The EURUSD pair has recently paused in its correction near the 200-hour moving average, with sellers in control. Last week, EURUSD reached a high of 1.18266, the highest point since September 2021, but the upward momentum faded, and the pair dropped to a low of 1.1718, falling below the 100-hour moving average. On Friday and earlier today, the price tried to bounce back and test the 100-hour MA, but sellers remained strong. Although the price slipped below the 200-hour MA at 1.1744, the low of 1.1718 from Thursday has held as a short-term support level. The price rebounded toward the 200-hour MA, but sellers again halted the upward movement. As long as the price stays below this level, the downward trend persists. If the 1.1718 level is breached, the price could drop toward the 1.1663–1.1691 area, which has been a point of support and resistance since 2021. Falling below this zone could signal stronger downward momentum. What we’ve observed lately with EURUSD is a classic example of a strong rally losing strength at a technical barrier. The pair peaked at levels last seen in 2021 but has shown a slow pullback since then. The failure to maintain momentum above key short-term moving averages, especially the 100-hour and 200-hour, is significant. Recent attempts to rally, including a brief rise on Friday and another earlier today, were cut short near the 100-hour line, which indicates a lack of buying interest at these levels. Sellers seem firmly in control, creating lower highs, with any bounce facing immediate resistance. The 200-hour line at around 1.1744 effectively caps the price. Price action near this barrier has been consistent, but it shows a downward trend. The failure to close above it keeps short-term momentum negative. With the price below this line, buyers have not been able to regain control. The focus rests on the 1.1718 level, a low from late last week that acted as a temporary support. If this level breaks, the next area of interest is 1.1663 to 1.1691, where the price has reacted multiple times over the past few years. We should watch for repeated patterns and track trading volume as these levels are tested. If the price moves toward the lower band around 1.1663 with strong selling and continued downward days, the pressure could intensify below these support levels. A lack of buyers may lead to wider downside movement. We will keep an eye on any rejection candles or failed bounce attempts just below 1.1718, as these could reinforce a negative bias. There’s been a technical development, rather than just random volatility. The structure over the past two weeks suggests a market losing confidence in further upward movement. Support zones are tight, and attempts to regain lost ground face strong rejection. There’s no erratic movement, only a series of lower highs struggling to push higher. Now is not the time to assume that a rebound will come easily. Instead, keep an eye on where the price is relative to the moving averages and lower reaction zones. The longer the pair remains below 1.1744, the less likely an upward drift seems. Current activity indicates tight support and clear resistance. When one breaks, it could have significant implications.

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GBP/USD began the week on a downward trend, trading under 1.3600 due to political tensions in the UK and a stronger US Dollar. The pair is close to a key support area between 1.3560 and 1.3550 as market sentiment turns negative. Recently, GBP/USD hit its highest level since October 2021 before falling back to around 1.3650, influenced by changes in the US Dollar and fluctuations in the British bond market. After a rally lasting two weeks, the Pound lost momentum as traders took a break, creating temporary bearish conditions.

AUD/USD Pressure

AUD/USD also faced pressure, dropping back to the 0.6480 range on Monday as the US Dollar gained strength. The Reserve Bank of Australia (RBA) is likely to lower the official cash rate (OCR) by 25 basis points soon. EUR/USD fell below 1.1700 due to trade concerns and a strong US Dollar. Ongoing trade tensions arose after tariffs were announced for Japan and South Korea. Gold prices approached $3,340 due to a slowdown in the US Dollar’s strength and continuing trade tensions. Ripple’s price rose steadily, supported by positive market sentiment and demand from institutional investors. In April, Eurozone retail sales dropped by 0.7%, and services activity fell by 0.3%. This data hints at potential negative GDP growth for the second quarter.

