Forex

There is an old, almost cliché truth in finance: a strong U.S. economy means a strong dollar. It seems logical enough. GDP rises, and investors bring money into America. Strong employment data strengthens the dollar. Geopolitical tensions drive investors into the dollar as a safe haven. This relationship worked for decades. It was an axiom that required no proof.

But, as it turns out, even axioms can become outdated.

HSBC Asset Management, which oversees $863 billion in assets, has made a rather provocative claim. According to the firm's strategists, the dollar is headed for weakness. Not merely a temporary correction or a short-term pullback, but a structural downward trend. Their key argument sounds almost paradoxical: the dollar no longer responds to good news the way it once did.

Joe Little, Global Chief Strategist at HSBC Asset Management, articulated the idea with remarkable precision. Historically, the combination of strong domestic growth and geopolitical tension created a powerful and sustained uptrend for the U.S. currency. Investors from around the world flocked to the dollar because America was both a haven of stability and an engine of growth. Today, that dynamic appears to be fading. The dollar still rises at times, but reluctantly, sluggishly, and with frequent reversals. Little sees this as a symptom of a deeper problem.

Something has changed. The question is: what exactly?

Let's look at the numbers. The Bloomberg Dollar Spot Index gained just 0.6% over the past month. In currency markets, six-tenths of a percent is barely a move. It's a tremor rather than a trend.

And this happened despite the U.S. economy continuing to surprise on the upside. Job openings exceeded expectations. Consumer spending remains resilient. Industrial production is expanding....

Currency & Commodity Analysis:

US Dollar Index

The US dollar index rose further to 99.50 on Wednesday, reaching its highest level in nearly two months, after an ADP report showed that the private sector added 122,000 jobs in May, exceeding expectations and reaching a new high since January 2025. The data shows a continued strengthening labor market, further solidifying market expectations that the Fed may raise interest rates later this year. Earlier this week, Jolts data showed that job openings in April rose to their highest level since November 2024, further highlighting the resilience of labor demand. The dollar has been supported by escalating tensions in the Middle East, and oil prices rose for the third consecutive trading day, exacerbating concerns about inflationary pressures. The market currently estimates an 85% probability of the Federal Reserve raising interest rates by 25 basis points before the end of the year, up from 60% a week ago.

The US dollar index is trending slightly higher on the daily chart, currently trading above 99.30 and holding above all moving averages. Short-term resistance is seen at the previous high of 99.55, with medium-term resistance at 100.00 (a psychological level). Support lies at the 20-day and 50-day moving averages and the previous low of 97.63. The MACD remains above the zero line, with the DIFF above the DEA, indicating a slight continuation of bullish momentum. The RSI is between 55 and 60, above the 50 level, suggesting bulls are in control but not yet overbought. The moving average system is bullish, with the medium-term center of gravity steadily rising. Short-term consolidation is seen due to resistance at the previous high. The market is trending slightly higher, supported by moving averages. Key levels to watch are the 99.55-100.00 (psychological resistance) level and the 99.00-98.58...

The silence during Wednesday’s Asian trading session was tense. Not the kind of silence where nothing happens, but the kind where everyone holds their breath and stares at a single number on their screens: 160. Three digits that, for the Japanese yen, matter more than any economic forecast or government report.

The dollar-yen exchange rate hovered around 159.9. It was like standing at the edge of a cliff and looking down. One step forward, and you're at 160 — precisely the level Japanese authorities deemed unacceptable back in April.

Four months ago, Japan’s Ministry of Finance woke up to a yen trading at 160 and launched a currency intervention on a scale the country had not seen in decades. Officials spent a record ¥11.5 trillion — nearly $73 billion — defending the currency. It was the largest single-round intervention in modern Japanese history.

But markets are notoriously stubborn. The impact proved short-lived. As soon as Japanese officials breathed a sigh of relief and congratulated themselves, the dollar resumed its slow, relentless advance. And today, the 160 level was briefly touched again. Only for a few minutes — but those few minutes were enough to make thousands of traders around the world forget about their coffee and everything else.

There are several explanations, rooted not in emotion but in the hard realities of global finance.

The most obvious factor is U.S. monetary policy. The Federal Reserve has made it clear that it is in no rush to cut interest rates. Contrary to gloomy predictions, the U.S. economy continues to show remarkable resilience.

Labor market data surprised analysts with stronger-than-expected job openings, while consumer spending has softened only modestly...

Wednesday was not a particularly good day for the Canadian currency. Then again, neither were the previous several weeks. The Canadian dollar, affectionately known as the “loonie” after the solitary loon depicted on the one-dollar coin, remained dangerously close to its multi-month lows against its American counterpart.

It did not plunge. It did not collapse. It did not crash. It simply stood still. And that stillness — that stubborn pause at a level that pleases no one — speaks more loudly about the challenges facing the currency than any dramatic selloff could.

