US Dollar Edges Higher as Market Looks Beyond Supreme Court Tariff Ruling

Traders' Opinions

Summary:

The US Dollar Index (DXY) is attempting a modest recovery during European trading, climbing back toward 97.75 after a soft open near 97.50.

BUY USDX

EXP

TRADING

97.700

Entry Price

99.500

96.900

97.580 -0.120 -0.12%

0.0

Pips

Flat

96.900

Exit Price

97.700

Entry Price

99.500

The price action in the US Dollar this morning reads like a classic "buy the rumor, sell the fact" scenario—with a legal twist. The DXY opened the European session on the back foot after Friday’s seismic ruling from the Supreme Court, which struck down President Trump’s invocation of emergency economic powers to impose reciprocal tariffs. The court’s decision effectively nullified the so-called reciprocal duties, creating a brief moment of uncertainty for a currency market that had been pricing in a protectionist premium.

However, as the morning session progressed, the narrative shifted from legal obstruction to political pragmatism. It appears the market has concluded that the White House is unwilling to cede its leverage on trade. In a swift and strategic response to the court’s ruling, President Trump has already announced a baseline of 10% global duties. This move is widely interpreted by analysts as a legal workaround—a way to maintain tariff pressure on trading partners without relying on the specific emergency powers that the Supreme Court just rejected.

This is the key catalyst for the Dollar’s bounce. The market is looking past the legal defeat and focusing on the administration's determination to keep trade policy restrictive. The prevailing sentiment in the dealing rooms this morning is that while the judicial branch may have clipped the wings of the reciprocal tariff plan, the executive branch still has plenty of arrows in its quiver.

Adding another layer of complexity to the USD bid is the commentary from US Trade Representative Jamieson Greer. Speaking on Tuesday, Greer dangled the prospect of a significant tariff hike, stating that Washington could raise duties to 15% or higher on certain nations, up from the newly established 10% floor.

While Greer remained tight-lipped on which specific trading partners would be targeted, the ambiguity is doing the heavy lifting for the Dollar right now. In the world of FX, uncertainty regarding tariffs often translates into a premium for the reserve currency. No one wants to be short the Dollar when a 15% tariff on a major trading partner like the EU or Japan could be announced without warning. This lingering threat is providing an invisible bid under the DXY, preventing any significant downside follow-through despite the legal setback.

While trade headlines dominate the narrative, the monetary policy backdrop remains a crucial pillar of support for the Greenback. There is a noticeable disconnect between the market’s previous hopes for aggressive easing and the reality of the Fed’s current stance.

According to the CME FedWatch tool, traders are increasingly confident that the Federal Reserve will maintain the status quo, holding interest rates steady at both the March and April Federal Open Market Committee (FOMC) meetings. This recalibration of expectations was bolstered by comments from St. Louis Fed President Albert Musalem on Wednesday. Musalem characterized the current interest rate policy as "appropriate," striking a balanced tone regarding the dual mandate of controlling employment risks and inflation.

His comments suggest that the Fed is in no rush to cut rates, especially with the fiscal side of the equation (tariffs) potentially adding a new variable to the inflation outlook. For the Dollar, a patient Fed is a supportive Fed.

Technical Analysis

From a technical perspective, the U.S. Dollar Index (DXY) is attempting to transition from a corrective phase into a renewed bullish structure. On the 4-hour chart, price action has rebounded strongly from the 96.00–96.30 demand zone following a sharp capitulation selloff and is now consolidating around 97.70–97.80, which aligns with a previously broken support area that has turned into near-term resistance.

The broader structure shows a clear liquidity sweep below 96.00, followed by an impulsive recovery — a classic reversal signature. Since bottoming, DXY has established a sequence of higher lows, suggesting that buyers are gradually regaining control. However, price is currently compressing beneath the 98.50–98.70 supply zone, which represents a key intraday pivot and former breakdown level.

The 97.40–97.60 region now serves as immediate support. As long as price holds above this band, short-term bullish pressure remains intact. A decisive break below 97.40 would weaken the developing higher-low structure and could expose a retest of 96.50, followed by the major 96.00 demand floor. A sustained move beneath 96.00 would invalidate the recovery narrative and reopen downside risk toward 95.50.

On the upside, bulls are focused on a clean break above 98.70. A sustained move through this resistance would confirm continuation and likely trigger momentum buying toward 99.30–99.50. Beyond that, the major supply zone near 100.00–100.30 stands as the next high-probability objective, aligning with prior distribution highs and a strong psychological barrier. A decisive breakout above 100.30 would signal a broader trend resumption on higher timeframes.

Structurally, price action suggests accumulation rather than exhaustion. The consolidation just beneath resistance indicates absorption of supply, and the projected path on the chart reflects a pullback-and-break scenario — a common bullish continuation pattern.

Overall, DXY remains in a recovery phase with bullish potential building, provided support at 97.40 holds and price can reclaim 98.70 decisively.

TRADE RECOMMENDATION

BUY DXY

ENTRY PRICE: 97.70

STOP LOSS: 96.90

TAKE PROFIT: 99.50

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