Is US Dollar Losing Its Edge? De-Dollarization And Fading Exceptionalism Raise Alarms

The U.S. Dollar Index Spot fell below a key support level on Friday, indicating a further downside risk for the currency amid the ongoing de-dollarization theme and dampening American exceptionalism. Here’s what the technical analysis of the index shows.

What Happened: According to the technical analysis of a chart shared by LPL Financial’s Chief Technical Strategist, Adam Turnquist, the U.S. Dollar’s price fell below its key support at the 50 and 20-day simple moving averages.

“The break below key support from the April lows implies the dollar's two-year consolidation range is likely over, paving the way for the downtrend off the January highs to continue lower,” said Turnquist, adding that “The technical setup for the dollar points to further downside risk.”

According to him, “The dollar is also contending with recently renewed tariff threats, an ongoing de-dollarization theme, and fading enthusiasm for American exceptionalism.”

However, adding that all is not wrong, Turnquist said that “While positioning and sentiment have arguably reached contrarian levels, bearish momentum has not hit extremes. In terms of downside risk, the next areas of support for the greenback set up at 95.61 and near 94.75.”

Why It Matters: The U.S. dollar index fell to a three-year low since April 2022 last week after a cooler-than-expected consumer and wholesale inflation data.

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David Lubin, a Chatham House expert, noted in April that some in the Donald Trump administration see the dollar's reserve currency status as “more of a burden to the U.S. economy than a blessing.”

He described this “policy push” by the Trump administration as an effort to permanently weaken the dollar against other currencies, to narrow the trade deficit, and encourage manufacturers to return to the U.S.

Lubin, however, issued a strong warning against this strategy, stating that “if the international monetary system cannot rely on the dollar's full convertibility, or its availability in a crisis, it is entering unknown territory.”

“Undermining the dollar's global status would not only transmit huge amounts of additional uncertainty to the global economy, but would be a needless act of self-harm for the U.S.”

Price Action: As of Friday, the SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, declined. The SPY was down 1.12% at $597, while the QQQ declined 1.26% to $526.96, according to Benzinga Pro data.

The U.S. Dollar Index Spot was 0.12% lower at the 98.0630 level.

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