Traders are confronting a high-stakes Federal Reserve meeting and President Trump’s tariff brinkmanship with Europe and Canada – twin threats that could unleash major volatility. At the same time, economic signals are wildly mixed worldwide. The U.S. economy is defying slowdown fears with an estimated +2.4% Q2 GDP surge (after a Q1 contraction), prompting the Fed to hold interest rates at a restrictive 4.25–4.50% range. Meanwhile, peers overseas are in retreat: the European Central Bank (ECB) has slashed rates eight times since last year (down from 4% to ~2%) amid sluggish growth, and the Bank of Canada (BoC) has cut a hefty 225 bps off its benchmark since 2024. In short, the Fed’s hawkish stance stands against a backdrop of global easing, creating a recipe for U.S. dollar strength – just as political tensions (like looming 30–35% US tariffs on EU and Canadian goods) stoke risk-off sentiment. All of this is playing out on the price charts in real time.
Commodity currencies like the Australian dollar and Canadian loonie are reeling from slowing Chinese demand and trade war fears, while the euro faces its own demons in a stagnating Eurozone economy. Below we break down the action and outlook for AUD/USD, EUR/USD, and USD/CAD – each at a critical juncture. We’ll dive into the technicals on the 5-minute charts, dissect the impact of key economic events (from Fed/BoC decisions to data on the provided economic calendar), and map out concrete trading ideas with levels and strategy. Let’s jump in.
AUD/USD
AUD/USD 5-minute candlestick chart, July 24–28, 2025. After a weekend gap, the pair spiked toward 0.6600 in early Asia trading before rolling over into a downtrend.
The Australian dollar enters the week under pressure, having been knocked lower last week by surprisingly soft inflation and persistent risk aversion. Despite a brief pop in early Monday trade, Aussie sentiment remains fragile – caught between hopes of domestic resilience and fears of global headwinds. Traders are wary of China’s sputtering recovery (a key Aussie demand driver) and are positioning cautiously ahead of big-ticket U.S. events that could roil this risk-sensitive pair.
Technical Analysis
The M5 chart shows that every bounce is being sold. Last Thursday, AUD/USD peaked near 0.6620 before trending steadily lower into Friday around 0.6560. The pattern of lower highs continued: early Monday’s spike toward 0.6600 failed under last week’s high, forming a mini double-top relative to the late-week peak. The pair rolled over hard, dropping back toward 0.6560 support – essentially re-testing last week’s lows. This sequence underscores a bearish short-term structure, with a clear descending trendline capping rallies. Momentum favors the downside as long as the price stays below the 0.6600 resistance region. A decisive break below 0.6550 could trigger an accelerated selloff (no notable support until the low-0.6500s), whereas any rebound that does clear 0.6600 would face the next hurdle around 0.6625 (the mid-July swing high).
News & Macro Drivers
Fundamental forces are aligned against the Aussie for now. Australia’s latest inflation data dramatically undershot expectations – core CPI slowed to 2.4%, slipping below the midpoint of the RBA’s 2–3% target band, with headline inflation only +2.1% (vs 2.3% expected). This steep drop in price pressure has flipped the policy outlook: markets are suddenly pricing in an RBA rate cut as imminent, with a whopping ~92% probability of a July rate reduction. The prospect of easier Aussie monetary policy has naturally dulled AUD’s yield appeal. On the macro front, Australia’s economy is showing strain – Q1 growth was barely above zero as consumers turned cautious amidst global trade conflicts. Chinese demand worries (amid weaker Chinese PMI and commodity import data) further darken the outlook, given Australia’s export ties. That said, not all news is grim: last week’s Aussie retail sales came in a touch stronger than prior (0.4% MoM vs 0.2% previously), suggesting consumer spending hasn’t buckled completely. Still, the broader sentiment is that the Fed’s steadiness versus a dovish RBA tilts yield differentials in the USD’s favor. Unless we see a sudden improvement in risk appetite – for example, a positive turn in U.S.-China or U.S.-Europe trade talks – AUD/USD rallies are likely to remain limited.
