Dollar Fights Back - Market Analysis
Date: 02 July 2025
Market Overview
On this Wednesday, traders are observing significant movements in global markets, with several key instruments nearing critical technical zones. The macroeconomic landscape continues to influence market sentiment.
Recap of Tuesday's Data
The Eurozone's Consumer Price Index (CPI) met expectations, resulting in minimal volatility for the Euro. In the U.S., the ISM Manufacturing PMI also aligned with forecasts, while JOLTS job openings exceeded expectations, indicating a resilient labor market. Notably, comments from central bankers, particularly Jerome Powell of the Federal Reserve, provided a boost to the U.S. dollar, reversing its recent weakness and triggering technical shifts across major currency pairs.
U.S. Dollar Recovery
The prevailing narrative is the potential recovery of the U.S. dollar. This resurgence is evident in key FX pairs. The USD/JPY is rebounding from significant technical support, bolstered by Powell's hawkish remarks. Conversely, the NZD/USD appears to be forming a head and shoulders pattern, indicating a potential reversal. The GBP/USD is breaking a mid-term uptrend line, suggesting growing dollar strength and possibly signaling a broader trend shift.
Upcoming Economic Indicators
Wednesday's economic calendar includes the Australian retail sales data, which reported a modest increase of 0.2%. Despite this soft reading, the Australian dollar remains stable. Attention now shifts to the ADP Non-Farm Employment Change report from the U.S., anticipated to show just under 100,000 jobs added. While this report is not always a reliable predictor of the official jobs data released the following day, it often sets the tone for dollar sentiment midweek.
Equity and Commodity Markets
In the equity markets, major U.S. indices are nearing all-time highs, with the European session also starting positively. The bullish trend appears to be continuing, despite concerns about potential overextension and macroeconomic risks.
In commodities, the situation is mixed. Oil prices are fluctuating, with WTI slightly down and Brent showing modest gains. Gold, after a strong start to the week, is experiencing a corrective pullback, while silver is also under mild pressure.
Conclusion
The focus remains on the U.S. dollar. Traders are left to ponder whether this marks the beginning of a substantial recovery or if it is merely a temporary correction before further weakness. The upcoming trading day is expected to provide clarity on this matter.