On Monday, January 6, the US Dollar Index exhibited a peculiar pattern, initially surging significantly during the session only to plummet sharply later, resulting in a daily candlestick with a long upper shadow upon closing. Based on Beijing time, the turning point occurred at 21:40 yesterday, as the market shifted from the strong gains seen during the Asian and European sessions to a steep decline during the US session. The intraday high reached 98.83 points, while the low touched 98.22 points. The bearish trend continued into today's Asian session, with the current low at 98.17 points, and it is anticipated that new lows will be set during the day.
The most significant event over the past weekend was the US taking control of the Venezuelan president, secretly transporting him to New York, where he faced judicial proceedings yesterday. Maduro pleaded not guilty in court and declared that he remains the President of Venezuela. The next court hearing is scheduled for March 17.
Although the Maduro incident demonstrates the United States' influence in South America, its heavy-handed approach could potentially damage the credibility of the US dollar. This may seem paradoxical, but there is a logical rationale. While US global influence is proven to remain strong, countries outside the US are left feeling insecure, fearing they could face a similar fate to Venezuela. The effect is somewhat analogous to the tariff policies implemented during the first year of Trump's second term; the US may gain excess tariff revenue, but the cost is severe damage to the export industries of other nations.
The combined impact of the Maduro incident could potentially lead central banks worldwide to increase their gold reserve allocations while reducing their US dollar holdings, thereby inflicting long-term damage to the dollar's credibility.
US economic data released yesterday may have contributed to the dollar's decline. At 23:00 Beijing time yesterday, the Institute for Supply Management released the US ISM Manufacturing PMI data for December. The previous value was 48.2, with an expectation of 48.3, but the final published figure was only 47.9, significantly lower than both the prior reading and forecasts, indicating a continued contraction in the US manufacturing sector.
Analyzing the sub-components of the ISM Manufacturing PMI data, the Production Index fell from 51.4 to 51.0, while the Prices Index remained unchanged at 58.5. The Employment Index rose from 44.0 to 44.9, the Inventories Index dropped from 48.9 to 45.2, and the New Orders Index increased from 47.4 to 47.7 points. Overall, three sub-indices declined, with the Inventories Index showing the most significant drop, two indices saw an increase (though their absolute values remain below the 50-point boom-or-bust line), and one component was unchanged. The release of this data intensified market pessimism regarding the US manufacturing sector, exerting downward pressure on the US Dollar Index.
In terms of market performance, the US Dollar Index continues its descent in search of a bottom. On July 1, 2025, the index hit an interim low of 96.34 points, a level that subsequently proved to be a significant support zone over the following months. Over the past six months or so, the Dollar Index established an interim high and a strong resistance level at 100.23 points through two notable rallies. Currently, the index is trading steadily within this consolidation range (96.34 ~ 100.23). The downward wave that began on November 21, 2025, guided significantly by the descending trendline (dashed line) in the chart, may ultimately find support near the lower boundary of the range. The two bullish candlesticks last Thursday and Friday broke above this descending trendline, suggesting a potential for a correction to the downtrend. However, yesterday's long upper shadow bearish candlestick shattered this expectation. If today's candlestick closes bearish again, the decline is likely to continue.
Comments