Pause in Dollar Rally: Weak Data and Powell Dismissal Rumours

Amid rising market volatility, the US dollar is losing ground: USD/JPY is correcting after a recent bullish impulse, while USD/CAD is retreating from the upper boundary of its medium-term sideways range. This corrective movement was triggered by disappointing US producer price index (PPI) data and speculation surrounding a potential dismissal of Federal Reserve Chair Jerome Powell—rumours later denied by Donald Trump.

Yesterday's US macroeconomic data underperformed expectations: the core PPI was flat month-on-month (forecast: +0.2%), while the annual reading slowed to 2.6% versus the expected 2.7%. The headline PPI also showed weakness, fuelling speculation that the Federal Reserve might accelerate its easing cycle if producer price pressures continue to weaken.

Market participants also reacted to a brief spike in volatility following unconfirmed reports that Powell could be removed from office. Although the rumour was quickly debunked, the episode has contributed to lingering unease in the dollar-denominated asset segment.

In the near term, traders’ attention is shifting towards today’s US labour market data, which could shape the dollar's direction for the remainder of the week.

USD/JPY

After updating its May highs, USD/JPY sharply pulled back and is currently trading near the 148.00 level. Technical analysis suggests the potential for a deeper correction, as a bearish engulfing pattern has formed on the daily timeframe. However, if recent highs are breached again, the pair may resume its rally towards the 150.00–151.00 range.

Key events likely to influence USD/JPY today:

• 15:30 (GMT+3): US Core Retail Sales
• 15:30 (GMT+3): US Initial Jobless Claims
• 15:30 (GMT+3): Philadelphia Fed Manufacturing Index

USD/CAD

USD/CAD has been consolidating in the 1.3550–1.3600 range for an extended period, despite heightened volatility and a mixed macroeconomic backdrop in recent weeks. Yesterday’s pullback from the 1.3750 level resulted in the formation of a bearish engulfing pattern, although the prevailing sideways trend suggests that the formation may lack sufficient momentum for a sustained downside move. The 1.3740–1.3760 zone remains a key resistance area; if price breaks and holds above this range, a test of the 1.3800 level could follow.

Key events that may impact USD/CAD pricing today:

• 15:30 (GMT+3): Canada Foreign Securities Purchases
• 19:45 (GMT+3): Speech by FOMC Member Mary Daly
• 20:00 (GMT+3): Atlanta Fed GDPNow Estimate
  

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