The U.S. dollar has gained strength against major currencies, nearing a two-week high due to improved trade sentiment and stable Treasury yields. President Trump addressed currency policies and trade issues, criticized China and Japan for devaluing their currencies, discussed potential trade agreements with the EU, and reiterated his tariff plans. EUR/USD traded below 1.1750 because of option expirations and expected discussions between Trump and the EU’s Ursula von der Leyen. GBP/USD faced downward pressure from disappointing UK retail sales data, closing below its 100-hour moving average, which suggests limited corrections.

US Advanced Durable Goods Report

The U.S. Advanced Durable Goods Report for June 2025 showed a 9.3% decline in total orders, which was better than expected after a 16.5% increase in May. This drop was largely due to transportation equipment, impacting $32.6 billion. Excluding transportation, orders increased by 0.2%, while core capital goods decreased by 0.7%. Despite a steady 2.4% growth estimate for Q2 2025 from the Atlanta Fed’s GDPNow model, traders will keep an eye on the upcoming factory orders report. U.S. stock indices finished higher, reaching record highs thanks to tech earnings and anticipation of the Fed’s decision and GDP release, indicating a positive market outlook amid significant upcoming economic events. Given the wave of upcoming events, we see the current market calm as a major risk. The CBOE Volatility Index, or VIX, is at around 13, a historically low level that suggests traders might not be ready for potential market fluctuations from next week’s data and earnings. We are preparing for an increase in volatility by considering options strategies to take advantage of larger price movements.

Currency Policy and Market Outlook

The President’s remarks on currency policy support a strong dollar, matching the current trend. The U.S. Dollar Index (DXY) remains above the 106 level, and we will be closely monitoring the upcoming GDP and Core PCE inflation data to see if the dollar continues to strengthen. If the dollar experiences temporary dips due to weaker data, this could be a buying opportunity for us in the uptrend. For EUR/USD, 1.1700 is a vital support level, as shown by last week’s rebound from that area. We will exercise caution in holding large positions over the weekend, as upcoming trade discussions with von der Leyen may create a significant price gap at the market open. The 100-hour moving average will remain our key pivot for short-term trades. The pound is under pressure, and we believe the 200-hour moving average is crucial to maintain stability and avoid a steeper decline. Given the weak UK economic data, any positive news from the meeting with Starmer could present selling opportunities. We plan to sell into rallies that approach the 1.3500 mark. With stock indices reaching all-time highs, we are reducing our long exposure ahead of major tech earnings. The combined risk of reports from Microsoft and Apple, along with the Fed’s interest rate decision, is too significant to overlook. Historically, a hawkish stance from Powell has outweighed even strong corporate profits, so we are actively protecting our remaining equity positions. The Federal Reserve’s decision is the main focus. While a rate hold is expected, Fed funds futures indicate nearly a 60% chance of a rate cut by September. We will be attentive to any changes in language from the Fed Chair that could alter those odds, as this will influence market direction. The employment report on Friday will be the final confirmation of the Fed’s position, with economists predicting around 180,000 new jobs. Create your live VT Markets account and start trading now.

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