The DXY Index closed at 96.8 overnight, edging slightly above Tuesday’s close of 96.7. Despite the appearance of day-to-day stability, the overnight session was just as volatile as the previous day. In each of the first two days of July, the DXY initially rose by 0.6% from intraday lows before retreating 0.3-0.4% in the final stretch of the US session. With markets heading into the US Independence Day long weekend, another bout of volatility is likely.
Yesterday’s intra-day volatility during the US session revealed how the USD was pulled in opposite directions.
The DXY initially tumbled from 97.1 to 96.8 following a shocking June ADP employment report, which showed 33K private sector job losses, far below expectations for a 98K gain, compared to the modest 29K increase in May. However, the soft data boosted expectations for an earlier Fed cut, which in turn lifted the S&P 500 to a fresh record high and helped the DXY rebound to an intra-day high of 97.2. On the one hand, new highs in US stocks undermines the waning US exceptionalism narrative that sent the DXY depreciating by 7% in 2Q25. On the other hand, the greenback cannot brush off the downside risks Trump stepping up efforts to push for aggressive Fed cuts and Fed Chair Jerome Powell’s resignation.
In the second half of the US session, the DXY later gave back these gains, falling back to 96.8 after US President Donald Trump announced a preliminary limited trade deal with Vietnam. Markets have come to recognize Trump’s approach – whether in trade or geopolitics – follows an “escalate-to-deescalate” strategy aimed at forcing parties towards trade agreements or ceasefires. Securing trade deals is central to advancing Trump’s MAGA (Make America Great Again) agenda of restoring US manufacturing dominance and expanding access for US exports. This inherently implies a weaker USD bias to improve America’s export competitiveness, one reinforced by his push for aggressive Fed cuts.
Hence, markets can expect a third day of volatility ahead if the long weekend in the US. After the shockingly weak ADP report, markets are bracing for downside surprises in today’s nonfarm payrolls, i.e., below 100K or negative readings. Given the US-Vietnam trade deal and the looming July 9 deadline for the reciprocal tariff pause, markets are also alert to similar trade announcements with India and the European Union. Negotiations are progressing with South Korea, Canada, and Thailand but they may need extensions. The push to get Trump’s One Big Beautiful Bill passed before the Independence Day (soft) deadline adds another later of uncertainty. A last-minute passage of the bill could not be ruled out, an outcome that could cement the fiscal deficit financing worries weighing on the USD. Don’t be surprised if Trump takes another swipe at Powell during the Independence Day celebrations.
Our view remains unchanged. The DXY needs to break its support level around 95.6 – the floor of a two-year price channel and a long-term trendline – to sustain its downtrend in a lower 90-100 range.
Quote of the Day
“Life's a bit like mountaineering – never look down.”
Edmund Hillary
July 3 in history
Scottish inventor John Logie Baird demonstrated the first colour television transmission in 1928. 
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