Dollar Dives to Fresh Low as Trump Threatens Fed Independence

• The U.S. dollar plunged to a record low as the market perceived heightened uncertainties about the Fed‘s independence.

• Japanese Yen and Swiss Franc jumped to new highs as markets sought safe-haven currencies for shelter.

• Market eyes on Japanese CPI that is due tomorrow to gauge Yen’s strength.

Market Summary

The U.S. dollar plunged to its lowest level since March 2022, after President Trump signaled intentions to challenge the independence of the Federal Reserve, igniting a fresh wave of uncertainty in global financial markets. The president, alongside key allies, is reportedly exploring legal avenues to remove Fed Chair Jerome Powell, citing dissatisfaction with current monetary policy amid rising inflationary risks and slowing growth.

The move was met with sharp backlash from investors, who viewed it as a potential threat to the institutional integrity of the U.S. central bank. As a result, the Dollar Index (DXY) collapsed below the critical $99.00 mark, triggering risk aversion across asset classes.

Safe-haven demand surged, with the Japanese Yen and Swiss Franc outperforming their G7 peers, as investors fled from the greenback and repositioned into traditional shelters. The dollar‘s decline was further exacerbated by lingering concerns over Trump’s sweeping global tariffs, which have strained trade ties and added to global economic unease.

Equities werent spared. Wall Street is bracing for deeper losses, with major indices under pressure as traders digest the implications of potential political interference in monetary policy.

Looking ahead, attention now turns to Japans CPI release tomorrow, which could offer key insights into the strength of the Yen and further shape safe-haven flows in the near term. Market sentiment remains fragile, and any additional shocks from Washington could trigger more dollar liquidation and flight to safety.

Current rate hike bets on 7th May Fed interest rate decision:

Source: CME Fedwatch Tool

0 bps (86%) VS -25 bps (14%)

Market Movements

DOLLAR_INDX, H4

The U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, came under renewed selling pressure as markets reopened on Monday. Confidence in the U.S. economic outlook remains fragile despite ongoing trade discussions between the U.S. and major global economies. While the broader U.S.-China trade relationship continues to be a crucial catalyst, fears surrounding de-dollarization are mounting. The dollars direction will largely hinge on the progression of these trade talks and overall global risk sentiment.

The Dollar Index is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 24, suggesting the index might enter oversold territory.

Resistance level: 99.25, 101.95

Support level: 97.15, 95.15

XAU/USD, H4

Gold prices remained resilient, holding near record highs amid persistent geopolitical tensions and a retreat in risk appetite. The ongoing U.S.-led trade disputes have strengthened demand for safe-haven assets, with gold benefiting from market uncertainty. Investors are closely monitoring upcoming economic data and the IMFs latest projections, due this week. IMF Managing Director Kristalina Georgieva has indicated significant downward revisions to global growth forecasts—though recession is not currently expected. This backdrop continues to support gold's bullish momentum.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 74, suggesting the commodity might enter overbought territory.

Resistance level: 3380.00, 3495.00

Support level: 3350.00, 3290.00

USD/JPY, H4:

The USD/JPY pair continued to decline as dollar weakness and renewed demand for the Japanese yen weighed on the pair. Investors have been rotating into the yen amid heightened global uncertainties following the long weekend. The Bank of Japan, which has adopted a more hawkish stance compared to its peers, has also contributed to yen strength, reinforcing the downward trend in USD/JPY.

USD/JPY is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum. However, RSI is at 28, suggesting the pair might enter oversold territory.

Resistance level: 143.95, 147.15

Support level: 140.45, 137.45