The US Dollar Index Breaks 4-Week Low as Tariff Tensions Ignite Commodity Rally
The U.S. Dollar Index has decisively broken below its 4-week low of 98.680, trading at 98.62 and confirming a bearish continuation pattern. This move comes amid a confluence of macroeconomic and geopolitical pressures, including renewed tariff threats, capital flight concerns, and a broad shift in investor sentiment toward commodities and safe havens.
President Trump’s announcement of a 50% tariff on imported steel and aluminum, effective Wednesday, has rattled markets. The move has reignited fears of a global trade war, especially as legal disputes over U.S. tariff authority and tensions with China escalate. Investors are increasingly wary of holding dollar-denominated assets, fearing both inflationary pressures and slower U.S. growth.
This uncertainty has triggered a flight to safety. Gold surged over $85 per ounce today, rising more than 2%, while copper and silver also posted gains above 2%, with copper leading the charge up 5%. The Stipelis Metals Index Indicator is up 4%, our proprietary Energy Indicator is up over 3%, and our broader Commodity Indicator is up over 1.88%, reflecting a strong rotation into hard assets.
In the energy sector, natural gas is over 6% and crude oil is climbing steadily. These gains are supported by both geopolitical risk and seasonal demand expectations. The dollar’s weakness is amplifying the commodity rally, as dollar-denominated assets become cheaper for foreign buyers.
Technically, the DXY is trading below all major pivot levels: daily (99.31), weekly (99.45), and monthly (99.92). It’s also below the 50-day and 200-day moving averages (100.82 and 103.892, respectively), reinforcing the bearish trend. The Relative Strength Index (RSI) is at 43, and the Stochastic Oscillator shows %K at 10 and %D at 17—both deep in oversold territory.
Volume confirms the move, with yesterday’s trading volume 22% above the 20-day average. Open interest remains firm, suggesting that traders are not yet covering short positions. The Donchian Channel low of 98.680 has been breached, and the next key support levels lie at 98.47 and 98.02. A break below these could open the door to the 52-week low of 97.68.
Meanwhile, the euro is trading above its 4-week high, defying expectations of an ECB rate cut. European markets are buoyed by fiscal stimulus, and capital appears to be rotating out of U.S. assets and into European ones.
In summary, the dollar’s breakdown below key technical and psychological levels, combined with rising geopolitical and fiscal risks, has triggered a broad-based rally in commodities. With the DXY under pressure and safe-haven demand rising, traders should watch for continued volatility and potential downside toward the 97.68 level.
From the Trading Desk at Stipelis 6-2-2025