US Dollar Forecast: Traders Targeting 97.90 as Trump Tariff Deadline Supports Rally

Dollar Strengthens on Trump Tariff Deadline Uncertainty

The dollar index is up 0.34% to 97.294 mid-morning on Monday as traders positioned ahead of President Trump’s August 1 tariff deadline, with uncertainty over policy implementation driving safe-haven demand. Despite reaching a one-week high, the greenback remains near 3.5-year lows after declining 10% year-to-date.

Trump Tariff Threat: Will August 1 Deadline Hold?

Trump confirmed Sunday that new reciprocal tariffs take effect August 1, targeting multiple countries with higher duties after the 90-day moratorium expires Wednesday. The President plans to name roughly a dozen nations receiving tariff notices Monday, while threatening an additional 10% levy on countries supporting BRICS “anti-American” policies.

Market analysts remain skeptical about full implementation. “This administration is trying to find ways to avoid going all out on fresh tariff positions,” said Chris Beauchamp, chief market analyst at IG. “They saw what happened with the volatility in April, and I don’t think they want to wish that again.”

Federal Reserve Policy Expectations Support Dollar

Last week’s resilient labor market data pushed back Fed easing expectations, providing additional support for the dollar. The currency extended gains from Friday’s session, with the dollar-yen pair rising 0.78% to 145.725 – a one-week high.

HSBC’s Paul Mackel notes that U.S. policy uncertainty weighing on the dollar “may not be as potent as in early April, but we think this correlation still matters” for medium-term positioning.

Major Currency Pairs: Euro Retreats, Yen Weakens

The euro slipped 0.41% to $1.1738 despite rallying over 13% year-to-date. Dollar-Swiss franc gained 0.25% to 0.797, hovering near January 2015 lows. Risk-sensitive currencies underperformed, with the Australian dollar down 0.61% and New Zealand dollar falling 0.63% ahead of central bank meetings.

Technical Outlook: Counter-Trend Rally Continues

The dollar index trades in a 4-day counter-trend rally within the 99.421-96.377 range. Key resistance sits at the 97.899 pivot level. The main trend remains bearish, but near-term strength could persist if tariff implementation uncertainty continues supporting safe-haven demand.

Options data suggests limited volatility expectations ahead of the tariff deadline, with traders pricing in potential deadline extensions.

Short-Term Forecast: Dollar Strength Into August 1 Deadline

The dollar looks positioned for continued strength through Wednesday’s tariff deadline, with the index targeting resistance at 97.899. Key risk events include Trump’s Monday tariff announcements and any policy clarifications from administration officials.

Expect heightened volatility around the August 1 implementation date, with potential for sharp reversals if tariff extensions are announced. EUR/USD faces pressure toward 1.17 support, while USD/JPY could test 146.50 if safe-haven flows persist.

More Information in our Economic Calendar.