Tariffs, Turmoil, and a Tumbling Dollar: Is the Greenback Losing Its Grip?

The US dollar has come under intense pressure this week as markets absorb the economic fallout from President Trump’s sweeping tariff announcement. With fears of a global slowdown escalating, investors have rotated sharply into traditional safe havens, accelerating the dollar’s decline to multi-month lows. Amid growing stagflation concerns and a broader crisis of confidence, bearish sentiment continues to build—both fundamentally and technically—putting the greenback’s near-term outlook in sharp focus ahead of Friday’s key US jobs report and Fed Chair Powell’s remarks.

Dollar Drops Hard as Tariff Shock Sparks Flight to Safety

The US dollar tumbled to six-month lows on Thursday as markets reacted to President Trump’s sweeping new tariffs on all imports. The move triggered fears of a global economic slowdown, prompting investors to flee to traditional safe havens like the yen and Swiss franc. Despite mixed US economic data, the greenback extended losses as concerns over stagflation and a potential crisis of confidence deepened. Meanwhile, the euro surged to its strongest level since late 2024, while the Canadian and Mexican currencies also gained. All eyes now turn to Friday’s US jobs report and Fed Chair Powell’s speech for further direction.

Tariffs Backfire: Dollar Drops as Recession Fears Take Hold

Despite conventional economic theory suggesting tariffs should boost a country’s currency, the US dollar has fallen sharply following President Trump’s sweeping tariff announcement. Investors are increasingly worried that these trade measures could tip the US into a recession, making the dollar a riskier asset. The drop reflects growing pessimism about US economic stability and long-term policy direction. While tariffs typically reduce dollar supply and strengthen its value, the scale and market reaction to these policies have instead driven investors toward safer assets and away from the greenback.

Dollar Plunges as Tariff Shock Triggers Crisis Fears

The US dollar posted its largest one-day drop on record Thursday, as President Trump’s sweeping tariff announcement fueled fears of a deepening economic slowdown. The Dollar Index plunged 1.69%, with the dollar weakening across all G-10 currencies and safe havens like the yen and Swiss franc leading gains. Investors increased bearish bets on the dollar amid expectations of deeper Fed rate cuts and rising volatility. As doubts grow over the dollar’s haven status, strategists warn of a broader crisis of confidence if the economic and policy outlook continues to deteriorate.

Dollar Under Pressure: Downtrend Deepens as Sellers Take Control

Since peaking at 110.176 on January 13, the US Dollar Index (DXY) has remained under sustained downward pressure, establishing a clear bearish trend defined by successive lower highs and lower lows. Price action continues to trade below both the 20- and 50-period Exponential Moving Averages (EMAs), underscoring persistent selling momentum and reinforcing a negative near-term outlook.

Technical indicators corroborate the prevailing weakness. The Momentum Oscillator remains entrenched below the 100 mark, signaling a lack of bullish conviction, while the Relative Strength Index (RSI) continues to register values below the neutral 50 level, affirming ongoing bearish sentiment.

If the downtrend persists, the focus may shift toward key support levels at 100.793, 98.388, and 97.546. Conversely, a potential shift in sentiment or macroeconomic catalysts could prompt a corrective rebound, bringing resistance levels at 103.197, 104.683, and 105.420 into consideration.

Conclusion

With the US dollar under mounting pressure, both fundamental and technical signals point to continued downside risk. The sharp selloff following President Trump’s aggressive tariff policy has not only intensified fears of a recession but also shaken confidence in the dollar’s traditional safe-haven status. As market participants brace for Friday’s nonfarm payrolls report and Fed Chair Powell’s speech, any surprises could serve as a catalyst for further volatility—or a potential inflection point. Until then, the dollar’s bearish trajectory remains firmly in place.