US Dollar extends losses amid fresh trade tensions

• DXY plunges as US-Canada trade dispute escalates.
• US equities retreat, Dow Jones down over 1%.
• DXY dips below 103.50, with markets eyeing further downside.

The US Dollar (DXY) continues its downward spiral on Tuesday, with DXY hovering near 103.40 as trade tensions escalate. United States (US) President Donald Trump’s decision to hike tariffs on Canadian steel and aluminum to 50% rattled markets, adding further pressure on the Greenback. Meanwhile, in Europe, Germany’s Green coalition voiced support for a defense spending bill, providing an additional boost to the Euro (EUR). US equities erased earlier gains, with the Dow Jones down over 1%, reflecting broader market concerns.

Daily digest market movers: Trade dispute and policy shifts

• The US-Canada trade rift intensified as President Trump moved forward with a sharp increase in tariffs on Canadian steel and aluminum, hitting 50%.
• Germany’s Green coalition reaffirmed its commitment to a defense spending bill, reinforcing the Euro’s strength against the US Dollar.
• The NFIB Business Optimism Index for February fell short, coming in at 100.7, down from the previous 102.8 reading.
• The CME FedWatch Tool indicates a near certainty that rates will remain unchanged in the March 19 meeting, while the probability of a rate cut in May has climbed significantly.

DXY Technical Outlook: Multi-month lows as indicators signal oversold conditions

The US Dollar Index (DXY) sinks further, slipping below the key 103.50 level, marking its lowest level since October 2024. The 20-day and 100-day Simple Moving Averages (SMA) continue their bearish crossover, reinforcing negative momentum. The Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) both indicate oversold conditions, suggesting a possible short-term rebound. However, if 103.30 support fails to hold, the next downside target sits near 103.00.