DXY Recap & Outlook (Nov 9 – Nov 13): The Post-Election Tug-of-War & The Inflation Catalyst

 

DXY – Outlook and Analysis

Outlook: We maintain a slightly bullish bias on the U.S. dollar, supported by continued tensions between the United States and Iran, stronger-than-expected labour market growth, persistent inflationary pressures, and renewed expectations that the Federal Reserve could tighten monetary policy in December. These factors could help keep the DXY supported in the near term.

The U.S. midterm elections resulted in a sweeping victory, with the Democratic Party gaining control of both the House of Representatives and the Senate. This outcome overturned Republican control of Congress, resulting in a divided government for the remaining two years of Trump's presidency.

With Democrats now controlling Congress, lawmakers are expected to intensify scrutiny of AI-related capital expenditure and data centre expansion. This could potentially dampen foreign investment in U.S. technology equities, reducing one of the sources of demand that has supported the dollar. This concern is also reflected in the recent sharp sell-off in AI-related equities, as investors reassess the sustainability of spending and valuations across the sector.

Nevertheless, despite gaining control of Congress, Democrats still face significant legislative constraints. Trump retains the power to veto bills passed by Congress, while Democrats lack the two-thirds majority required to override a presidential veto. This could result in legislative gridlock, limiting the Democrats' ability to implement their policy agenda and potentially creating further uncertainty over future fiscal spending.

Meanwhile, the latest Non-Farm Payrolls (NFP) report came in significantly stronger than expected, with 165,000 jobs added compared with the forecast of 65,000. The unemployment rate edged down slightly to 4.1%, from 4.2%. Average hourly earnings increased by 0.4% month-on-month, bringing average private-sector hourly earnings to approximately $38.00. Over the past 12 months, hourly earnings have risen by 3.1%. Overall, the stronger employment data suggest that the labour market remains more resilient than anticipated, potentially giving the Fed greater confidence in maintaining a restrictive monetary policy stance and keeping the possibility of a December rate hike on the table.

Overall, Treasury yields initially declined following the midterm election results, as investors anticipated that Democratic control of Congress could constrain Trump's fiscal spending plans and limit further escalation of the conflict with Iran. This was also reflected in oil prices, which fell to a multi-month low at 86.569. However, the stronger-than-expected NFP report subsequently pushed yields higher as investors reassessed the outlook for monetary policy and demanded higher returns. These developments have created two opposing forces for the dollar, with political uncertainty weighing on sentiment while stronger economic data providing support.

Technical Setup & Levels: As of November 8, the DXY is trading at 102.297, while the support level of 101.511, identified in my previous analysis, continues to hold. Bullish momentum appears to be building, suggesting that the dollar could maintain its upward trajectory if the current support remains intact. Resistance remains at 102.383, while support is at 101.511.

Looking Ahead: Next week, the key events to watch will be the inflation report on November 10 and the Producer Price Index (PPI) on November 13. These releases should provide further insight into whether inflationary pressures have continued to build and whether producers are passing higher costs on to consumers. The results could influence expectations for the Fed's December policy decision and, consequently, the DXY's direction in the coming week.

Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries significant risks, particularly during periods of geopolitical volatility. Technical levels (support and resistance) and indicators are provided for illustrative analysis and should not be interpreted as guaranteed price targets. The author accepts no liability for any trading losses. Please conduct your own research.

	Nov 30	Dec 30
DXY	102.691	103.2376

DXY Recap & Outlook (Nov 2 - Nov 6): Midterm Election Clashes & The NFP Trigger

 

DXY – Outlook and Analysis

Outlook: We remain a slightly bullish bias on the U.S dollar, driven by continued tensions between the United States and Iran, and the upcoming midterm elections. Unless clearer signals emerge regarding the direction of the situation, the USD is likely to remain supported by its safe-heaven status, while oil prices are expected to remain elevated. 

The latest FOMC meeting saw the Federal Reserve leave interest rates unchanged at 3.75%–4.00%, with a 10–2 vote. However, Lisa Cook and Beth Hammack dissented in favor of higher rates, citing persistent inflationary pressures. As expected, Kevin Warsh did not provide any clear guidance on the Fed’s next policy move, leaving markets to assess incoming economic data for further clues.

