In the foreign exchange market on March 13, 2025, the US dollar (USD) has managed to regain some lost ground, as observed by Scotiabank. However, the overall market seems to be in a state of inertia, with investors adopting a wait – and – see approach. They are keenly anticipating crucial data releases and new developments that could provide more clarity on the future direction of the currency.
The dollar’s gains have been somewhat subdued on a broad scale. But when it comes to high – beta and commodity – linked currencies like the Australian dollar (AUD), New Zealand dollar (NZD), Swedish krona (SEK), and Norwegian krone (NOK), the USD has registered more notable increases. This movement follows a mixed performance in Asian equity markets and a relatively flat to slightly declining trend in US equity futures, as pointed out by Scotiabank’s Chief FX Strategist, Shaun Osborne.
Lingering Bearish Sentiments Despite the USD’s Rebound
Despite the current upward movement of the dollar, the underlying market trends continue to paint a bearish picture. One of the main concerns plaguing investors is the potential reciprocal tariff action by the US scheduled for April. This looming trade policy change has the potential to further unsettle market sentiment and risk appetite.
The recent US Consumer Price Index (CPI) data also added to the market’s uncertainty. While both the headline and core inflation rates came in lower than expected, there are nuances to consider. For instance, factors like lower airfares, which contributed to the lower inflation figures, may not be accurately reflected in the Personal Consumption Expenditures (PCE) data. Moreover, the decline in airfares could be an indication of weakening consumer demand, which has broader implications for the economy.
Limited Upside and Technical Outlook for the Dollar Index
Looking at the Dollar Index (DXY), which measures the USD’s value against a basket of major currencies, it has managed to gain a small amount of ground. However, these gains are restricted. The market might be undergoing a minor technical correction within what still appears to be an ongoing downtrend.
Technical analysis of the DXY across short – term, medium – term, and long – term studies shows bearish trend momentum signals. This typically suggests that any countertrend rallies or rebounds in the index will likely be limited in both magnitude and duration. As a result, for investors, these short – lived upward movements could present an opportunity to either re – establish or increase short positions on the DXY.
Resistance levels for the DXY are identified at around 103.70, which is close to the current levels, and another at 104.00 – 104.05. Recent data from the Commodity Futures Trading Commission (CFTC) indicates a reduction in net long positions on the USD. Nevertheless, investors, in general, still maintain a long – term positive stance on the dollar. Interestingly, other data sources suggest that active traders have not significantly reduced their exposure to the USD. This divergence in positioning among different types of investors adds another layer of complexity to the current market situation.
