The US Dollar (USD) is rallying higher on Monday driven by two main drivers. First element is Donald Trump’s promise to impose tariffs on BRICS countries if they stop using the USD. The second amin driver is the increasing French political turmoil, which is weighing on the Euro (EUR).In a post on Saturday, the US President-elect said he would impose a 100% tariff on the BRICS if the group decides to move away from trading using the USD. “We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” he said.Investors are also punishing the EUR – the main currency within the DXY US Dollar Index basket – on the back of failed budget talks in France and increasing chances that a no-confidence vote against the current prime minister is approved. Finance Minister Antoine Armand said on Bloomberg television over the weekend that France will not be blackmailed on far-right demands from the National Rally (NR) of Marine Le Pen, which is asking for changes in the budget bill. The NR President Jordan Bardella said on Monday that its party will trigger a no-confidence vote mechanism “unless there is a last-minute miracle,” Reuters reports. A no-confidence vote could take place as early as Wednesday, and if successful it could bring the French government down.Meanwhile, the US economic calendar is set to kick off with an eventful Monday ahead, with the Institute for Supply Management (ISM) releasing its numbers for November.
Daily digest market movers: Keep an eye on the Fed speakers
- The headline PMI is set to tick up to 47.5, from 46.5, but still stuck in contraction territory.
- The Prices Paid index, a leading indicator of inflation, is expected to tick up to 55.2 from 54.8.
US Dollar Index Technical Analysis: A week full of pivotal moments (DXY) is seeing a flight from across the Atlantic Ocean, with investors pulling out some investments out of Europe and into the US. A potential fall of the French government could quickly spill over into Germany, where Prime Minister Olaf Scholz position is hanging by a threadahead of the 2025 elections. All this political uncertainty could block investment opportunities, with investors favoring the equity-supportive Trump administration that is set to take over in January. On the upside, 106.52 (April 16 high) is the first level to watch and looks ready to be tested already this Monday. Should the Dollar bulls reclaim that level, 107.00 (round level) and 107.35 (October 3, 2023, high) are back on target for a retest. However, warnings for a knee-jerk reaction need to be issued. In case of a downturn, the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the big figure and the 200-day Simple Moving Average at 104.03 should catch any falling knife formation. (Click on image to enlarge)US Dollar Index: Daily ChartMore By This Author:Crude Oil Consolidates As Traders Prepare For Final Weeks Of 2024 Crude Oil Steady After Biden Calls Gaza Ceasefire Permanent Crude Oil Ticks Up Rumors Picking Up On OPEC+ Discussions
