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The US dollar is beginning to recover as easing trade tensions and fresh international agreements restore some market confidence. While the rebound is still cautious, improving sentiment and policy clarity are helping to stabilise the currency.
US dollar finds support as new Japan trade deal eases tensions
The US dollar is showing early signs of recovery following a newly signed trade agreement between President Trump and Japan.
The deal features a 15% tariff on Japanese imports – significantly lower than the 25% previously floated in a letter earlier this week.
This softer stance has provided some relief across the currency markets, pushing the US Dollar Index (USDX) up by 0.1% to 97.488 at the time of writing.
The agreement paves the way for further capital inflows, with Japan committing to inject $550 billion into the US economy – offering longer-term support for the greenback, especially in today’s climate of ongoing global uncertainty.
Additional trade negotiations are also progressing, including revised terms with the Philippines and an emerging deal with Indonesia.
Technical analysis
The US Dollar Index saw an intraday decline before stabilising at 97.009, a level where buying interest began to emerge.
Short-term price movements on the 15-minute chart show a modest, sideways recovery in progress, though upward momentum remains limited.
Picture: USDX tries to claw its way back above 97, as seen on the VT Markets app.
While the MACD has crossed above its signal line, the flat histogram and low trading volume indicate a weak recovery rather than a solid bullish reversal.
Moving averages are starting to align, with price attempting to regain the 97.15 region – currently facing resistance from the 30-period moving average.
For bulls to gain control, a clear break above the 97.27 level is needed to shift the short-term structure towards a bullish bias. Until then, caution prevails.
Fed credibility back in focus amid Powell debate
Despite a cooling in trade-related headlines, political discussions surrounding the Federal Reserve continue to stir the markets.
US Treasury Secretary Scott Bessent told Fox Business that Jerome Powell should remain as Fed Chair, despite earlier calls to review the central bank’s role and actions.
These comments underscore the importance of policy stability and credibility in the forex market.
Any perceived weakening of the Fed’s authority – or a surprise dovish shift in guidance – could once again put pressure on the US dollar.
Cautious outlook for the US dollar
For now, the 97.00 support level on the US Dollar Index appears to be holding firm.
If macroeconomic conditions remain stable and political noise subsides, the USDX could edge higher, targeting the 97.50–97.60 zone.
That said, market participants should stay alert. Any flare-up in Fed-related uncertainty or renewed trade tensions could halt gains and send the index back toward support.
At present, the recovery remains tentative – offering stabilisation rather than a confirmed trend reversal.
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