Never miss a story from Christopher Vecchio

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Christopher Vecchio

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

- The DXY Index has fallen back to its daily 21-EMA, which proved to be supportive of price back in early-June.

- Proliferation of trade tensions with China and the EU continues to be the main focal point for market participants.

- Sentiment for the US Dollar remains mixed despite the pullback in recent day.

For longer-term technical and fundamental analysis, and to view DailyFX analysts’ top trading ideas for 2018, check out the DailyFX Trading Guides page.

The US Dollar (via the DXY Index) is posting a gain for the first time in four days as ongoing trade tensions with the United States' allies and rivals alike continue to simmer. Both China and the EU have staked out aggressive positions against the US under WTO rules, with the threat of a legitimate trade war seemingly increasing every day.

In general, an escalation of trade tensions leading to an outright trade war should be a negative development for the US Dollar. While we don't have much proper historical data to reference - there haven't been that many significant trade issues impacting markets since 2001 (when China joined the WTO and the EU was in existence) - the isolated instances we have suggest that a US-driven trade war would be a net-negative for the US Dollar.

As such, it's worth noting that the US Dollar has been trading like a risk currency in recent days, rallying when US Treaury yields and US stocks go up, and falling when yields and stocks go down. That the US Dollar is gaining today speaks to the fact that yesterday's slide by US equity markets hasn't found follow through in futures market trading overnight.

DXY Index Price Chart: Daily Timeframe ( to June 2018) (Chart 1)

DXY Index Finds Support at Daily 21-EMA as Trade Concerns Linger

The pause in the US Dollar's drop over the past few days comes at an interesting time for the DXY Index, with price falling to the daily 21-EMA for the first time since the June 14 ECB rate decision. Throughout early-June, the daily 21-EMA was been a magnet for support in the DXY Index, with no two consecutive daily closes coming below the moving average since April 17 and 18.

The driving force behind the DXY Index climbing back to its highest level since July 2017 was the clear policy divergence forming between the Federal Reserve and the European Central Bank, with the Fed eying up to four more hikes before the ECB even begins to raise rates even once. This perception hasn't changed; but the reappearance of trade war fears has momentarily shifted attention from central banks.

Read more: Euro Forecast: Euro Turn to June CPI for Next Catalyst


Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX