DXY Falls to Five-Week Low as U.S. Tax Cuts and Fiscal Woes Weigh

Dollar index (DXY)

Fundamental Analysis

U.S. Dollar Index (DXY) continued to weaken, falling below 99—its lowest level in five weeks—amid rising concerns over new tax policies and a deteriorating U.S. fiscal outlook. President Trump’s proposed tax-cut and spending bill, now awaiting Senate review, is projected to increase the budget deficit by $3.8 trillion over the next decade.

The postponement of the 50% EU tariffs until July 9 helped the euro rise to its highest level since late April, while safe-haven currencies like the Japanese yen and Swiss franc also strengthened. Investors are now awaiting key U.S. economic data and Fed speeches later this week.

Technical Analysis

The current price structure shows that DXY has broken below the short-term ascending trendline and is now forming a series of lower highs and lower lows, confirming a bearish pattern.

All key EMA levels (34, 89, 200) are positioned above the price, clearly signaling that a downtrend is in place.The RSI is around 31.18, near the oversold threshold. However, there is no clear bullish divergence yet, suggesting that the market may continue declining in the short term.

Dollar - yen (USDJPY)

Fundamental Analysis

Japanese Yen rose to a four-week high at 142.16/USD, bolstered by comments from BOJ Governor Kazuo Ueda, who said the central bank may continue raising interest rates if inflation remains stable. He specifically warned about the impact of food prices on core inflation.

Additionally, the weaker USD, driven by concerns over U.S. debt and unpredictable trade policies, has increased demand for the yen as a safe-haven asset. Japanese government bond yields dropped sharply, with the 40-year yield falling 10 basis points to 3.435%.

Technical Analysis

Price is moving within a well-defined downtrend channel, marked by two parallel blue lines.The bearish structure began after failing to hold the 147–145.5 resistance zone and breaking below key EMA support.

Current RSI: 32.22, nearing the oversold level (<30). There is a slight bullish divergence between price and RSI, suggesting a potential short-term technical rebound. The recent sell-off occurred on high volume, but volume has been gradually decreasing, possibly indicating weakening selling pressure.

WTI crude oil (USOIL)

Fundamental Analysis

WTI Crude Oil prices dropped to around $61.30 per barrel due to concerns that OPEC+ may raise production by 411,000 barrels/day at its meeting later this week. The group had already accelerated production increases for June, adding pressure to the market.

However, the downside is limited after President Trump delayed EU tariffs until July 9, easing concerns about fuel demand. Meanwhile, Iran’s refusal to suspend uranium enrichment has heightened the risk of a failed nuclear negotiation—potentially keeping Iranian oil supply restricted.

Technical Analysis

Price is currently fluctuating around $61.33, after being rejected at the resistance zone of $62.73–$64.50. The prior uptrend has been invalidated after failing to stay above the 200 EMA.Now, price trades below all three EMAs, especially the 200 EMA, confirming a medium-term bearish trend. 

Additionally, the 34 EMA has crossed below the 89 EMA, generating a bearish crossover signal.RSI is at 47.71, below the neutral level of 50. RSI shows a slight downward slope, indicating weakening buying pressure, though it has not yet reached oversold territory.

 

 

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