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25 July 2025,06:05

Daily Market Analysis

Dollar Softens as EU-U.S. Trade Deal Nears; Wall Street Rallies on Trade Optimism

25 July 2025, 06:05

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Key Takeaways:

*Persistent trade uncertainty has pressured the greenback, with the U.S. Dollar Index down over 1.2% since Monday, as capital flows rotate out of dollar-denominated assets.

*Easing trade tensions fueled a broad rally in U.S. equities. The Dow Jones jumped more than 500 points, leading gains across major indices. Robust earnings from Alphabet Inc. (GOOGL.O) added to the bullish momentum.

Market Summary:

Following the recently concluded trade agreement between the U.S. and Japan ahead of the August 1 deadline set by President Donald Trump, the European Union is reportedly nearing a similar deal with the U.S., potentially involving a 15% baseline tariff on EU goods—down from the previously threatened 30%.

While negotiators in Brussels aim to secure favorable terms, the looming deadline and ongoing uncertainty surrounding Trump’s trade policy have weighed on investor sentiment toward dollar-linked assets. The U.S. Dollar Index has declined more than 1.2% since Monday, reflecting persistent capital outflows from U.S. equities and bonds.

In contrast, optimism around easing trade tensions has lifted Wall Street sentiment. All three major U.S. indices closed higher in the previous session, with the Dow Jones Industrial Average leading gains—surging more than 500 points. The upbeat momentum was further supported by robust earnings, particularly from Alphabet Inc. (GOOGL.O), which delivered results that beat market expectations and bolstered broader market confidence.

Looking ahead, continued progress in EU-U.S. trade talks could further lift risk appetite and extend the equity rally, while potentially stabilizing the declining dollar. Earnings from other members of the so-called “Magnificent Seven” could also provide additional upside catalysts in the near term.

Technical Analysis 

DXY, H4: 

The U.S. Dollar Index (DXY) is under sustained selling pressure, sliding more than 1% since the start of the week as bearish momentum intensifies. The index has decisively broken below its prior uptrend channel, signaling a potential trend reversal. Further downside was confirmed as DXY failed to hold above the long-term downtrend resistance and breached the 61.8% Fibonacci retracement level from its previous rally—reinforcing the bearish bias.

Momentum indicators align with the downbeat outlook. The Relative Strength Index (RSI) has slipped into oversold territory, while the MACD has crossed below the zero line, both pointing to strengthening downside momentum.

Unless a near-term catalyst emerges to halt the decline, the technical breakdown suggests the dollar may remain under pressure in the coming sessions.

Resistance Levels: 98.12, 99.20

Support Levels: 96.35, 95.65

Dow Jones, H1

The Dow Jones Industrial Average has surged over 1.3% across the past two sessions, carving out a steep uptrend channel and lifting the index toward its all-time high above the 45,000 level. The move underscores strong bullish momentum, driven in part by robust market sentiment and favorable earnings expectations.

Momentum indicators confirm the upward bias, with the Relative Strength Index (RSI) firmly in overbought territory, suggesting sustained buying pressure. However, the MACD has also edged higher but now shows signs of a potential bearish crossover above the signal line, raising the prospect of a short-term technical pullback.

While the broader trend remains bullish, traders may exercise caution in the near term as overextended conditions hint at the possibility of a brief consolidation or retracement.

Resistance Levels: 45,050.00, 45,330.00

Support Levels: 44740.00, 44,400.00

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