Outlook: We remain a slightly bullish bias on the U.S dollar, driven by continued tensions between the United States and Iran, and the upcoming midterm elections. Unless clearer signals emerge regarding the direction of the situation, the USD is likely to remain supported by its safe-heaven status, while oil prices are expected to remain elevated.

Meanwhile, the November 3 midterm elections could have significant implications for the remainder of Trump's presidency, as the results will determine the extent of his ability to advance his policy agenda over the next two years. Although Republicans currently hold majorities in Congress, a Democratic victory could result in a divided government, potentially creating further political uncertainty at a time when the U.S. economy is already facing pressure. Regardless of the outcome, the elections could introduce additional volatility into the DXY. Furthermore, Trump's political capital could come under pressure due to the ongoing conflict with Iran and the tariffs imposed on neighboring countries.

On the geopolitical front, the United States and Iran have recently engaged in another round of peace talks, with Qatar acting as a mediator. However, Trump has continued to warn of potential military strikes following Tuesday's midterm elections, while Iran has responded by warning that it is prepared to retaliate against its adversaries beyond its immediate geographical region. These conflicting developments highlight the fragile nature of diplomatic efforts and suggest that geopolitical risks remain elevated.

As of November 2, the DXY is trading at 101.952. Bullish momentum remains intact but appears to be fading, with the RSI slipping towards the 50 level. Nevertheless, the index continues to trade above the 25-day simple moving average (SMA). As noted in my previous post, support remains at 101.511, while resistance is at 102.383.

The week ahead will be crucial, with the ISM Manufacturing PMI scheduled for November 2, ISM services on November 4 and the Non-Farm Payrolls (NFP) report due on November 6. These releases should provide further insight into the resilience of U.S. economic activity and the labor market, as well as the broader outlook for household income and consumer spending. The results could influence expectations for the Fed's next policy move and, in turn, shape the DXY's direction in the coming week.

Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries significant risks, particularly during periods of geopolitical volatility. Technical levels (support and resistance) and indicators are provided for illustrative analysis and should not be interpreted as guaranteed price targets. The author accepts no liability for any trading losses. Please conduct your own research.

DXY Recap and Outlook for the Week Ahead 25/10 - 30/10

 

DXY – Outlook and Analysis

Outlook: We maintain a slightly bullish bias on the U.S. dollar, driven by continued tensions between the United States and Iran. Unless clearer signals emerge regarding the direction of the situation, the USD is likely to remain supported by its safe-haven status, while oil prices are expected to remain elevated.

This week was relatively quiet in terms of economic data releases. Consumer sentiment came in slightly above expectations at 48.0, compared with the forecast of 46.3. However, sentiment fell to a five-month low, reflecting concerns over inflation, potentially driven by rising prices and higher interest rates.

Meanwhile, President Trump said on Saturday that "striking Iran remained a possibility, although the two countries could still reach a deal". Other reports indicated that the United States was moving some diplomats and their family members out of Middle Eastern posts amid the growing threat of regional escalation. These developments suggest that the risk of further escalation remains elevated.

Iran-aligned Houthi forces have also continued their attacks in the region, adding to geopolitical uncertainty and raising further concerns about the outlook for oil prices.

Looking ahead, we expect the DXY to remain supported by geopolitical tensions and elevated energy prices. However, concerns about rising borrowing costs among AI companies could temporarily ease some upward pressure on the dollar, particularly if these concerns weigh on risk sentiment and prompt investors to seek safer assets.

As of October 25, the DXY is trading at 101.751. Bullish momentum remains intact but appears to be fading, with the RSI slipping towards the 50 level. Nevertheless, the index continues to trade above the 25-day simple moving average (SMA). As noted in my previous post, support remains at 101.511, while resistance is at 101.961.

The week ahead will be crucial, with the FOMC meeting and the U.S. advance GDP release scheduled for October 29. We expect the Federal Reserve to hold interest rates steady. While Kevin Warsh is not expected to provide forward guidance, markets will be watching closely for any comments he makes during the press conference that could offer clues about the future direction of monetary policy.

“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”. 

DXY Recap and Outlook for the Week Ahead 20/10 - 23/10

 

DXY – Outlook and Analysis

Outlook: We maintain a slightly bullish bias on the U.S. dollar, supported by ongoing tensions between the U.S. and Iran. Unless clearer signals emerge regarding the trajectory of the conflict, the USD is likely to remain supported by its safe-haven status. However, prolonged tensions could keep oil prices elevated, potentially exacerbating inflationary pressures and weighing on global economic growth.

