US Dollar Forecast: DXY Gains as Trump’s Tariff Threats Hit Global Stocks

US Dollar Edges Higher as Tariff Announcements Pressure Risk Assets

The US Dollar Index (DXY) is edging higher as risk sentiment sours across equities following President Trump’s fresh tariff threats on Canada and signals of broader trade escalation.

The dollar’s firming comes as the S&P 500 retreated 0.4% on Friday, a day after posting a record high, while the Dow Jones shed 222 points and the Nasdaq slipped 0.3%.

Trump announced a 35% tariff on Canadian goods, citing fentanyl concerns, and indicated additional hikes if Canada retaliates. He also signaled blanket tariffs of 15% to 20% on remaining trade partners, above the 10% baseline investors had priced in, increasing the market’s defensive tilt toward the dollar.

This trade tension is reinforcing dollar demand, as risk-off flows deepen and traders seek safety in USD cash, a typical pattern during escalating geopolitical uncertainty.

Trump’s remarks indicating tariffs are “well-received” by markets did little to calm equity traders, as the latest tariff on imported copper and Brazil’s goods (at 50%) underscores the administration’s aggressive stance. Meanwhile, Nvidia’s sharp gains on AI optimism that lifted the Nasdaq to a record earlier in the week faded as tech shares led premarket declines.

Technical Context Supports Stabilization

The DXY chart shows a rebound from the July low of 96.377, now testing the 97.90–98.00 zone near the 50-day SMA at 98.90, which remains immediate resistance.

Previous swing highs at 99.421 and 100.540 remain distant, yet the recent series of higher daily closes suggests momentum is shifting cautiously back toward the dollar.

The 200-day SMA at 103.64 remains a distant ceiling and will likely only come into focus if trade escalation accelerates risk aversion.

Traders Eye Fed Path and Earnings Next

Citi’s Drew Pettit noted that for equity rallies to sustain, macro data and Federal Reserve policy must align, but “we’re not quite there.” With second-quarter earnings season starting next week and tariffs injecting fresh uncertainty into corporate margin forecasts, traders are assessing potential risk-off flows that could benefit the dollar further if equities remain under pressure.

Market Outlook

Near term, the US Dollar Index may attempt a push toward the 98.90 resistance if risk-off sentiment persists into early earnings season, with a decisive close above opening the way toward 99.40.

However, the potential for oversold equity conditions to trigger a bounce remains a limiting factor for aggressive dollar upside unless the Fed’s stance shifts or trade risks escalate further.

Dollar traders should watch for any follow-through tariff announcements on the EU and subsequent equity reactions to gauge USD upside momentum into next week.

More Information in our Economic Calendar.