Dollar Index drops 0.25 percent on trade confrontations

• USD under pressure as trade tensions trigger risk-off moves.
• Rate differentials continue to favor the greenback.
• DXY trades below the 50-day MA

The dollar index (DXY) is feeling the heat of rising trade tensions.

As of writing, the index, which tracks the value of the greenback against majors, is trading at 89.63 - down 0.25 percent on the day. Also, the DXY is trading well below the descending 50-day moving average (MA) of 89.84.

US stocks tumbled yesterday after Trump imposed tariffs on $60 billion worth of Chinese goods. The Dow Jones Industrial Average closed down 723 points. The Asian stocks are flashing red as well, with Japan's Nikkei trading a seven-month low.

The escalating trade tensions and the resulting risk aversion are doing the USD no good. That said, with every Fed hike, the interest rate differential continues to rise in the USD-positive manner. So, the greenback will likely remain bid against majors except anti-risk currencies like Yen.

Dollar Index Technical Levels

A break below 89.40 (previous day's low) would open doors for a sell-off to 89.16 (Jan. 245 low) and 89.02 (Feb. 5 low). On the higher side, breach of resistance at 89.84 (50-day MA) could yield a re-test of 90.24 (Feb. 22 high) and 90.45 (March 20 high).