With neither side showing signs of backing down, Iran has warned that “even if America’s action is limited, the world will face a serious energy crisis,” highlighting the potential economic consequences of further escalation.

September CPI rose to 0.6%, up from 0.4%, driven by increases in energy prices and the services sector. Similarly, PPI climbed to 1.3%, up from 0.4%, while Core PPI increased to 0.7%, compared with 0.2% previously. These figures suggest that higher energy costs are spilling over into other categories, including food and beverage services. A further rise in energy prices could intensify inflationary pressures on consumers, potentially prompting households to reduce spending on discretionary items.

While the stronger-than-expected CPI and PPI readings have provided support for the DXY, some of these gains have been partially offset by concerns over rising borrowing costs among AI companies with substantial capital expenditure requirements. These concerns have weighed on investor sentiment, prompting a reassessment of risk exposure and potentially encouraging a shift towards safer assets, including U.S. Treasuries.

Looking ahead, we expect the DXY to remain supported by geopolitical tensions and elevated energy prices. However, concerns over financing costs and capital expenditure among AI-related companies could continue to drive market volatility and provide temporary relief to the dollar’s upward momentum.

As of October 20, the DXY is trading at 101.741. Bullish momentum remains intact but appears to be fading, with the RSI slipping towards the 50 level, although the index continues to trade above the 25-day SMA. Resistance is at 101.810, while support is at 101.511.

“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”. 

Weekly Recap and Outlook for the Week Ahead 28/7 - 1/8

 

DXY – Outlook and Analysis

Outlook: We maintain a bearish bias on the U.S. dollar, driven by rising geopolitical risks, the upcoming August 1 tariff deadline, widening fiscal deficits, potential tariff-induced inflation, and broader macroeconomic instability. Unless there is clearer guidance on fiscal and trade policy, the dollar’s position as a global reserve currency will likely remain under sustained pressure.

Near-term volatility in the USD is expected to remain high as the widely anticipated tariff deadline approaches. However, a major development occurred earlier today, as the U.S. and European Union reached a trade agreement, easing tensions between two of the world’s largest economies. This breakthrough supported a rebound in the DXY and lifted broader equity markets, as global economic sentiment improved. Meanwhile, Canada remains under pressure, as Trump stated that talks with Ottawa remain "rough", with substantial negotiations still required to finalize any deal.

On Thursday, President Trump visited the Federal Reserve headquarters regarding the ongoing renovation project, which has exceeded $2 billion in cost. Fed Chair Jerome Powell defended the expense, citing the need to modernize the aging facility to meet safety and accessibility standards. Despite long-standing tensions, Trump struck a more conciliatory tone, stating that there is "no tension" with Powell and that replacing him would be a "big move"—offering a temporary reprieve to a central bank increasingly under pressure to cut rates.

Looking ahead to the upcoming FOMC, we expect the Fed to hold rates steady. Although part of the tariff-related inflation has started to show, price pressures are likely to remain elevated in the short term. Cutting rates now could risk exacerbating inflation, even if it may provide temporary support to the economy—putting the Fed in a difficult balancing act.

As of this writing, the DXY is trading at 98.172. Bullish momentum appears to be fading, with the RSI slipping back to 50. Resistance levels are seen at 98.647 and 99.166, while support is located at 97.551 and 97.270.

The week ahead is critical, featuring key economic releases including: ADP Non-Farm Employment Change (July 30), FOMC rate decision (July 31), Non-Farm Payrolls (NFP) (August 1).

These data points will provide important insight into the Fed’s policy stance, potentially setting the direction for the U.S. dollar in the weeks ahead.

GBP/USD 

Outlook: We maintain a slightly bullish stance on GBP/USD. While recent data has been unfavourable for the pound, there remains a possibility of two additional BoE rate cuts by year-end, depending on incoming economic data and the anticipated slowdown in the second half of 2025. Nonetheless, persistent U.S. economic challenges—including rising business costs, fiscal imbalances, and ongoing global trade tensions—alongside the inflationary impact of Trump’s tariffs, may help cushion downside risks for the pound in the near term.