Trading Ideas
Given the downtrend momentum, strategies favor selling into strength:
- Resistance: 0.6590–0.6600 (immediate barrier with trendline resistance), then 0.6625.
- Support: 0.6550 (key floor – last week’s low); a break opens 0.6500.
- Trade Plan: Consider a short position on a relief bounce. For instance, sell in the 0.6580–0.6600 zone, with a stop loss above 0.6625 to cap risk. Take-profit targets could be 0.6500, with partial profits near the 0.6550 support. Alternatively, more aggressive traders might sell a clear breakdown under 0.6550 (on a 5-min close below that level) to ride any breakout selloff. (If instead a surprising risk-on wave lifts AUD/USD above 0.6625, it would negate the bearish bias – in that case, sidestep shorts and watch for a potential bullish reversal toward 0.6700).
Outlook
Overall, AUD/USD looks biased to the downside as the week begins. The combination of a dovish RBA stance and jittery global mood (trade wars, China fears) puts the Aussie on its back foot. Barring an unexpected de-escalation in geopolitics or notably weak U.S. data that sinks the dollar, any AUD/USD advances may be short-lived. Traders should stay nimble and watch how the pair behaves around that mid-0.65s support – a breakdown could gather steam quickly, while a hold above might prompt a consolidation. With the Fed meeting looming midweek, expect choppy, range-bound action until Chair Powell’s statement provides the next catalyst.
EUR/USD
EUR/USD 5-minute chart, July 24–28, 2025. The pair failed twice to break above 1.1780 resistance, carving a potential double-top (yellow highlights) before easing toward support.
The euro starts the week walking a tightrope. It enjoyed a rebound late last week, buoyed by optimism that the ECB’s easy policy and fading inflation might stabilize growth. However, that bounce ran into a wall as focus shifted to the Fed meeting and mounting trade tension between Washington and Brussels. Euro traders are juggling a complex backdrop: the Eurozone has finally wrestled inflation down to 2%, but at the cost of stagnating growth, while the U.S. economy is outperforming. This leaves EUR/USD torn between opposing forces – will the Fed’s tone or a trade-war twist tip the balance?
Technical Analysis
On the 5-minute timeframe, EUR/USD’s rally momentum faded notably as it approached the upper-1.17s. The chart reveals two distinct attempts to breach ~1.1780 – one on Thursday and another during early Asia hours Monday – both of which stalled out, marking a double-top pattern. Each peak saw sellers step in aggressively, knocking the pair back down. By the European morning on July 28, EUR/USD was retreating toward the 1.1720–1.1700 support zone. Short-term, the bias has turned mildly bearish: the failure to clear 1.1780 and subsequent lower high suggest buying enthusiasm is waning. Immediate support lies at 1.1700, a round-number level that roughly held on dips late last week. A break below 1.1700 (especially if accompanied by rising USD momentum on news) could accelerate declines, exposing 1.1650 or even lower. Conversely, if euro bulls muster strength, initial resistance is 1.1750 (minor intra-day pivot), with the key ceiling remaining 1.1780/1.1800 – only a clear push above that would invalidate the bearish setup and signal a bullish reversal. The 5-minute RSI (not shown) has been cooling from overbought conditions, reflecting the consolidation of the recent pullback.
News & Macro Drivers
The euro’s fundamentals this week are a mixed bag. On one hand, the ECB paused rates at its July meeting after a string of easings – the main refi rate sits around 2% now, with President Lagarde declaring the Eurozone “in a good place” on inflation. Indeed, inflation is at target (2%) and the pandemic-era cost-of-living crisis has eased. However, the reason inflation has calmed is the economy’s evident weakness. Eurozone growth has flatlined – Q2 GDP came in around 0.0%, a sharp drop from Q1’s 0.6% expansion (Germany and France have been stagnating). The ECB’s aggressive easing (eight rate cuts in nine months) reflects concern that without stimulus, the bloc could tip into recession. There’s also a gnawing fear of deflation: with disinflation “deeply entrenched” and external risks building, analysts warn the ECB may soon need to cut more aggressively to prevent a deflationary slump. This dour outlook contrasts with the U.S., where last week’s data showed a robust economy – a 2.4% GDP rebound and still-solid job market have traders betting the Fed will remain steadier for longer, keeping U.S. rates high. Additionally, the U.S.-EU trade skirmish is a sword hanging over the euro: President Trump’s threat to slap a 30% tariff on European goods by August 1 if no deal is reached has injected uncertainty. Such tariffs could hurt EU exporters and consumer prices, potentially forcing the ECB’s hand further. All told, the macro narrative favors the USD over EUR right now – stronger relative growth and higher yields in America, versus Europe’s sputtering economy and dovish bias. The wildcard is the Fed’s messaging: if Powell signals an earlier start to rate cuts or serious worries about U.S. growth, the dollar’s rally could pause, giving the euro some breathing room.