GBP/USD’s Opening Slide

The drop in GBP/USD below 1.3600 reflects strong demand for the US Dollar and increasing political uncertainty in the UK. With the pair nearing the 1.3560–1.3550 support zone, it raises questions: can buying interest hold, or will sellers take control? After a two-week rally, the Pound’s progress fizzled when traders lost their confidence. As bullish sentiment cools, attention shifts to whether this is just a temporary dip or the start of a deeper decline. With the recent high at 1.3650 behind us and US bond yields pushing the Dollar higher, how the market reacts near this lower support will be crucial. Buyers around the mid-1.35s need to hold steady; otherwise, we could see a longer downturn. Traders should be on alert for sudden volatility, especially since political news can quickly change the market’s direction. Turning to AUD/USD, prices around 0.6480 indicate vulnerability for the Aussie, especially with expectations of a 25 basis points rate cut by the RBA. Future market predictions lean towards a softer policy, limiting any upside. Buyers are hesitant even at minor pullbacks, suggesting sentiment hasn’t improved yet. If the RBA doesn’t push back against this outlook, we may see further declines next week. In the Eurozone, EUR/USD falling below 1.1700 appears to be an adjustment to tighter trade conditions and renewed strength in the US Dollar. While tariffs on Japan and South Korea seem remote, they heighten risk sensitivities across Asia and Europe. Further declines in the Euro are possible given recent poor retail performance and ongoing weakness in the services sector. These disappointing figures increase the likelihood of GDP contraction in the Eurozone during the second quarter, making it hard to forecast medium-term strength for the Euro. Currently, sellers seem to be gaining ground. Gold’s rise toward $3,340 shows a different trend. It’s influenced by the US Dollar moves and trade anxieties, but it also highlights an increased investor shift toward metals when yields slow. As real rates stabilize and spreads lose steam, gold’s safe haven appeal grows. However, previous resistance at this level may restrain further gains. If the Dollar strengthens again, gold bulls might struggle to maintain support. Meanwhile, Ripple’s steady ascent indicates growing interest from larger market players, possibly easing regulatory risks. If this continues, these buyers could support the market during lower trading volumes. This trend is orderly rather than chaotic, favoring gradual buying strategies. We should also watch Eurozone macro data closely, particularly the retail decline and weak services indicator from April. These trends are not isolated incidents but rather signs of a fragile economy, prompting a shift in how we assess regional risk across asset classes. The outlook now leans toward a more defensive approach to EUR-related strategies. In the coming weeks, the observed pattern—stronger US Dollar, weaker commodity-linked currencies, and targeted investments in metals and select cryptocurrencies—can guide strategies, as long as we monitor changes diligently. Trade tensions, especially those originating from the US, can lead to sharp intraday movements, making flexible positioning and tight risk management essential. Create your live VT Markets account and start trading now.

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The Pound Sterling drops below 1.3600 against the US Dollar as the market pays close attention to upcoming trade deals ahead of the US tariff deadline on July 9. The GBP/USD rate is falling while the US Dollar remains stable amid expectations for trade updates. The US Dollar Index rises 0.35%, getting close to 97.45, as US Treasury Secretary shows optimism about new trade deals. Washington has announced agreements with the UK, Vietnam, and a limited deal with China, with plans to finalize a deal with India soon.

Trump’s Tariff Strategy

The US is preparing to send letters to countries without agreements, extending tariffs for 90 more days. Trump aims to inform twelve countries about the initial tariff levels for their exports to the US. The Pound Sterling faces pressure due to potential UK budget issues connected to increased welfare spending, which may lead to tax hikes in the Autumn Budget. These fiscal changes could cost £4.8 billion by 2029-2030, drawing attention to GDP and factory data due this Friday. The Bank of England is predicted to lower interest rates by 25 basis points to 4% in August, with more cuts expected in November and December. Technical analysis indicates that GBP/USD is struggling below the 20-day EMA, with major support at 1.3500 and resistance near 1.3800. A weaker Pound has slipped below 1.3600, mainly due to growing domestic budget concerns and a firm Dollar. Recent trends reflect an increasing focus on trade developments, especially progress in US negotiations as the July 9 tariff deadline approaches. Traders are keeping a close eye on the US Dollar’s ascent, with the Dollar Index approaching 97.50. This strengthening follows Mnuchin’s remarks on new trade partnerships, including agreements with Vietnam and the UK, while preparing for talks with India.

