US Dollar Forecast: DXY Falls as Fresh U.S. Tariff Uncertainty Pressures Markets
Author: James Hyerczyk
Published: February 25, 2026
Overview
The U.S. Dollar Index (DXY) has experienced a decline due to renewed uncertainty surrounding new tariffs imposed by the Trump administration. Following a Supreme Court ruling that overruled previous emergency tariff policies, President Trump announced new tariffs under Section 122, starting at 10% and potentially increasing to 15% within 150 days. This instability has led to a 0.17% drop in the dollar index, which was trading at 97.686 at 20:15 GMT.
Market Reactions
Euro and Yen Movements
The euro has gained against the dollar, reaching $1.1814 before pulling back, likely due to relief from tariff-related stress rather than any new bullish signals from Europe. The European Central Bank (ECB) has indicated no plans for monetary policy changes in 2026, allowing traders to buy EUR/USD with more confidence.
Conversely, the Japanese yen has weakened to 156.42 amid speculation regarding the government's reflation policy and concerns from PM Takaichi about future rate hikes, which has led to increased selling pressure.
Federal Reserve Outlook
The Federal Reserve's stance remains steady, with rates expected to hold until at least June despite persistent inflation. This stability is preventing a collapse of the dollar, but without more hawkish signals, there is little incentive for the dollar to rise significantly. Currently, there is no indication that Forex traders are reacting to U.S.-Iranian tensions.
U.S. Treasury Yields
U.S. Treasury yields have seen a slight increase, with 10-year yields at 4.05% and 2-year yields at 3.48%, following President Trump’s State of the Union address. However, a disappointing sale of $70 billion in 5-year Treasury notes has dampened enthusiasm for rising yields, keeping demand for the dollar subdued.
Technical Analysis of DXY
The technical outlook for the DXY is mixed. A potentially bullish formation has emerged with a secondary higher bottom at 96.494, but the index has failed to decisively break above the previous high of 97.973, stalling at 98.078. The recent breach of the 50-day moving average at 97.929 has not led to a follow-through, indicating more short-covering than new buying activity.
If the bears continue to defend against a breakout above the 50-day moving average, a near-term pullback could occur, targeting a pivot zone between 97.286 and 97.100.
Conclusion
The current tariff situation is likely to create confusion among investors in the short term, potentially capping gains for the dollar. However, the stability of U.S. interest rates may limit significant selling pressure. Without clear direction from policymakers, the DXY is expected to remain rangebound in the near term.