Dollar Under Pressure: Tariffs and Geopolitical Risks Shift Market Sentiment

The US dollar continues to weaken after a period of short-term consolidation, amid rising tariff uncertainty and increasing geopolitical tensions. Statements by Donald Trump regarding the possible introduction of new tariffs against Europe have heightened market concerns about the consequences for global trade and economic growth, undermining support for the dollar as a defensive currency.

Additional caution is being driven by expectations of a heavy slate of US macroeconomic releases, including housing market data, inflation indicators, business activity figures, as well as speeches by Federal Reserve officials. In this environment, market participants prefer to reduce dollar exposure and act more selectively, awaiting new signals that could clarify the future path of monetary policy.

USD/JPY

At the start of the current week, the USD/JPY pair slowed its downward movement that followed the formation of a “dark cloud cover” pattern on the daily timeframe. For several sessions, price action has been consolidating within a narrow range of 157.60–158.50, although this sideways movement may soon come to an end.

A break below the 157.60 level could allow the downtrend to resume towards 156.80–157.00. Conversely, a sustained move above 158.50 may support a retest of this year’s highs.

The following events may influence USD/JPY price dynamics in the coming trading sessions:

– today at 11:00 (GMT+2): the International Energy Agency’s monthly oil market report;
– today at 15:30 (GMT+2): a speech by US President Trump;
– tomorrow at 01:50 (GMT+2): Japan’s trade balance (seasonally adjusted).

USD/CAD

Last week, USD/CAD buyers failed to overcome the key resistance zone at 1.3900–1.3930. Technical analysis points to the potential for a decline towards the 1.3750–1.3790 area, as a bearish engulfing pattern has formed on the daily chart.

Invalidation of the bearish scenario would require a firm break and sustained consolidation above 1.3900.

The following events may affect USD/CAD price action in the upcoming sessions:

– today at 15:30 (GMT+2): Canada’s Raw Materials Price Index (RMPI);
– today at 19:00 (GMT+2): the Atlanta Fed’s GDPNow indicator;
– today at 20:00 (GMT+2): the US Treasury auction of 20-year bonds.

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