US Dollar Forecast: Tariff Deals Lift Sentiment—All Eyes on 50-Day MA for Next Breakout

DXY Rebounds as U.S. Strikes Tariff Deal with EU and Japan

The U.S. Dollar Index (DXY) climbed to 98.28 on Monday, registering a 0.62% gain after the U.S. and European Union reached a tariff agreement that eased fears of a broader trade war.

The move higher extends the greenback’s rebound from last week’s 97.11 low, putting 98.95—the July 16 high—back in play as a short-term resistance level. A recent agreement with Japan and renewed trade talks with China also contributed to the dollar’s strength, as markets increasingly discount trade disruption risk.

Tariff Relief Fuels Dollar Buying—What’s the Impact on Euro and Yen?

The EU deal announced Sunday from Scotland slashed planned U.S. import tariffs on EU goods from 30% to 15%, providing near-term relief to exporters and markets.

The euro, initially buoyant during early Asia trade, reversed sharply to close 0.7% lower at $1.1653, its biggest single-day drop in 10 weeks. The dollar also strengthened against the yen, up 0.5% at 148.37, and pushed the British pound down 0.24% to $1.3413.

A pullback in safe-haven demand, seen in the 0.74% gain versus the Swiss franc, further confirmed the broader dollar bid.

Central Bank Meetings Loom Large—Is Yield Differential Returning to Focus?

While trade relief helped spark the DXY rally, focus is now turning to this week’s Federal Reserve and Bank of Japan meetings. Both central banks are widely expected to hold rates steady, but markets will parse post-meeting commentary for policy direction.

Yield differentials, long suppressed by policy uncertainty, may become more relevant again if the Fed signals rate stability while overseas dovishness persists. HSBC’s Paul Mackel noted that recent trade deals could reduce policy risk, giving more weight to traditional FX drivers such as relative interest rates.

U.S. Tech Earnings and Trump-Fed Tensions Add More Volatility Potential

Upcoming earnings from Apple, Microsoft, Amazon, and Meta could add fuel to dollar momentum if results draw flows back into U.S. assets. Equities with heavy index weightings often influence USD through global portfolio rebalancing.

Meanwhile, the market remains alert to any Fed-related political risk, after reports that President Trump nearly attempted to fire Fed Chair Jerome Powell last week. While he backed off, such tensions could reintroduce uncertainty depending on how the central bank communicates its next move.

DXY Outlook: Can Bulls Retake the 50-Day Moving Average?

Technically, the DXY’s close at 98.28 brings it just shy of the 50-day simple moving average at 98.30. A sustained break above that level would open the door to retest the 98.95 high, with 99.42 as the next target.

Support is now firm at 97.66. With trade tensions cooling and investors refocusing on earnings and Fed policy, near-term momentum favors continued upside—but confirmation above the 50-day average remains key for a bullish continuation.

More Information in our Economic Calendar.