U.S. Dollar Weakens Amid Fiscal Concerns Over Trump-Backed Tax Plan

Key Takeaways:

*U.S. Dollar pressured as markets react to Trump’s $4.9 trillion tax and spending proposal.

*Debt sustainability in focus with national debt at $36 trillion and potential deficit expansion.

*Credit risks resurface following Moody’s downgrade and fears of further fiscal slippage.

Fundamental Analysis

The U.S. dollar came under renewed selling pressure as investors weighed the implications of former President Donald Trump’s proposed $4.9 trillion tax cut package, which narrowly passed through the House Budget Committee. The bill includes significant cuts to programs such as Medicaid and food assistance, raising political friction and economic concerns.

With the U.S. national debt already at $36 trillion, the bill has sparked renewed anxiety over fiscal sustainability. Market participants fear that without more substantial spending cuts, the legislation could widen the budget deficit and invite further credit rating downgrades, especially in the wake of Moody’s recent outlook revision.

Although rising U.S. yields may offer short-term support for the dollar, growing fiscal uncertainty and political gridlock could erode long-term investor confidence, particularly if structural economic reforms are delayed.

Technical Analysis – Dollar Index

DOLLAR_,INDEX, 4-Hour Chart: 

The Dollar Index (DXY) is showing continued signs of weakness after breaking below a key support level, reinforcing the bearish outlook. 

The MACD indicator is displaying growing bearish momentum, with the histogram expanding further below the zero line—signaling strong downward pressure. At the same time, the Relative Strength Index (RSI) sits at 34, remaining below the midline and suggesting that bearish sentiment still dominates. 

If this momentum persists, the index is likely to extend its decline toward the next support level at 99.15, and potentially deeper toward 98.00. 

However, if selling pressure begins to ease, a technical rebound could occur, with the index likely to retest the former support-turned-resistance at 100.30. A successful breakout above this level could open the door for further upside toward 101.90.

Resistance level: 100.30, 101.90

Support level: 99.15, 98.00