The UK CPI rose to 3.6%, exceeding the forecast of 3.4%, primarily driven by higher prices in alcohol and tobacco, clothing and footwear, and transport, though partially offset by declines in household services. The persistent price pressure complicates the BoE’s policy path, as subdued economic growth may warrant a rate cut to spur activity, yet doing so could risk further inflation.

The labour market also weakened, with employment falling by 135,000 and the unemployment rate rising to 4.7%, up from 4.6%. Additionally, job vacancies dropped by 56,000 to 727,000, indicating that employers are hesitant to hire or replace departing staff, potentially reinforcing the case for rate cuts to support employment.

As of this writing, GBP/USD trades at 1.34364, showing bearish momentum as the RSI dips below 50. Resistance is seen at 1.35028 and 1.35716, while support levels are at 1.33916 and 1.33413.

Looking ahead, the key events to watch include: M4 Money Supply m/m (July 29), OPEC Meetings (August 3).

These may impact risk sentiment and broader market positioning for GBP in the short term.

USD/JPY 

Outlook: We maintain a bearish bias on USD/JPY, reflecting our view that the yen retains upside potential, particularly if Japanese inflation continues to surprise to the upside. The BoJ now has further justification to continue rate hikes following the recent trade agreement with the U.S., which may lead to stabilization or upward pressure on Japanese yields, thereby offering support to the yen.

The Tokyo Core CPI came in at 2.9%, just below the forecast of 3.0%, indicating that inflationary pressures remain persistent. However, more time is needed to fully assess the impact of the 15% U.S. tariffs on Japanese goods, which are still in place.

On July 23, President Trump secured a trade deal with Japan, under which Japan agreed to invest $550 billion into the U.S. This development briefly strengthened the yen, as the deal reduced uncertainty around trade and improved economic sentiment, giving the BoJ more confidence to consider further rate hikes later this year.

Additionally, on July 20, Japanese Prime Minister Shigeru Ishiba lost his majority in the upper house. While members of his own party have pressured him to step down, Ishiba has insisted on staying in office, bringing a degree of stability to the political landscape as there is currently no clear successor. This has helped calm market nerves in the near term.

As of this writing, USD/JPY is trading at 147.650, with bullish momentum still intact, as the RSI has rebounded above the 50 level. Key resistance levels are at 148.103 and 148.792, while support lies at 145.884 and 145.195.

Looking ahead, markets will closely watch: The BoJ Policy Rate decision and The Outlook Report (July 31).

These releases are expected to provide further insights into Japan’s monetary policy stance, and could significantly influence the direction of the yen in the sessions ahead.

Forecasts

Currency Pair	Jul 30	Aug 30	Sep 30
GBP/USD	1.36070	1.36070	1.37454
USD/JPY	145.823	145.823	143.191

“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”. 

Weekly Recap and Outlook for the Week Ahead 7/7 - 11/7

DXY – Outlook and Analysis

Outlook: We maintain a bearish bias on the U.S. dollar, driven by mounting geopolitical risks, the July 9 tariff deadline, rising fiscal deficits, potential tariff-induced inflation, and broader macroeconomic instability. Unless there is clearer guidance on fiscal and trade policy, the dollar's role as a global reserve currency will likely remain under pressure.

On Monday, Trump threatened that any country aligning themselves with the Anti-American policies of BRICS will be charged additional 10% tariff with no exceptions to this policy.

The USD has regained some strength after touching a low of 96.390, likely supported by recent U.S. economic data and ongoing trade negotiations. While Trump has secured trade framework agreements with China, the UK, and Vietnam, other negotiations remain in progress. 

On Thursday, Pichai Chunhavajira and U.S. trade representatives held a positive meeting, aiming to pursue a mutually beneficial trade deal. However, discussions with countries like India, the EU, Canada, and Japan remain in flux, as all parties rush to reach at least a framework agreement before the July 9 deadline, or face the high tariff set on April 2, with new dateline given till August 1.

Despite Trump stating that the tariff deadline will not be extended, he clarified that countries failing to reach a deal may continue negotiations, though tariffs will be reinstated. In parallel, Trump has also publicly criticized Fed Chair Jerome Powell, suggesting he should resign and be replaced with someone who would cut rates. Such statements threaten the independence of the Federal Reserve, potentially undermining investor confidence in the USD.