During trading, the Canadian dollar was virtually unchanged at 1.3838 per U.S. dollar. Converted into U.S. cents, that works out to roughly 72¼ cents for one Canadian dollar — a level that would have seemed insultingly low to many Canadians just a few years ago. Today, it has become an uncomfortable reality to which people are gradually adapting.

Throughout the session, the currency traded within a narrow range between 1.3816 and 1.3854. By foreign-exchange standards, that range is almost laughably small. This is not volatility; it is indecision. Traders do not know which direction to run, so they remain frozen in place, clinging tightly to their positions.

The most troubling moment came last Thursday, when the Canadian dollar slipped to a six-week low of 1.3869. Since then, conditions have not improved, but at least they have not deteriorated dramatically. Whether this calm is the quiet before a storm or merely the beginning of a long and tedious period of stagnation remains to be seen.

Trying to explain the Canadian dollar’s weakness with a single factor would be impossible. As always, it is a cocktail of problems — a bitter blend that financial markets swallow reluctantly because they have...

There was something almost tragicomic about it. Throughout 2024, analysts, economists, and geopolitical observers kept wondering: surely this is the moment when the euro finally makes its move.

The United States pursued such an unpredictable economic policy that even its own allies were left bewildered. Trade wars, abrupt policy reversals, public disputes within the administration—a perfect storm that should have pushed the world to look for an alternative to the dollar.

And that alternative already had a name: the euro. The world’s second-largest reserve currency. The natural contender for the throne.

But the world, as it often does, refused to behave as experts expected. It did not rush into the arms of the euro. In fact, it did not rush toward any single currency at all. Instead, investors, central banks, and major funds cast their votes for something else entirely: gold—and the currencies of small, often overlooked countries.

The euro remained roughly where it had always been, holding a share of about 20% of the global market.

These are not rumors or speculation. The figures were published on Tuesday by the European Central Bank (ECB) in its latest report. And, frankly, the numbers make for rather disappointing reading from a European policymaker’s perspective.

Because 20% is not bad. But it is not progress either. It is stagnation. And perhaps most frustrating of all, the euro’s current share remains below the level it enjoyed twenty years ago, in the early years of its existence.

Let’s dispense with euphemisms. Twenty percent is not a commanding second place. It is a frozen picture.

The euro is neither growing nor shrinking. It is holding the line.

At first glance, given reports that the dollar is also losing ground, this could be framed as...

As long as I traded against the trend, I kept losing. The moment I made friends with it, everything changed.

Hi, this is NorthRay.💪

There was a time when I opened trades simply because “the price is too high, it has to fall now” or “the price is too low, it has to rise now.”

I wasn’t paying attention to the trend. I was trading my feelings.

And do you know what happened?

During an uptrend, I would open Sell positions (because “it can’t keep going up forever”). The price kept rising. My losses kept growing. I held on, hoping for a reversal. Eventually, I either closed at a loss or got stopped out.

Then I read a phrase that every experienced trader repeats:

“The trend is your friend.”

I decided to test it. And surprisingly, once I started trading with the trend, my trades began closing in profit much more often. Not always, but noticeably more often.

Today I’ll explain what trends are, how to identify them, and why trading against them is like swimming upstream in a mountain river.

A trend is the direction of price movement.

If the price is moving up, it’s an uptrend (bullish trend).

If the price is moving down, it’s a downtrend (bearish trend).

If the price is moving sideways within a range, it’s a sideways trend (range or consolidation).

Think of it this way:

Imagine you’re standing on an escalator.

An uptrend is an escalator moving upward. You can stand still and it will carry you up. You can walk up and get there faster. But if you try to walk down, you’ll struggle.

A downtrend is an escalator moving downward. Walking up is difficult and risky.

A sideways market is an...

Currency & Commodity Analysis:

US Dollar Index

The US dollar index remained above 99 on Tuesday, after rising in the previous session, as stalled US-Iran peace talks increased safe-haven demand, while inflation risks and interest rate expectations came into focus. On Monday, Iranian media reported that Tehran had suspended communication with Washington in response to Israeli attacks in Lebanon. Meanwhile, President Trump stated that discussions are ongoing and hinted that a memorandum of understanding with Iran on reopening the Strait of Hormuz could be reached next week. However, rising energy-driven inflation has led markets to anticipate a possible Federal Reserve rate hike before the end of the year. Investors are now awaiting Tuesday's Jolts job openings report, followed by Friday's closely watched US monthly employment data, for further insight into the Fed's policy outlook.

The US dollar index will be under pressure. The dollar index faces greater downside risk, with 98.79 (the Bollinger Band middle line) and 98.58 (the 200-day moving average) serving as key short-term support levels. A break below these levels could lead to a move towards 97.62 for support. From a cross-market technical perspective, the dollar index and US Treasury yields are currently showing some divergence. On the 240-minute chart of the dollar index, the price has fallen from the mid-May high of 99.55, currently trading at 99.20. The MACD histogram is -0.0169, with both the DIFF and DEA lines below the zero line and in a bearish divergence, indicating the downtrend has not yet reversed. Support levels to watch are the psychological level of 99.00 and the previous pullback low of 98.75; a break below these levels would target the next support zone at the recent low of 97.62.

