Resistance holds, dollar retreats
The US dollar index slipped ~0.7% on Monday after several failed attempts to breach the 98.500 resistance level since Friday, triggering a technical pullback that pushed it below the 98 mark.
In the current Fed blackout period, investors were left digesting Waller’s dovish remarks from Friday, which have sparked speculation around the broader tone of the FOMC and the extent of political pressure on Chair Powell.
More generally, the slide is also illustrative of how, despite the dollar showing greater resilience to tariff-related noise, and with consensus pointing to a lower ultimate tariff level, the approach of the deadline has reintroduced uncertainty, keeping the greenback on edge. The prolonged lack of substantive news on this front has also made investors more wary, justifying a further, albeit contained, move lower for the dollar.
Meanwhile, mounting evidence continues to suggest that recent dollar declines—such as yesterday’s—are mostly flow-driven, with hedging playing a key role, rather than stemming from outright selling of U.S. assets.
For example, yesterday, the S&P 500 hit an all-time high, as traders look for signs of earnings resilience amid rising tariff risks, building on last week’s strong quarterly results from major banks. This week’s earnings releases cover roughly 20% of the index, with Tesla and Alphabet among the key names reporting on Wednesday.
Also, Treasury data from last week revealed substantial foreign purchases of U.S.-denominated long-term securities in May: the highest number in years, despite that month being marked by peak uncertainty. Overall, such events reinforce the view that the dollar’s weakness is more closely tied to hedging and speculative positioning than to broad liquidation of U.S. assets.
With limited data releases and a muted Fed presence, we expect DXY to continue consolidating between 98.500 (resistance) and 97.700 (support) as markets await a clearer catalyst.
Overall, as long as the index holds above 97.700, the dollar remains technically constructive. A sustained break below that level would suggest a continuation of the broader downtrend seen this year.
Sterling finds breathing room
The pound started the week on a positive note, ticking up against most major peers as market participants pare back expectations for multiple interest rate cuts by the Bank of England (BoE) this year. With just over a 25-basis-point cut still priced in for September, there may be further room for sterling to rise if upcoming data surprises to the upside, as it did last week. Watch out for Thursday’s PMI releases and Friday’s retail sales figures.
Against the dollar, sterling hit a one-week high at $1.3490, though it remains nearly 2% lower since the start of July. Repriced BoE hawkishness and broader dollar uncertainty helped push the pair out of its tightly traded range between $1.3380 and $1.3450—held since July 15th—but there lacked a decisive catalyst for the pair to break through resistance at $1.3500, despite repeated tests.
The pair remains below both the 21- and 50-day moving averages and will likely require a stronger catalyst—unlikely to emerge during this data-quiet week—to surpass those levels and resume its nearly 8% year-to-date upward trajectory.
Euro eyes breakout but needs more spark
George Vessey – Lead FX & Macro Strategist
EUR/USD pierced back above its 21-day moving average yesterday but failed to close the session above. Holding above it would provide a technical cushion if risk appetite were sustained and could invite fresh euro buyers to the mix, pushing the exchange rate back towards 2025 peaks. Such a move would suggest that bearish pressure may be easing, especially as traders reassess the dollar’s strength following resilient US data and tempered Fed rate cut expectations.
That said, the pair still faces headwinds — including strong US yields and geopolitical uncertainty — so this isn’t a breakout yet. But a close above $1.17 this week would be a constructive development that could set the stage for further upside if supported by data and sentiment.
With US growth fears fading and the Fed likely to stay on hold through Q3, rate differentials are steering FX again, which has been a drag on EUR/USD of late. However, looking ahead, a more dovish Fed stance into late 2025–2026 — in contrast to an ECB nearing the end of its own easing cycle — supports a constructive longer-term backdrop for the euro.
For now, markets are showing little appetite for hedging against wild swings in FX ahead of this Thursday’s European Central Bank (ECB) meeting, signalling broad confidence that the central bank will hold rates steady and avoid any major surprises. With inflation near target and trade risks still evolving, investors expect a low-drama outcome, keeping volatility expectations subdued.
Bottom line: The euro’s path into month-end hinges on whether subdued expectations give way to surprise — from data, central banks, or geopolitics. A quiet ECB and stable PMIs may keep EUR/USD rangebound, but the August 1 tariff deadline could be the real inflection point.
Gold price rises almost 2% in a week
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Calendar: July 21-25
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
