The US dollar continues to fluctuate, with tariff wars and capital flight from the US still an important factor. At this point, it looks like the situation will change.
The euro saw a good rally during the early hours of Monday morning, as we are now testing the critical 1.15 level. We got to it very quickly. As a result, I still believe there is a possibility of retreat. However, it is difficult to short sell this pair. In fact, I’m not thinking of short selling it until we break the 1.12 level. We may enter a trading range for a while. We just have to wait and see. Eventually, sooner or later, the interest rate differential will come back to the fore, but for now, it feels like foreigners pulling their capital out of the U.S. and bringing it home.
Technical analysis of USD/JPY
The US dollar fell significantly against the Japanese yen, now approaching the lowest level recorded in September last year. If we manage to bounce back and rise above the 143 yen level, it would be a very strong indicator. However, there is a possibility that the price will collapse if it drops below the 140 level. I think 140 is a crucial level for long-term trading.
If the price drops below this level, some traders will view this as a kind of head and shoulder pattern, and this could cause the price to drop to 120. If that happens, I think we are facing a financial crisis. So, keep a close eye on the situation.
Technical analysis of AUD/USD
The Australian dollar has risen against the US dollar, and is now peaking above the level of 0.64, an area that has served as a brick wall for the past few months.
Dollar weakness threatens its status as a global reserve currency
The US dollar has been the world’s most important currency, forming a global reserve asset and a safe haven in times of market turmoil. However, recent developments suggest that this well-established pillar of the global financial system may show signs of weakness.
The combination of aggressive trade policies, political pressure on monetary authorities, and changing market dynamics raise serious questions about the dollar’s future role in the international financial system.
Technically, the dollar is decisively heading lower, with the next downside target hitting a multi-year low of 97.685. This is another possible starting point for accelerating the decline with a focus on 95.137. Near-term resistance is between 99.578 and 100.000.
Dollar weakness accelerates amid global uncertainty
The US dollar has seen an alarming decline in recent months, falling to a three-year low against a basket of major currencies. This 9% decline from its peak in January is not just routine fluctuations, but points to growing international concerns about the stability of the US economy and its fiscal policy.
This weakness comes at a time when traditional safe harbor alternatives are gaining strength. The Swiss franc rose to a 14-year high, while the Japanese yen and the euro attracted large capital inflows. This deviation from historical patterns points to a fundamental reassessment of the dollar’s reliability.
“Obviously, the market now has uncertainties,” said Steve Englander, head of global foreign exchange research for the Group of Ten at Standard Chartered, highlighting a breakdown in the dollar’s traditional market correlations that began following the announcement of the new tariffs.
President Trump’s aggressive approach to trade policy, especially the sweeping tariffs imposed by his administration and escalating tensions with China, have shocked global markets.
Tariffs threaten the dollar’s global standing
The announcement of tariffs in April, which some analysts have described as “Liberation Day,” marked a turning point in the international outlook of U.S. economic leadership.
These protectionist measures have disrupted global markets and cast a shadow over the economic outlook, prompting investors to withdraw from US assets. China’s warning that countries are making broader economic deals with the United States at their expense further complicates the picture, raising the specter of a global trading system disintegrating.
Federal Reserve Chairman Jerome Powell has warned of the economic risks posed by these tariffs, describing a scenario in which the US could face the difficult challenge of balancing inflation control with supporting growth. In his remarks to the Economic Club of Chicago, Powell warned: “We may find ourselves in a difficult scenario in which our dual-mandate goals conflict.”
Reserve currency status threatened
Perhaps most worrying for America’s long-term economic interests is the growing uncertainty surrounding the dollar’s de facto global reserve currency. While this shift won’t happen overnight due to strong reticulatory effects, signs of wear are becoming increasingly apparent.
IMF data shows that the dollar’s share of global central bank reserves has been declining since the late nineties. Although it still dominates global trade – accounting for nearly half of all international transactions under the SWIFT system – recent market behavior points to a potential acceleration of the trend in the long term.
Thierry Wezeman, global strategist on the foreign exchange and interest rate market at Macquarie Group, explained: “There is now a perception that not only the drivers have changed, but also the methodologies.” “This suggests that the United States is no longer a guarantor of its own system. Rather, it is dismantling this system in an undiplomatic and surprising way.”
