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  • Trump criticizes the Fed for its hawkish monetary policy outlook.
  • Fed’s Bullard warns over yield curve  inversion risks.
  • US Dollar Index turns negative for the week in the NA session.

The US Dollar Index, which tracks the greenback against a basket of six major currencies, came under pressure in the second half the day on Friday and turned negative on the week. After touching a daily low at 94.30, the index made a small recovery and was last seen at 94.45, where it was still down 0.75% on the day.

Just when it looked like the index was about to make its first daily close of the week above the critical 95 handle on Thursday, US President Donald Trump’s remarks on the monetary policy during an interview with CNBC triggered a sell-off. Although it looked like the negative impact of Trump’s comments on the USD was starting to fade away on Friday, the US Dollar Index, once again, turned south as Trump went on to Twitter to remind investors about his views on the Fed’s policy outlook.

Claiming that the U.S. was at a disadvantage because rival economies like the EU and China were manipulating their currencies by keeping the interest rates low, Trump argued that higher rates and a stronger dollar were taking away their competitive edge.

“The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates – Really?” Trump concluded.

Right around the time when Trump tweeted out these views, St. Louis Fed President James Bullard crossed the news wires saying that the Fed should hold off raising rates further as the flattening yield curve was pointing to a slow down in the economic expansion and put extra weight on the buck.  

Furthermore, the lack of macroeconomic data releases from the U.S. that could change the market mood on Friday allowed these statements to continue to drive the market’s USD valuation.

Technical levels to consider

The initial support for the index aligns at 94.25 (50-DMA) ahead of 93.70 (Jul. 9 low) and 93.15 (Jun. 14 low). On the upside, resistances could be seen at 94.65 (20-DMA), 95 (psychological level) and 95.65 (Jul. 19 high).