Economic Forecast And Fiscal Policies

On the other hand, the UK faces potential financial challenges, with rising welfare expenses straining public finances. This situation goes beyond just the budget. The Chancellor’s forward guidance suggests possible tax changes in autumn, with an estimated extra £4.8 billion added to spending through 2029-2030. If this trend continues, it could negatively affect domestic output and public sentiment. We’re expecting new GDP and manufacturing data on Friday, and a weaker report could be likely, especially if factory output declines. Monetary policy expectations are changing. A rate cut of 25 basis points is widely expected at the August meeting, which would reduce the bank rate to 4%. There are predictions for another cut in November and possibly a third in December. This marks a significant shift from earlier this year when policymakers were more cautious. Those monitoring the forward curve will recognize this signal of a more dovish stance among rate-setters. Technically, the GBP/USD pair cannot maintain levels above the 20-day EMA, indicating a lack of strength for the Pound. The important support level at 1.3500 remains in sight, having provided support in previous sessions, while any upward movement is likely to encounter resistance near 1.3800. Given current trading volumes, these levels may be important for short-term strategy. In light of this wider shift, it’s crucial to keep an eye on cross-currency funding costs and short-term interest rate spreads. We’re closely monitoring weekly positioning, looking for any sharp rise in speculative flows around upcoming economic data or trade news. The timing of Washington’s planned letters to countries without deals could spark market volatility if perceived as an escalation. Adjusting exposure appropriately, especially around scheduled economic releases and expected policy statements, can help reduce the risk of significant market swings. Recent upward movements have tended to fall off quickly, suggesting that bullish sentiment may not last long. Participants should remain cautious and not take on too much risk, particularly as summer trading conditions become less active. Create your live VT Markets account and start trading now.

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USDJPY started the day with a small drop but quickly turned upward with a steady climb and few corrections. Initially, the pair fell below its 200-hour moving average during the Asian session, but buyers quickly pushed it back up around Friday’s low. After breaking the early session high of about 144.63, the pair gained momentum and reached new highs. On the hourly chart, USDJPY is approaching the 61.8% retracement level of the June 23 high at 145.978. This zone, ranging from 145.919 to 146.288, has been a tough barrier in recent months. The pair briefly broke this range in May and late June, but those moves didn’t last. Over the past two months, the broader range has been from 142.105 to 146.288. A firm move above 146.288 would suggest a stronger medium-term bullish trend.

Short-Term Support Levels

Right now, short-term support levels are at 145.347, which is the 50% retracement of June’s high-to-low movement, and at 145.216, the high from last week. Staying above these levels keeps buying momentum strong during the day. However, if the pair falls below these levels, it might weaken bullish interest and turn attention back to the 200-hour moving average. As the pair approaches tough resistance levels, it’s vital to pay close attention. The zone between 145.919 and 146.288 has often acted like a ceiling. While the pair has occasionally broken through this area, those moves have been short-lived, often lacking strong follow-up support. A clear break above this upper edge, confirmed with increased volume, would strongly suggest that buyers have regained control beyond short-term tactics. The timing of this move is interesting. The market seems to be responding not just to technical levels, but also to broader market dynamics. We see that quick buying occurs during small corrections in rallies, and dips are shallow, indicating strong buyer interest. However, previous attempts to stay above 146.288 have lost momentum. If current price levels only attract limited interest, we could see another stall, especially if momentum indicators start to flatten or diverge from price movements.

Key Short-Term Levels

Key short-term levels are critical now. The 145.347 mark, which is the midpoint of June’s highs and lows, continues to be important. If there’s a clear daily close below this level, it could signal a shift in the current positive sentiment. The area around 145.216, last week’s high, is another important reference point. If prices dip below both of these levels during the day, it suggests that the drive to push the pair higher may be weakening. We are also closely monitoring the 200-hour moving average, which briefly fell during the Asian hours but was quickly reclaimed. This average serves as a key reference point for short-term trading; if it is broken and not regained, it could shift strategies, especially for leveraged products. If the price drops below this average again, recent buyers may exit, increasing volatility. Given all of this, price movements around the next 30 to 40 pips are crucial. There’s little uncertainty here—the pair is at a pivotal point, and its behavior around these levels will influence the next adjustments. Staying patient and watching for clear breaks or rejections at key levels will allow us to act accordingly. This isn’t a time for wild guesses or vague forecasts. We need defined moves supported by real momentum. That, and only that, will justify larger trading decisions. Create your live VT Markets account and start trading now.

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Dow Futures are slightly lower as we approach Monday’s market opening after a long holiday weekend. US stocks are also down due to cautious trading amid uncertainties in global trade, especially as the 90-day tariff pause ends on July 9. Currently, S&P 500 futures are down 0.3%, close to 6,260, while Dow futures have dropped 35 points to around 44,800. Investors are turning to safe assets like the US Dollar as they doubt the outcome of US trade talks.

