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22 May 2025,06:24

Daily Market Analysis

Dollar Extend Losses Weakens as Debt Concerns Intensify

22 May 2025, 06:24

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Key Takeaways:

*Trump’s proposed tax and spending bill may deepen fiscal concerns.

*Treasury yields spike as weak bond auction dampens equity sentiment.

*DXY under pressure amid growing skepticism over U.S. fiscal sustainability.

Fundamental Analysis

The U.S. Dollar Index extended its losses as investors continued to react to Moody’s recent downgrade of the U.S. sovereign credit rating, citing unsustainable fiscal dynamics. Weaker economic data, combined with escalating trade uncertainties, have further fueled structural headwinds for the greenback. Adding to investor anxiety, former President Donald Trump’s newly proposed tax and spending bill—which aims to extend the 2017 tax cuts—is projected by analysts to increase U.S. debt by at least $3 trillion over the next decade. This has deepened market skepticism over the long-term sustainability of the U.S. fiscal outlook.

U.S. equity markets also retreated amid rising Treasury yields, following a poorly received 20-year bond auction that reflected weak investor demand. The bond market reaction, coupled with Moody’s downgrade and ongoing Congressional divisions over Trump’s fiscal package, underscores growing discomfort over the nation’s fiscal trajectory. The bill, which faces a key test in the House of Representatives this week, could potentially add $3 to $5 trillion to the existing $36.2 trillion debt burden—triggering further credit concerns and risk aversion.

Technical Analysis – Dollar Index

DOLLAR_,INDEX, 4-Hour Chart: 

The Dollar Index is trading lower, currently testing a key support level near 99.25. The bearish sentiment is underpinned by negative fundamentals, and a successful breakout below this level could pave the way for further downside toward the next support at 98.00. 

However, from a technical perspective, the MACD is showing signs of diminishing bearish momentum, while the RSI has dropped to 33—indicating that the index has entered oversold territory. This suggests that a technical correction or short-term rebound may be possible before the broader downtrend resumes.

Resistance Levels: 100.30, 101.90
Support Levels: 99.25, 98.00

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