On the economic front, Non-Farm Payrolls (NFP) rose by 147,000, beating expectations, while the unemployment rate declined to 4.1% from 4.3%. The participation rate slipped to 62.3% from 62.4%, driven by a 329,000 increase in the number of people not in the labor force. Meanwhile, average hourly earnings rose by $0.08 (0.2%) to $36.30. These figures reaffirm the resilience of the U.S. labor market, reducing the likelihood of a rate cut in July, though September remains a possibility.

Additionally, Trump’s “Big, Beautiful Bill” officially passed the House with a narrow 218–214 vote. The bill is projected to add over $3 trillion to the national debt over the next decade, pushing it well beyond the current $36 trillion to possible $40 trillion and was enabled by a $5 trillion increase in the debt ceiling. 

This surge in borrowing could trigger a spike in yields over the medium to long term, as the issuance of more bonds may lead to oversupply and rising borrowing costs. If investor confidence weakens, the U.S. risks another credit rating downgrade, further undermining its economic standing and safe haven status.

As of this writing, DXY is trading at 96.946. On the 4-hour chart, a bearish flag pattern is forming, and the RSI has rejected the 50 level, suggesting further downside momentum. Resistance is seen at 97.271 and 97.473, while support is at 96.762 and 96.477.

Looking ahead, key events this week include the 10-year Bond Auction and FOMC Meeting Minutes on July 10, followed by the 30-year Bond Auction on July 11. 

These releases will offer additional insights into monetary policy direction and investor appetite for U.S. debt, both of which will influence the dollar’s trajectory.

GBP/USD 

Outlook: We maintain a slightly bullish stance on GBP/USD. While the UK’s latest domestic data continues to reflect economic softness, particularly in the slowing labour market, which supports the case for two potential rate cuts by year-end, the pound may still find support from broader U.S. dollar weakness. The U.S. remains challenged by rising business costs, fiscal imbalances, and heightened trade tensions, with Trump’s tariffs potentially reigniting inflationary pressures in the months ahead.

Recent signs of weakness in the pound can be attributed to several factors. These include the resilient U.S. labour market—which has reduced expectations of near-term Fed rate cuts—and domestic developments such as the UK government’s reversal of its welfare bill, creating a $5 billion gap in the Chancellor’s fiscal plan. 

This reversal is significant not only because it may increase the UK’s fiscal deficit and push borrowing costs higher in the medium term, but also because it risks violating Chancellor Rachel Reeves' own fiscal rule, which states that public debt as a share of GDP must fall by FY2029–30. Should no alternative measures be taken, the UK could face a credibility challenge on fiscal discipline.

As of this writing, GBP/USD has pulled back from a recent peak of 1.37884 to 1.36381. The Relative Strength Index (RSI) remains hovering above 50, indicating bullish momentum is still intact. Key resistance levels are at 1.36732 and 1.37463, while support lies at 1.36059 and 1.34952.

Looking ahead, the upcoming week features important releases including the UK 10-Year Bond Auction on July 9 and monthly GDP data on July 11. 

These events will provide further insight into the UK’s economic activity, particularly in light of ongoing trade uncertainty and tariff developments linked to U.S. policy.

USD/JPY 

Outlook: We maintain a bearish bias on USD/JPY, reflecting our view that the Japanese yen retains upside potential, particularly if domestic inflation continues to exceed expectations. While the Bank of Japan (BoJ) remains divided—some policymakers signalling a readiness to respond to U.S. tariff-induced inflation with rate hikes, while others advocate a more cautious, data-driven approach—any stabilization or rise in Japanese bond yields could strengthen the yen. This would be supported by renewed safe-haven demand and capital repatriation amid global uncertainty.

Geopolitical tensions also add complexity to the outlook. Trump recently labelled Japan “spoiled” and threatened to impose unilateral tariffs if Japan does not increase imports from the U.S., particularly in areas such as rice and automobiles. These comments appear aimed at exploiting Japan’s current inflationary challenges, especially the spike in domestic rice prices, which could keep consumer inflation elevated and further pressure the BoJ.

In response, Japanese Prime Minister Shigeru Ishiba has stated that Japan will not concede easily, and the country is preparing for a wide range of scenarios. During a recent policy debate, Yoshimura emphasized the importance of pursuing a "win-win" trade solution while warning that Trump's tariff threats represent a significant country risk for Japan. He also suggested Japan should diversify trade relationships to reduce dependency on the U.S. These developments may further complicate trade negotiations between the two countries and increase market volatility.

