The U.S. Dollar Index (DXY) is encountering headwinds as recent tariff delays create new dynamics in the foreign exchange market, according to a report from BofA Global Research. The report highlights that the broader USD uptrend is being tested, with USDCAD and other USD/G10 pairs nearing trigger levels that could neutralize their upward momentum. "Recent news of delayed tariffs to March 1 have led to a CAD relief rally," BofA analysts note, pointing out a sharp five-figure drop in USDCAD within 48 hours.
Despite the current challenges, BofA does not foresee a USD downtrend forming, although four out of eight USD/G10 uptrends are expected to turn sideways if current conditions persist. The report also emphasizes the potential for a bearish EURJPY trend, driven by anticipated new tariff announcements affecting the Eurozone. "If a new round of Eurozone tariffs materializes, risk-off could see the pair retest its December 2024 low of 156.18," the analysts suggest. As the market navigates these developments, the DXY's trajectory remains uncertain, with trade uncertainties and tariff headlines playing a pivotal role in shaping future trends.