Trading Ideas
In the immediate term, caution is warranted with EUR/USD near key support, but the technical tilt is slightly bearish. Possible approaches:
- Resistance: 1.1750 (minor), 1.1780 (major double-top zone), then 1.1830.
- Support: 1.1700 (psychological level and recent low); below that, 1.1650 is next support from last week’s range.
- Trade Plan: A favored strategy is to sell rallies. For example, if EUR/USD bounces toward 1.1750–1.1780, one could initiate a short position with a tight stop above 1.1800. The first target would be a retest of 1.1700, with extension toward 1.1650 on a breakdown. An alternative is momentum trading: if a decisive break under 1.1700 occurs (on strong U.S. news or yield moves), a short entry there could aim for quick points into the mid-1.16s (with a stop-loss just back above 1.1720 to manage risk). On the flip side, if trade tensions miraculously ease or the Fed comes off more dovish than expected, EUR/USD might burst through 1.1800 – in that scenario, shorts would be risky, and nimble traders might flip bias to long, targeting 1.1850+.*
Outlook
EUR/USD’s near-term fate hinges on the Fed and trade headlines. With the Fed–ECB policy gap widening in the dollar’s favor and European growth stuck in the mud, the path of least resistance leans lower for the euro. We anticipate choppy trading into the Fed meeting, with the 1.1700 level as a line in the sand – watch if it can hold. A hawkish-sounding Fed (or any escalation in the tariff saga) could send EUR/USD slicing through support toward fresh lows. Conversely, any surprise positives – a U.S.-EU trade truce or a notably cautious Fed – might spur a relief rally for the single currency. Forex traders should be prepared for whipsaw moves, but overall maintain a slightly bearish bias on EUR/USD, adjusting if 1.1800 is decisively breached.
USD/CAD
USD/CAD 5-minute chart, July 24–28, 2025. The pair is consolidating gains after last week’s sharp rally, holding near 1.3700. A bullish flag appears to be forming below the 1.3730 high (upper red line).
The U.S. dollar versus Canadian dollar pair (USD/CAD) is kicking off the week near its recent highs, as the greenback flexes its muscles and the loonie struggles under a cloud of domestic and external pressures. Last week saw USD/CAD surge higher, thanks to a potent mix of U.S. economic outperformance and Canadian dovish expectations. Now, with the Bank of Canada meeting on deck (and no change expected) and oil prices wobbling, the question is whether USD/CAD will extend its breakout or take a breather. Sentiment among CAD traders is wary – Canada’s economy faces uncertainty from a brewing trade clash with the U.S., and the BoC may eventually resume cutting rates, all of which has kept the loonie on its back foot.
Technical Analysis
The short-term chart paints a bullish picture for USD/CAD. From Thursday into Friday, the pair staged a strong rally from the mid-1.36s up to around 1.3730 by the week’s end. Since peaking near 1.3730, price action has been range-bound in a tight corridor roughly between 1.3680 and 1.3730, forming what looks like a bullish flag pattern. Notably, dips have been shallow – every minor pullback has found support around the 1.3690 area, indicating persistent buying interest. The uptrend structure remains intact with higher lows on the M5. Key resistance is the 1.3725–1.3730 zone (the recent swing high). A clean break above 1.3730 would signal a continuation of the uptrend, potentially opening the door toward 1.3800 (next psychological level) or higher in extension. On the downside, initial support is at 1.3680–1.3690 (flag support and intraday pivot). A drop below 1.3650 would start to undermine the bullish bias, and deeper retracements could eye 1.3600 (former breakout level from last week). For now, momentum favors the USD – short-term moving averages on the M5 are trending up, and there are no signs yet of a trend reversal aside from a possible overbought pause.