As of this writing, USD/JPY is trading at 145.428, with the RSI trending above 50 on the daily chart, indicating that bullish momentum remains in place. Key resistance levels are located at 145.852 and 147.943, while support is seen at 144.361 and 143.357.

Looking ahead, the calendar features several key Japanese data releases: PPI y/y (July 10), Industrial Production m/m and Industrial Activity m/m (July 14)

These indicators will be closely watched for additional signs of price and production pressures, which could influence BoJ policy expectations and JPY direction.

Forecasts

Currency Pair	Jul 30	Aug 30
GBP/USD	1.36070	1.34787
USD/JPY	142.166	140.853

“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”. 

Weekly Recap and Outlook for the Week Ahead 16/6 - 20/6

DXY - Weekly Outlook and Analysis

The U.S. Dollar Index (DXY) surged approximately 0.7% to 98.566 following reports that Israel launched attacks on Iran’s nuclear facilities and missile sites. The escalating conflict triggered a flight to safety, prompting investors to move into traditional safe haven assets such as the Japanese yen and Swiss franc. The geopolitical tension also pushed oil prices up by nearly 11%, reaching $74.573 per barrel, amid fears that Tehran could choke off the Strait of Hormuz, a critical global oil shipping lane. With neither side showing signs of backing down, the risk of prolonged economic disruption has intensified.

Domestically, U.S. consumer sentiment showed a marked improvement, rising to 60.5, its highest level in six months and well above expectations of 53.5. Additionally, year-ahead inflation expectations declined to 5.1% from 6.1%, reflecting easing trade tensions between the U.S. and China. This optimism, however, was quickly overshadowed by the escalating Middle East conflict, tempering broader risk appetite.

On the inflation front, May’s Core CPI (m/m) came in at 0.1%, below forecasts of 0.3% and softer than April’s 0.2%, while headline CPI (y/y) rose slightly to 2.4%, exceeding the expected 2.3%. This uptick was largely driven by increases in food prices (+0.3%) and shelter costs (+0.3%). The data suggests that the inflationary effects of Trump’s tariffs have yet to fully materialize, reinforcing the likelihood that the Federal Reserve will keep interest rates on hold at its June 19 meeting, as policymakers continue to assess the evolving impact of trade policy and price pressures.

Producer inflation data also pointed to a mixed picture. May PPI rose 0.1%, missing the 0.2% forecast, lifting the annual rate to 2.6%. Similarly, Core PPI rose 0.1%, falling short of the 0.3% expectation, while the annual rate dropped to 2.7% from 2.9%. Though these readings reflect softer producer inflation compared to previous months, it may be due to wholesalers absorbing costs rather than passing them to consumers. However, cost pressures persist, and producers may eventually raise prices if margins continue to narrow, albeit cautiously to avoid losing market share to competitors.

As of June 8, the DXY is trading at 97.962, having retreated from recent highs. The Relative Strength Index (RSI) remains below 50, indicating continued bearish momentum. Resistance is observed at 98.711 and 96.372, with support levels at 97.631 and 97.283.

Looking ahead, key U.S. data releases this week include Core Retail Sales (June 17), Unemployment Claims (June 18), and the highly anticipated FOMC statement on June 19. The Fed’s policy guidance—particularly any signals from Chair Jerome Powell—will likely set the tone for the dollar’s next move.

Outlook: We maintain a bearish bias on the U.S. dollar. While geopolitical risks, such as the Israel–Iran conflict, may temporarily support the dollar’s safe haven appeal, the broader outlook remains clouded by rising fiscal deficits, lingering U.S.–EU trade tensions, potential tariff-driven inflation, and mounting macroeconomic instability. Unless clearer direction emerges from fiscal and trade policy, the dollar’s status as a global reserve currency may continue to face downward pressure.

GBP/USD

The UK labour market continued to show signs of weakness, with payrolls decreasing by 109,000 in May, following a 55,000 decline between March and April 2025. Additionally, the number of available job vacancies fell by 63,000 on a quarterly basis to 736,000 for the period of March to May 2025, while the unemployment rate edged up to 4.6% from 4.5% in the previous month. These figures suggest that firms are refraining from hiring or replacing departing workers, raising market expectations for Bank of England (BoE) rate cuts in the near future.

