Insights 
VT 
Key Points:
- USD Index (USDX) falls 0.38% to 99.59, now down 1.3% over two days.
- Trump’s tax bill fails to unify GOP support, raising deficit concerns.
- G7 meetings stir speculation about US preference for a weaker dollar.
The U.S. dollar continued its retreat on Wednesday, breaking below 99.50 for the first time this month as traders reassessed the currency’s resilience in light of growing fiscal risks, cooling trade momentum, and political gridlock in Washington.
USDX fell to an intraday low of 99.404 after opening at 100.281, extending its two-day slump to 1.3%. The slide came after President Trump failed to secure Republican consensus for his sweeping tax bill, which nonpartisan analysts estimate would add $3 to $5 trillion to the national debt over the next decade.
Markets are also eyeing the G7 finance minister meetings in Canada, where officials from major economies are expected to quietly raise concerns about U.S. currency direction. Traders worry Washington may tacitly endorse dollar weakness as a tool to boost competitiveness while inflation and growth remain tepid.
Adding to the bearish tone, the Moody’s downgrade of U.S. sovereign credit on Friday—while lightly absorbed by markets—has contributed to a broader reassessment of the dollar’s role as a safe-haven asset.
Fed officials, meanwhile, are keeping to a cautious path. Several policymakers reiterated on Tuesday that trade uncertainty and fiscal headwinds warrant a “wait-and-see” approach, reinforcing dovish expectations and limiting support for the greenback.
Technical Analysis
The USD Index (USDX) continues its decline, with price action forming a clear downtrend on the 15-minute chart. After opening around 100.281, the index has dropped steadily, closing at 99.429 and marking a session low of 99.404. This represents a significant intraday move, with the MACD histogram deep in bearish territory and the signal line widening, confirming ongoing downward momentum.
Picture: USDX dips below 99.50, eyes deeper support as bearish momentum builds below key moving averages, as seen on the VT Markets app
The moving averages (5, 10, 30) are all sloping downward and remain above the current price, reinforcing bearish control. Attempts at recovery have been shallow and short-lived, with sellers stepping in at every lower high. The breakdown below 99.600—a minor support level—further increases downside pressure.
With no immediate signs of reversal and MACD still trending lower, the index may retest 99.200 next. A break below this level could extend losses toward 98.900, while any bounce would need to clear 99.800 to neutralise the trend.
Cautious Forecast
With inflation concerns giving way to policy uncertainty and budget strain, the dollar may remain under pressure in the near term. While recession risks have eased, rising Treasury yields and growing fiscal imbalances complicate the longer-term outlook. If the tax bill continues to falter in Congress and trade negotiations with Tokyo and Seoul remain stagnant, USDX could retest support near 99.00. Markets await UK CPI data and Thursday’s U.S. jobless claims for the next directional cues.