US Dollar Movement

The US Dollar Index, which measures the dollar’s strength against six other currencies, is testing a high of about 97.45. The US aimed to secure 90 trade deals in 90 days but has only made limited agreements with the UK, Vietnam, and China. US Treasury Secretary Scott Bessent remains hopeful about future trade deals, even though some countries are delaying. The US may send letters to countries that do not reach agreements by August 1, outlining tariff rates. The Dow Jones Industrial Average includes 30 major US stocks and is a price-weighted index founded by Charles Dow, which uses high and low points for trend analysis. Traders can engage with the DJIA through ETFs, futures, options, and mutual funds. The Dow Theory helps guide trading decisions by analyzing both the DJIA and the Dow Jones Transportation Average.

Market Response and Strategy

While futures show some caution as the week starts, it is not a signal of panic. Instead, it reveals a careful sentiment influenced by uncertainties in global markets, especially regarding trade. The market is leaning towards minimizing risk, leading to a rise in interest for reliable assets like the US Dollar. Dow Futures are down 35 points after the long weekend, mostly reacting to the approaching end of Washington’s temporary trade pause rather than new data. With the deadline for resolving key tariffs set for July 9, market activity is shaky. Participants have not seen the anticipated results from the ambitious plan for 90 trade deals. Instead, a few agreements have been made mainly with Vietnam, the UK, and China. Bessent’s recent comments about potential deals may provide some reassurance, but concrete progress is still lacking. The rise of the US Dollar Index toward 97.45 shows how investors are losing confidence in other markets. For those following currency and rate trends with equities, a strong dollar suggests that investors are avoiding risks, which often negatively affects global cyclicals and industrials, sectors that heavily feature in the DJIA. Changes in index-linked derivatives indicate not only opportunities but also the need to keep an eye on volatility and expected price ranges. If the US sticks to its August 1 deadline for tariffs against non-complying countries, we might see firm positions and more defensive trading. In tactical terms, recent pauses and pullbacks may lead to a reassessment of options strategies. For example, we might reconsider covered positions or seek higher premiums in more volatile contracts. Given the limited progress in trade negotiations, any unexpected developments—positive or negative—could quickly change expectations. It’s important to monitor not just the overall industrial average but also the Dow Jones Transportation Average as per Dow Theory. Differences between the two can signal shifts in market momentum, which can be useful for futures strategies, especially as weekly options expire. Overall, the market appears cautious but not entirely stalled. With several key diplomatic and regulatory events approaching, being patient is just as strategic as being aggressive. The unfolding developments in the next few weeks are likely to provide clearer setups and opportunities for precise trading rather than broad strategies. Create your live VT Markets account and start trading now.

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The US dollar has dropped, while Cable has recovered over 60 pips from earlier lows, now down only 9 pips for the day. This shift is part of a larger decline in the US dollar seen in the last hour, reversing previous USD gains except against the yen. Recently, there have been several attempts to sell Cable over the past week, but buyers have jumped in each time. This includes a dip after the non-farm payrolls report. Although there’s fundamental news that usually supports the US dollar, sellers keep appearing, indicating a possible change in trends for the currency. The reasons for this ongoing shift aren’t completely clear, but it continues even as US tech stocks hit new highs. Current market price movements show a consistent departure from expected USD strength. The US dollar has dropped sharply, losing ground almost everywhere except against the yen. Sterling has made a strong comeback after an earlier dip, gaining back over 60 pips. It now trades just slightly lower, indicating a clear rejection of those previous lows. The significant aspect here is not just the bounce, but the pattern it represents. In recent trading sessions, there have been repeated efforts to lower Cable. These selling waves, especially after major reports like the non-farm payrolls, have consistently failed, with buyers stepping in forcefully again and again. This is more than just reacting to headlines; it suggests something deeper is happening. Despite strong economic data from the US, which would usually support a rising dollar, the market isn’t responding as expected. The dollar seems to have fewer supporters, even as American stock markets rise, mainly due to tech. This situation would typically increase demand for the dollar, but now it hints at stronger interest elsewhere. Overall, price actions no longer align with how they did six months ago. This change may be technical, but it feels behavioral. Every time the dollar tries to recover, it slips away quickly, showing less strength with each rebound. This suggests current positions in the foreign exchange market are becoming less favorable for the dollar. Powell’s recent comments haven’t changed this trend, nor have strong inflation reports or recent bond movements, indicating these flows might be driven by larger factors than a single report or central bank statement. For those involved in short-term holdings or swaps, this is important. Previous resistance levels are failing to hold, and the market’s reaction to macro data is becoming weaker. This inability to gain momentum from supportive catalysts makes directional clarity difficult. Charts where prices deviate from fundamentals often lead to sharp reversals or gradual moves in the opposite direction. Yellen’s remarks this week didn’t raise concerns, yet the market continued to move. Foreign inflows might be seeking diversification, or medium-term expectations may be changing as we move beyond this rate cycle. Regardless of the reason, prices show that some positions may no longer be sensible. As traders, when we see movements like this, especially after strong data or pressing narratives, we turn our attention to the options market. Is implied volatility changing? Who is bidding on risk reversals? These quieter signals can be more revealing than speeches or unexpected news. What we observe suggests a greater willingness to reduce USD exposure rather than pursue it, despite optimism in equities and stable bond yields. That’s significant. In the upcoming sessions, rate expectations will continue to shift. We may see more moves based on carry trades rather than outright growth. This doesn’t diminish the dollar’s usefulness, but it alters our approach to currency pairings involving GBP, EUR, and AUD. If positioning remains skewed, taking shorter-term risks becomes trickier. Understanding which levels have been repeatedly defended is crucial now—not just for support and resistance—but to see where the market is still trying to find agreement and where it is no longer responsive. This is the only guide we need right now. Observe how we react to known factors, not the factors themselves.