Adding to the downside, UK GDP (m/m) contracted by -0.3% in April, following a 0.2% increase in March. The biggest drag came from the services sector, which saw output fall by -0.4% in April, reversing from a 0.4% gain the previous month. These developments indicate a slowing economic backdrop, putting additional pressure on the BoE to consider policy easing.

Despite the weak economic data, the BoE is still expected to keep interest rates unchanged at its June 19 meeting, maintaining its "gradual and cautious" approach to monetary easing. Future decisions will remain data-dependent, particularly as the outlook continues to be shaped by broader global economic and trade dynamics.

As of June 14, GBP/USD is trading at 1.35684, with the Relative Strength Index (RSI) remaining above 50, indicating bullish momentum is still intact. Key resistance levels are located at 1.36182 and 1.36814, while support is found at 1.35422 and 1.34913.

Looking ahead, the week will feature several key releases, including: UK CPI y/y (June 18), BoE Bank Rate Decision (June 19), Retail Sales m/m (June 20). These releases will be critical in assessing the near-term economic health of the UK and gauging the likelihood and pace of future BoE rate cuts.

Outlook: We maintain a slightly bullish stance on GBP/USD. While the latest domestic data points to economic softness and supports the case for two potential rate cuts by year-end, the pound may find support from broader USD weakness. The U.S. continues to grapple with rising business costs, fiscal imbalances, and heightened trade tensions, while inflationary pressures from Trump’s tariffs may resurface. These factors could help cushion downside risks for GBP in the near term.

USD/CAD

The recent escalation in the Middle East—specifically Israel’s attack on Iran’s nuclear facilities and missile sites—has sent oil prices surging nearly 11% to $74.573 per barrel. This price spike is particularly significant for the Canadian dollar (CAD), given Canada’s status as a major oil exporter, especially to the United States. Higher oil prices typically translate into increased export revenues for Canada, thereby supporting the CAD. While heightened geopolitical risks have also prompted a flight to safety, benefiting traditional haven currencies such as the USD, CHF, and JPY, the impact on the CAD is being offset by the strength in oil markets.

Against this backdrop, the Bank of Canada (BoC) has signaled a cautious approach, indicating that it will await greater clarity on U.S. trade policy before adjusting interest rates. The continued rally in oil prices—should the conflict persist—could strengthen the BoC’s resolve to keep rates on hold or delay potential rate cuts, thereby providing additional near-term support for the loonie.

In reference to last week’s data, May’s employment report showed a net gain of 8,800 jobs, beating expectations for an 11,900-job decline. The unemployment rate rose to 7.0%, matching forecasts, while average hourly wages increased by 3.4% year-over-year to $36.14. This reinforces the view that labour market resilience and wage growth support the BoC’s decision to maintain its current policy stance.

As of June 14, USD/CAD is trading at 1.35773. The Relative Strength Index (RSI) is below 50, signaling bearish momentum. Key resistance levels are observed at 1.36473 and 1.37236, while support lies at 1.34922 and 1.34221.

Looking ahead, the week will feature important releases that could further shape sentiment on CAD: Housing Starts (June 16), BoC Governor Macklem’s Speech (June 18), Core Retail Sales m/m (June 20). These events will provide further insight into Canada’s economic health and potential monetary policy direction.

Outlook: We maintain a slightly bullish bias on the Canadian dollar in the near term. Robust GDP growth, firm inflation, resilient employment data, and rising wages support the BoC’s case for keeping rates steady. Additionally, geopolitical tensions—including the U.S.–EU trade dispute, and conflict risks in Ukraine, Israel, and Iran—are likely to sustain upward pressure on oil prices, while weighing on the U.S. dollar, thus reinforcing CAD’s upside potential.

Forecasts for the near term

Currency Pair	Jun 30	Jul 30
GBP/USD	1.36070	1.34787
USD/JPY	142.166	140.853
USD/CAD	1.36130	1.35703

“Disclaimer: Educational purposes only. Not financial advice or a recommendation to trade. FX trading carries high risk, especially during geopolitical volatility. Technical levels (Support/Resistance) and indicators are for illustrative analysis, not guaranteed targets. The author is not liable for any trading losses. Do your own research”.