Key Points

• USDX hovers near 99.09, after briefly touching a session high of 99.31, before paring gains.
• Trump’s “hard to deal with” post on Xi Jinping injects new uncertainty into tariff diplomacy.

The U.S. dollar index (USDX) drifted lower in late Wednesday trading, closing at 99.091, as FX markets turned cautious ahead of a packed macroeconomic calendar and deepening uncertainty around President Donald Trump’s escalating tariff rhetoric. After touching an intraday high of 99.311, the greenback reversed on lower volumes, pulling back toward the 99.00 psychological mark amid mixed macro signals and global noise.

Markets are walking a tightrope. Earlier optimism over U.S.–China negotiations took a hit as Trump posted that Chinese President Xi Jinping is “tough” and “hard to make a deal with.”

The blunt social media post, released shortly after news of a potential bilateral call between the two leaders, undercut hopes that a near-term tariff rollback would be agreed upon.

The doubled steel and aluminium tariffs are now being followed by a hard Wednesday deadline for new offers from U.S. trading partners. However, behind the scenes, the tone is anything but cooperative. While countries like the UK remain exempt due to standing trade agreements, broader investor sentiment remains tethered to tariff uncertainties and the escalating standoff with Beijing.

The dollar, traditionally a safe-haven in times of global stress, has struggled to capitalise on risk-off flows. Instead, traders are shifting focus toward near-term fundamentals — particularly the health of the U.S. labour market and services sector.

Data Divergence Adds Volatility

The greenback’s choppiness this week reflects a tug-of-war between negative manufacturing signals and surprisingly strong job openings. Monday’s ISM Manufacturing PMI contraction sent the dollar tumbling, only for it to recover sharply on Tuesday following an unexpected uptick in U.S. JOLTS data, pointing to still-tight labour conditions.

All eyes now turn to today’s ADP private payrolls and ISM services print, both seen as leading indicators ahead of Friday’s nonfarm payrolls. A strong showing in either could firm up the dollar’s footing — especially if paired with inflationary signals in the ISM’s price component.

Meanwhile, the euro rose 0.21% to $1.1395 ahead of the ECB’s Thursday rate decision. Sterling ticked up to $1.3539, helped by tariff immunity and stronger-than-expected May activity figures. The dollar was flat against the yen at 143.95, but down 0.16% versus the Swiss franc — classic signs of splintered sentiment across G10 currencies.

Technical Analysis

The USD Index (USDX) is showing signs of near-term exhaustion following a steady climb from the 98.494 low posted during the 3 June session. The price reached an intraday high of 99.311 before facing rejection and pulling back slightly toward the 99.09 mark. Short-term moving averages (5, 10, 30) had been trending upward in parallel, confirming bullish momentum until the early hours of 4 June, but have since begun to converge, suggesting waning upward strength.

Picture: USDX stalls at 99.31 high as bullish momentum fades; 99.00 now key short-term support to watch, as seen on the VT Markets app

MACD momentum has cooled following a brief bullish crossover, with the histogram now contracting into neutral territory. While the overall trend remains marginally positive (0.01%), price is hovering around the psychological 99.00 level, now acting as tentative support. If 99.00 fails to hold, deeper retracement toward the 98.85–98.70 range is likely. Upside recovery hinges on reclaiming 99.31 with conviction.

The next 48 hours may define the dollar’s trajectory heading into June’s FOMC window. Should the jobs data confirm slowing wage growth or easing hiring, the dollar could drift lower — particularly against yield-sensitive currencies like the euro and Aussie. However, resilient labour figures or further tariff deferrals could offer near-term support.

Until then, markets remain stuck between policy ambiguity and economic divergence — a combination that leaves the dollar vulnerable to data whiplash.

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