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The EUR/USD pair is going down while the US Dollar gets stronger, boosted by rising US Treasury yields. With the trade deadline on July 9, there’s renewed interest in the safe-haven status of the Dollar, causing the Euro to trade below 1.1720 in the European session. German Industrial Production unexpectedly grew by 1.2% in May, but Eurozone Retail Sales showed a 0.7% drop for the same month. Adding to the uncertainty in the market, U.S. President Trump’s upcoming tariffs and a potential trade deal have made traders cautious.

Trade Strategy Focus

Trump’s tariff focus is on Mexico, China, and Canada, aiming to strengthen the US economy. In 2024, these three countries made up 42% of US imports. The EUR/USD pair is under bearish pressure, with support expected around 1.1715 and resistance at 1.1790. In June, US private payrolls grew by 147,000, while the unemployment rate dropped to 4.1%. These figures have lowered expectations for a Federal Reserve interest rate cut in July. There continues to be debate over the economic impact of tariffs. The recent decline in the EUR/USD pair aligns with changing market views rather than surprising data. The drop below 1.1720 coincided with rising Treasury yields and increased investments in Dollar assets. This rise in US yields typically strengthens the Dollar, as higher returns attract investors away from currencies like the Euro. Despite stronger-than-expected German production data, sentiment hasn’t shifted much. The 1.2% growth indicates some resilience in industry, but consumption remains a concern. The 0.7% drop in Eurozone Retail Sales points to weaker demand, which is critical as retail trends can indicate broader economic growth, especially in a currency area facing political and economic challenges.

Concerns Around Trade Policies

Concerns about U.S. trade policies are still prevalent. With the July 9 deadline approaching, trade tensions are back in focus, and the language around policies has not calmed market nerves. The potential for further tariffs, especially against Mexico, China, and Canada, keeps traders on edge. Last year, these three countries represented 42% of US imports, meaning any disruption could have significant consequences. Recent labor data has also supported the Dollar. Private payrolls for June were at 147,000—an acceptable figure—but combined with a drop in unemployment to 4.1%, this has lowered expectations for a near-term rate cut. The Federal Reserve typically reacts decisively to weak job data or inflation issues, but currently, neither is a concern for them. With decreased chances of a rate cut, shorting the Dollar seems less attractive in the short term. Support for the EUR/USD pair is around 1.1715, just below today’s trading level, where previous bids offered some protection. If the downward pressure continues, traders may look further south, but any significant climb needs to break through resistance near 1.1790, which has limited upward movement this week. Looking forward, attention will remain on upcoming trade announcements and their effects on the market. Since expectations for a rate shift in the US have cooled, currencies may react more to news rather than fundamentals for the time being. Traders might want to be cautious about options pricing in the next two weeks. As implied volatility reacts to geopolitical and policy risks, premiums may increase. Therefore, revisiting short-dated, out-of-the-money strategies—especially those sensitive to headlines—may be worthwhile. Create your live VT Markets account and start trading now.