Consider shorting the US Dollar Index at 99.30 today, with a stop-loss at...

Tuesday’s New York cut. For most people, it’s simply the close of the U.S. trading session. For FX traders, it’s a moment of truth. Options contracts worth billions of dollars are set to expire, and these expiries often exert an almost gravitational pull on spot exchange rates, drawing them toward specific levels. Market makers hedging their positions will do everything possible to keep prices near major strikes. Once the options expire, however, those anchors disappear—and the market may make a sharp move. Let’s look at the key currency pairs and where the traps are set today.

The main magnet for the euro today sits at 1.1850, where options totaling €1.82 billion are due to expire. This is not just a large expiry—it is a gravitational anomaly. The spot rate could be pulled toward this level during the final hours before the New York cut.

Additional anchors include €1.51 billion at 1.1750 and €1.27 billion at 1.1700. Together, these levels create a web of attraction within which the pair may fluctuate. Market makers will actively manage their positions to minimize payouts on expiring contracts. If EUR/USD trades below 1.1850, they may buy euros and push the price higher; if it trades above, they may sell and pull it back toward the strike. This is classic options-related gravity, making sharp moves before expiry less likely.

Notably, an even larger expiry is scheduled for Wednesday: €2.47 billion at 1.1710. This suggests that even after Tuesday’s cut, the market will not gain complete freedom—the next anchor is already waiting.

For dollar-yen, the primary magnet is 160.00, where $1.59 billion in options expire. The 160 level is the same red line that triggered large-scale foreign exchange intervention by the...

In recent years, the British pound has often looked like a currency adrift. Brexit, political turmoil, scandals involving prime ministers, inflation shocks, and the Iran crisis have all weighed on sterling from different directions. Yet beneath the surface of this turbulence, largely unnoticed by newspaper headlines, a structural shift has been taking place. According to Bank of America strategist Kamal Sharma, this shift could become a long-term pillar of support for the pound. The shift has a name: a transformation in the quality of foreign direct investment (FDI).

For decades, sterling was highly sensitive to global mergers and acquisitions (M&A) cycles. When international corporations acquired British companies, billions of dollars flowed into the country, strengthening the pound. When M&A activity slowed, the currency weakened. This created a chronic dependence on short-term, volatile capital flows. A deal closed, money arrived. No deals, no money. The pound effectively danced to the tune of Wall Street investment bankers.

Now, according to EY data cited by Bank of America, the nature of investment flows is changing. The UK is gradually moving away from its dependence on mergers and acquisitions. Instead, it is attracting investment into new production facilities and research and development (R&D). Capital is no longer being used primarily to purchase existing assets but to create new ones. This represents a fundamentally different quality of investment.

Sharma points to specific sectors: artificial intelligence, biotechnology, and advanced manufacturing. These are knowledge-intensive industries that create high-paying jobs, generate intellectual property, and improve economic productivity. When Google or Microsoft opens a research center in Cambridge, when a pharmaceutical giant builds a laboratory in Oxford, or when a semiconductor manufacturer establishes a plant in Scotland, it is not merely a one-off capital inflow. It is the creation of long-term...

In recent weeks, the Indian rupee has looked like a punching bag—hitting seven consecutive record lows, slipping close to 97 per dollar, and triggering waves of panic headlines in the local press. But if we step back from the day-to-day volatility and look at the broader picture, a more nuanced—and surprisingly less alarming—reality emerges.

ING analysts have examined the rupee's situation under a microscope and reached a clear conclusion: yes, the currency is likely to remain under pressure as long as oil prices stay elevated. However, the risk of a disorderly collapse—the kind that forces central banks into emergency rate hikes and sends the IMF scrambling to prepare rescue packages—appears limited. India has come a long way since 2013 and now stands on a much stronger foundation.

Back in 2013, when the Federal Reserve merely hinted at reducing monetary stimulus, the rupee plunged and India found itself on the brink of a balance-of-payments crisis. At the time, the current account deficit had reached nearly 5% of GDP, foreign exchange reserves were thin, and the country's dependence on oil imports seemed like a structural vulnerability.

Today, the picture is very different. ING expects India's current account deficit to widen to around 2.1% of GDP in 2026. For comparison, it was roughly 0.5% last year. The increase is driven almost entirely by higher oil prices. India still imports more than 80% of the crude oil it consumes, and when oil becomes more expensive, the import bill inevitably swells.

But a deficit of just over 2% of GDP is not the same as 5%. It remains a manageable level that does not threaten macroeconomic stability. Why? Because India has diversified its sources of energy supply. Whereas the country once depended heavily on a small group...