News & Macro Drivers
Fundamentally, Canada’s dollar is caught in a tough spot. The Bank of Canada has already eased aggressively – it cut rates by a total of 2.25% in the past year, bringing the overnight rate to 2.75% – and while it’s on hold now, markets expect further cuts ahead. In fact, a Reuters poll last week found a strong majority of economists predicting at least two more BoC cuts by year-end. Why? Canada’s economy is losing momentum: after a decent Q1, GDP likely contracted ~0.5% in Q2, and a technical recession is on the radar for many analysts. Inflation in Canada is roughly back to target (headline around 1.9% recently), but core inflation remains a tad sticky and, importantly, external risks are huge. Chief among those is the escalating trade conflict with the U.S. – President Trump has rattled markets by threatening an across-the-board 35% tariff on Canadian goods not covered under the USMCA trade deal. This kind of threat is a dagger at the heart of Canada’s export-driven economy (over 80% of Canadian exports go to the U.S.), hurting business confidence. The BoC has cited the “confusing barrage” of U.S. tariff moves as a key reason to stay cautious. In addition, Canada’s all-important oil sector is facing headwinds – global crude prices have been unsteady amid concerns that a global slowdown (exacerbated by trade disputes) will sap energy demand. Softer oil tends to weaken the petro-linked CAD. On the flip side, the U.S. dollar has everything going for it right now: a Fed that’s not cutting yet, U.S. growth accelerating, and safe-haven flows from investors hedging against international uncertainties. Unless the BoC surprises with a hawkish tone on Wednesday (an unlikely scenario given recent data) or the U.S. suddenly backs off its tariff threats, the fundamental bias for USD/CAD remains upward.
Trading Ideas
The prevailing trend is bullish, so trading plans favor buying on dips or on a breakout:
- Support: 1.3690 (near-term intraday support), 1.3650 (flag bottom/extended support), then 1.3600.
- Resistance: 1.3730 (immediate top; breakout trigger), 1.3800 (next target), and 1.3850 beyond.
- Trade Plan: One strategy is a dip buy – watch for any pullback into the mid-1.36s. For example, if USD/CAD slips to 1.3660–1.3680, consider going long with a stop loss under 1.3640 (just below flag support). Profit targets could be set at 1.3730 (prior high) for a quick gain, and 1.3800 if the rally resumes. Alternatively, a momentum trade is to buy the breakout: if we see a 5-minute candle close above 1.3730, it may signal bulls are taking control again – one could enter there with a tight stop back below 1.3700, aiming for ~1.3800. Be mindful of event risk: the BoC rate decision Wednesday could whipsaw this pair. If, for instance, the BoC unexpectedly hints at no further cuts (hawkish tilt), CAD might strengthen sharply – that would be a cue to tighten stops or take profit on USD/CAD longs. Conversely, a dovish BoC or any escalation in U.S.-Canada trade tensions could fuel the next leg higher for USD/CAD.
Outlook
USD/CAD retains a bullish bias heading into the week. The U.S. dollar’s strong tailwinds combined with Canada’s vulnerability (trade disputes, softening growth) point to upward pressure on the pair. We anticipate that dips will likely be bought by the market unless there’s a significant change in narrative. Nonetheless, traders should keep an eye on the 1.3730 resistance – a failure to break higher, or a surprise improvement in risk sentiment, could induce a temporary pullback. In summary, the path of least resistance is upward, with USD/CAD potentially targeting the mid-1.38s in the coming days if current trends persist. The wildcards to watch are any breakthroughs (or breakdowns) on the U.S.-Canada trade negotiations and the tone of the Fed/BoC this week. Until then, the loonie remains on the ropes, and the dollar is in the driver’s seat.