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The employment trends index from The Conference Board increased from a revised 107.49 to 107.83 in June. While this index does not offer new insights into the economy, it gives a snapshot of the current job market. The job market shows mixed signals. Recent reports, like ADP and ISM, indicated weak job metrics, while non-farm payrolls showed strong results.

Stabilization Of The Index

After months of decline, the index seems to have stabilized. We see a slight rise in the Employment Trends Index (ETI), moving from 107.49 in May to 107.83 in June. This increase follows several months of declining numbers. The Conference Board creates this index using eight labor market indicators to provide an overview of employment conditions. The latest figures suggest that while some weaknesses remain, a stable baseline is forming, which can help us understand the future of hiring. Last week delivered conflicting signals. The ADP data was weak, raising doubts about the private sector’s strength, and the ISM services survey showed a slowdown in hiring. However, the non-farm payrolls report contradicted this by showing job gains that exceeded expectations. This conflicting data can be confusing, but focusing on the data within the ETI helps clarify the picture. It’s important that the index has stopped decreasing. Previously, we observed gradual declines across employment components, including fewer job openings and weaker hiring plans. So, even a slight increase deserves attention as we reconsider short-term pressures on interest rates and growth expectations. Some of the gains in June might be related to changes in temporary employment and job advertising trends, which often lead actual employment changes. If these aspects are improving, as the index suggests, we can anticipate broader job gains. This trend has wider implications, especially for inflation and interest rate expectations.

Market Sensitivity To Employment Trends

As changes in labor indicators affect rate expectations, we may see pressure on the spread between the expected terminal rate and the current rate. This impacts curve positioning, especially in short-term derivatives. With stable prints like this, it’s less about new information and more about how people perceive trend changes. If the perception shifts toward stabilization, we might need to adjust probabilities, leading some near-term hedges to seem crowded. Short-term instruments respond sensitively to even small changes in labor data. A steady ETI, especially if it comes after a downtrend, reduces some of the risks that had been creeping back into the market after the ISM report. It’s not a complete reassurance—yet—but it suggests a pause in overly negative pricing. The timeline is less important than the trajectory. For those managing exposure in the short term or assessing spread momentum, this index supports avoiding risky downside positions. We should monitor whether July’s data continues this slight upward trend. Consistency will encourage reallocation. However, due to how leverage reacts to payroll numbers and other significant drivers, it’s wise to wait for confirmation of this direction rather than act on a single index movement. Create your live VT Markets account and start trading now.

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The US Dollar rose against the Canadian Dollar, increasing 0.5% today and up 0.8% since last week’s lows. This change was influenced by worries about new US tariffs, following President Trump’s announcement about tariff letters. US Treasury Secretary Scot Bessent hinted at a possible new deadline for tariffs on August 1, allowing some countries time to negotiate. However, China, the UK, and Vietnam already have deals from April. The Canadian Dollar struggled as Oil prices fell, with OPEC+ approving a larger increase in Crude supply.

Impact Of Oil Prices On The Canadian Dollar

West Texas Intermediate (WTI) prices dipped below $65.00 but later rose back above $66.00, affecting the Canadian Dollar since Oil is Canada’s main export. The currency is influenced by the Bank of Canada’s interest rates, Oil prices, and economic indicators like GDP and employment stats. The value of the Canadian Dollar is also affected by inflation and the US economy’s strength. The Bank of Canada targets inflation between 1-3% and adjusts interest rates based on this, impacting the CAD. Typically, higher interest rates and Oil prices strengthen the Canadian Dollar. Recently, the US Dollar gained momentum against the Canadian Dollar, climbing 0.5% during the day and nearly a full percentage point above last week’s low. This rise has been mostly due to new worries about trade and tariffs. Trump’s announcement of tariff measures created uncertainty, leading to a stronger demand for the Dollar. Bessent pointed to a potential new enforcement date of August 1, which might give negotiators a small window to secure new agreements. However, countries like China, the UK, and Vietnam have already established their positions. Meanwhile, the Loonie faces challenges.

