Q: Why did the Dollar rise if the Supreme Court blocked tariffs?

The SCOTUS ruling removed the known tariff path and replaced it with an unknown legislative or emergency executive response, driving capital into the liquidity of the US Dollar.

Q: Is the DXY overextended at 106.80?

While RSI is near 70, fundamental interest rate divergence suggests the move is backed by institutional capital flows, supporting a continued upward trend.

The Catalyst

The US Dollar Index (DXY) reached its highest level since late 2022 on February 21, 2025, following a dual-threat macro event. First, the Personal Consumption Expenditures (PCE) price index—the Federal Reserve's preferred inflation gauge—rose 0.4% month-over-month, exceeding the 0.3% consensus. This suggests that the "last mile" of disinflation is stalling, forcing markets to price out mid-year rate cuts.

Event: PCE Inflation Beat & SCOTUS Tariff Injunction.
Reaction: DXY breakout from 105.80 to 106.85; 2-Year Treasury yields spiked to 4.72%.

Simultaneously, the Supreme Court's decision to block broad executive tariffs created a policy vacuum. While initially viewed as a "risk-on" move for trade, the resulting uncertainty regarding Trump’s Section 122 counter-measures triggered a defensive rotation back into the Greenback as the cleanest shirt in the global laundry.

Critical Data

Institutional positioning shows a massive short-squeeze in EUR/USD and a buildup of long USD gamma. The divergence between Fed hawkishness and ECB stagnation is widening.

Metric	Current Status	Implication
Core PCE (MoM)	0.4% (Actual) vs 0.3% (Exp)	Hawkish / Bullish USD
EUR/USD Spot	1.0445	Bearish / Breakdown confirmed
US 2Y Yield	4.72% (+12bps)	Bullish USD / Yield Advantage
DXY RSI (Daily)	68.4	Approaching Overbought / Momentum Strong

Execution Plan

The structural trend is firmly bullish. The DXY has cleared the multi-month consolidation zone of 104.50–106.00. We expect a continuation toward the 108.20 level, which represents the 2023 swing high. Traders should look for "dip-buying" opportunities on retests of the 106.00 breakout level.

Watchlist: DXY (Long), EUR/USD (Short), USD/JPY (Long).

Invalidation: A daily close below 105.20 negates the immediate bullish thesis. Expansion Target: 108.50.

To validate these levels with custom indicators, check the Chart Analyzer or set automated monitors via TradingWizard Bots.

FAQ

Why did the Dollar rise if the Supreme Court blocked tariffs?

Markets hate uncertainty. The SCOTUS ruling removed the "known" tariff path and replaced it with an "unknown" legislative or emergency executive response (Section 122). This uncertainty, coupled with hot inflation data, drove capital into the liquidity of the US Dollar.

Is the DXY overextended at 106.80?

While the RSI is nearing 70, the fundamental divergence in interest rates between the US and Europe/Japan suggests that the move is backed by capital flows rather than just speculative fervor. A consolidation is likely, but the trend remains upward.

DXY Hits 2-Year High: PCE Heat and Tariff Chaos Fuel Dollar Surge

The Catalyst

Critical Data

Execution Plan

FAQ

Sources