embargo” and reflects both nations’ interest in continued trade engagement.

Treasury Yields Surge as Risk Premium Recedes

Bond markets responded sharply, with the U.S. 2-year Treasury yield jumping 10 basis points to 3.996%, and the 10-year rising nearly 6 basis points to 4.433%. The easing of geopolitical tensions—including a ceasefire between India and Pakistan and scheduled talks between Ukrainian and Russian leaders—added to the global risk-on tone, further pressuring bond prices and lifting yields.

Market Eyes Key U.S. Economic Data for Confirmation

Attention now turns to upcoming U.S. macroeconomic releases, including Tuesday’s consumer price index and Thursday’s retail sales and producer price index data. These indicators will be closely watched for signs of inflation pressure and consumer resilience, which could influence the Fed’s rate outlook.

Market Forecast: Dollar Bulls Eye 200-Day Average

With trade risks easing and Treasury yields rising, the backdrop favors further upside in the DXY. A successful breach of the 50-day moving average at 102.10 would strengthen bullish conviction, potentially targeting the 200-day moving average at 104.297. Near-term momentum hinges on the CPI print and whether it aligns with stronger demand fundamentals following the tariff reprieve.

More Information in our Economic Calendar.