The Relationship Between Oil Prices And The Canadian Dollar

Oil dynamics have added more downward pressure. OPEC+ has approved an increase in supply, causing fluctuations in commodity prices. WTI fell below $65 before rising above $66 again. Since Canada relies heavily on oil exports, any drop in crude prices tends to weaken the CAD. Traders have adjusted short-term positions and recalibrated expectations around volatility. The connection between Canada’s currency and global oil is strong, and in the current market, energy price fluctuations can have a big impact. Traders are also adjusting rate expectations based on the Bank of Canada’s response to inflation. The central bank is managing persistent inflation that exceeds its 1–3% target range. If inflation doesn’t slow, policymakers may need to maintain or raise interest rates. Typically, tighter policies strengthen the currency, provided no external factors like oil prices interfere. On another front, the strength of the US economy and job data has increased demand for Dollars. Healthy growth and employment make it hard to predict Federal Reserve policy. This strength complicates the outlook for a CAD recovery, especially when commodity prices remain low and Canadian data lacks upward movement. In the coming week, we will keep an eye on volatility across different assets. Rate differences favor the Dollar in most pairs, especially with Canadian markets showing weakness amid uncertain inflation. Traders should monitor how risk skews shift with energy data and central bank hints. Flows appear cautious, and short-term positions may take precedence given the fast-changing narrative. Currently, volatility premiums on CAD-linked contracts seem undervalued considering the potential for fluctuations in oil prices and tariff news. Timing entries during key economic releases will likely provide better opportunities than chasing trades based on headlines. We’re also watching for any mispricing in rate futures that could influence future policy paths. In these situations, waiting for the right moment is usually more effective than rushing into trades triggered by headlines. Create your live VT Markets account and start trading now.

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The USDCAD pair bounced back from last week’s low, stopping just above the 2025 low and near the June 17 swing low at 1.3554. This recovery pushed the pair toward the 100-hour moving average around 1.3613. Initially, the pair faced resistance during the Asian session but then broke through. Buyers gained strength, driving the price above the 200-hour moving average in the early European session. The upward momentum continued, reaching the 50% midpoint of June’s decline at 1.3676, where sellers appeared near the swing area low between 1.36858 and 1.36923. As sellers took hold, over the last few hours, the price returned to the 200-hour moving average at 1.36401. This moving average is crucial for predicting future price movements. If the price falls below the 200 MA at 1.3640, it might weaken the bullish outlook and lead back to the 100-hour moving average at 1.36128. Support levels are located at 1.3640 (200-hour MA) and 1.36128 (100-hour MA), while resistance levels can be found at 1.3647 (200-hour MA), 1.36763 (50%), and the swing area between 1.3685 to 1.3692. In summary, the USDCAD currency pair saw a short-term rally after bouncing from last week’s low and testing key support levels. It rose from near the 2025 low and paused around 1.3554. The price climbed, breaking its 100-hour moving average at 1.3613, often seen as a signal for short-term direction. Once buyers gained control and surpassed the 100-hour average, the pair surged past the critical 200-hour moving average, important for determining medium-term direction. The rally continued up to 1.3676, but sellers stepped in near the swing zone between 1.36858 and 1.36923, a barrier that had previously held back price advances. After reaching that level, the rally faded, and sellers pushed the price back toward 1.3640, the 200-hour moving average. This moving average now acts as a balance point for current market sentiment. The price’s behavior around this level will signal the next move. If the price drops below 1.3640, it would be disappointing and could break the recent upward trend, paving the way back toward the 100-hour average at 1.36128. This level has previously acted as support, and its ability to hold against selling pressure will determine whether the bounce was temporary or the start of a larger movement. Conversely, if the price stays above 1.3640 and gains strength, attention will shift to higher resistance levels—first at 1.3647, then the midpoint at 1.36763. Any push toward these levels could lead to resistance in the swing zone above 1.3685, a critical area that has acted as a barrier before. Failing to hold within that range might trigger a faster market adjustment. What we’re monitoring in this situation is not only the levels themselves but also how the price interacts with them. Are buyers consistent? Is selling pressure weakening, or are sellers just waiting in the upper range? These answers will start to emerge over the following sessions, depending on whether the price moves down or up. In the near term, with uncertainty on both sides, we might see opportunities as the price fluctuates between these technical markers. Acting precisely, especially near the 200- and 100-hour moving averages, will be more critical than trying to predict the direction. The closer the structure, the clearer the reaction levels become. This may be where the real advantage lies for attentive observers.

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