US Dollar Index approaches 100 as Taiwan Dollar surge triggers spillover, Bessent words

• The US Dollar Index edges to 99.60 as the Taiwan Dollar posts the biggest intraday jump in over 30 years.
• ISM Services PMI climbs to 51.6 in April, beating estimates and March's 50.8 reading.
• Treasury Secretary Bessent says trade deals may be reached this week; deficit reduction targeted.
• Market activity remains thin with holidays in China and the United Kingdom.
  

The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, posted mild gains on Monday as the Taiwan Dollar surged over 5%. The move sparked a broader rally in Asian currencies amid speculation of FX conversions by exporters. Markets remained thin with multiple public holidays affecting liquidity.

Daily digest market movers: US Dollar tumbles on Taiwan FX move and trade deal hopes

• US Treasury Secretary Scott Bessent said the United States may finalize some trade deals as early as this week, sparking optimism.
• Bessent expressed confidence that 17 trading partners, excluding China, have presented "very good" proposals that are under review.
• The Secretary expects US economic growth could return to 3% by this time next year if current plans are implemented.
• He mentioned a goal to lower the Congressional Budget Office projections and reduce the federal deficit by about 1% annually.
• Bessent pointed to strong private credit growth as a sign that US banking regulations are excessively tight and need adjusting.
• He also noted that China has only made public offers in trade negotiations, with no new developments privately disclosed.
• The Taiwanese Dollar's 5% surge, the largest since the early 1990s, triggered widespread selling of US Dollars in Asian FX markets.
• Exporters in Taiwan are believed to be converting USD holdings in anticipation of an appreciating domestic currency to secure trade gains.
• The Taiwan-US negotiations reportedly held their first official meeting on May 1, though no outcomes were revealed.
• Market activity was unusually thin, with China and the United Kingdom closed for holidays, exacerbating FX volatility.
• The ISM Services PMI rose to 51.6 in April, beating both March's reading and analyst expectations, signaling steady US service sector activity.
• The Employment Index from the same report climbed to 49.0, suggesting some labor market improvement within the service industry.
• The Prices Paid Index jumped to 65.1, raising concerns that underlying inflation may remain sticky despite recent easing in headline figures.
• Despite the positive ISM data, the US Dollar Index fell, pressured by external FX dynamics and lowered Fed rate hike expectations.
• Traders are increasingly confident the Federal Reserve will hold rates steady at the 4.25%-4.50% range in the upcoming meeting.
  
  

Technical Analysis

The DXY Index currently trades at 99.93, up 0.08% on the day, within a daily range of 99.46 to 100.05. Momentum remains neutral with a Relative Strength Index (RSI) of 40.84, while the Moving Average Convergence Divergence (MACD) flashes a buy signal. However, the 20, 100, and 200-day simple moving averages -- at 100.13, 105.38, and 104.39, respectively -- all point to continued bearishness. Additional downward pressure comes from both the 10-day and 30-day EMAs, which sit at 99.77 and 101.09. Key support is located at 99.60, with resistance at 99.77, 100.08, and 100.13.