US Dollar Index Dips Below 100 as Fed Cites Confidence Concerns and Tariff Risks

The US Dollar Index (DXY) extended its losing streak for a third consecutive session, falling to 99.70 during the early Asian hours on Wednesday. The Greenback remains under pressure as Federal Reserve officials express increasing concern over the health of the U.S. economy, particularly in light of softening business and consumer sentiment.

The decline comes amid broader uncertainty surrounding U.S. trade policy and the lasting impact of Moody’s credit downgrade of U.S. sovereign debt.

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🗣️ Fed Officials Turn Cautious on Growth and Policy Stability

In recent remarks:

• San Francisco Fed President Mary Daly and
• Cleveland Fed President Beth Hammack
  highlighted growing anxiety within both the private sector and households, pointing to a gradual erosion in confidence.

Although some macro indicators remain stable, officials suggested that trade policy instability is fueling concern across markets and logistics networks.

On Monday, Atlanta Fed President Raphael Bostic reiterated his stance for only one rate cut in 2025, adding that tariff unpredictability from previous administrations may disrupt the U.S. supply chain — particularly in sectors reliant on imported goods.

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⚠️ Credit Downgrade Continues to Haunt the Dollar

The U.S. Dollar has remained on the defensive ever since Moody’s downgraded the U.S. long-term credit rating from Aaa to Aa1. This follows previous downgrades from:

• Fitch Ratings in 2023
• Standard & Poor’s in 2011

Moody’s cited significant long-term fiscal imbalances and projected that U.S. federal debt will reach 134% of GDP by 2035, up from 98% in 2023. The agency also forecasted a 9% budget deficit, driven by:

• Higher debt servicing costs
• Rising entitlement spending
• Slowing tax revenue

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🔍 US Dollar Index Forecast: Key Levels to Watch

Type	Level
Immediate Support	99.50 – Psychological floor
Deeper Support	98.80 – Near April swing low
Resistance	100.40 – Former support
Resistance	101.25 – 50-day EMA

Bearish Scenario:

• Continued credit concerns
• Fed’s cautious tone
• Weak consumer sentiment
  Could drive DXY below 99.50, targeting 98.80

Bullish Scenario:

• Hawkish Fed surprises
• Stabilizing macro data
• Improvement in global risk sentiment
  Might lift DXY back above 100.40

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