A storm is brewing in global markets this Wednesday as political drama and economic events converge. The US Dollar is on a tear – surging to one-month highs – after a surprise trade deal between the U.S. and EU and expectations of status quo from the Fed and Bank of Canada this week. This Dollar strength has left rivals like the Euro and Australian Dollar bruised, with the Euro suffering its largest single-day drop since 2024 earlier this week. Meanwhile, commodity currencies like the Canadian and Australian Dollars are whipsawed by trade tensions and shifting risk sentiment. Traders are navigating an onslaught of signals – from transatlantic tariff accords to looming Fed decisions and Friday’s U.S. jobs report – making for a volatile backdrop. Below we break down the technical outlook and trade setups for EUR/USD, USD/CAD, and AUD/USD in this charged environment.
EUR/USD
The Euro has been under heavy pressure this week, caught in the crossfire of U.S. economic surprises and geopolitics. On Monday, EUR/USD plunged over 1.3%, its worst fall since late 2024, after a new U.S.-EU trade agreement sent the Dollar soaring at the Euro’s expense. Softer U.S. data paradoxically added fuel to the Dollar’s rise – job openings came in ~200K below expectations while consumer confidence climbed, a mix that bolstered USD safe-haven appeal. By mid-week the pair stabilized around the mid-1.15s, with traders now awaiting the Fed’s rate decision and Eurozone inflation data for the next catalyst. Euro sentiment has flipped bearish as markets digest the transatlantic deal (seen as benefiting the U.S.) and brace for Eurozone CPI on Friday, which will shape expectations for the ECB.
Technical Analysis
EUR/USD, 5-minute chart as of 30 July 2025. The pair remains in a short-term downtrend with lower highs and lows, hovering above a key support zone around 1.1540-1.1550.
EUR/USD’s technical picture is decisively bearish in the short term. The 5-minute chart above shows a steady downtrend in recent days, with each rebound setting a lower peak (e.g. ~1.1620 on Tuesday, then ~1.1580 overnight). The pair is hovering just above strong support in the 1.1540–1.1555 zone – an area identified by analysts as a likely stabilization point. This support marks the base of a descending channel and a Fibonacci retracement region, making it a critical line in the sand. Thus far, buyers have tentatively defended this floor (EUR/USD dipped to ~1.153x before bouncing). If 1.1540 decisively breaks, it would signal a fresh lower low, potentially accelerating the selloff toward the psychological 1.1500 handle and even the next support around 1.1460. Momentum indicators (like short-term RSI, not shown) are flirting with oversold levels, but have yet to flash any bullish divergence – consistent with the persistent downward momentum.
Overhead, resistance is layered first at 1.1600–1.1620, where yesterday’s recovery attempt faltered. Beyond that, the 1.1660 level (Monday’s post-crash bounce high) and 1.1700 mark further hurdles. Notably, the Euro’s prior uptrend has been emphatically reversed; it would take a push back above 1.18 (a major barrier per recent highs) to seriously challenge the new bearish bias. For now, old support around 1.1600 has turned into resistance on bounces, keeping the near-term bias tilted to the downside. In summary, EUR/USD remains vulnerable while below its falling trendline and 1.1600, with bears eyeing a breakdown below 1.1540 to extend the decline.
Trade Ideas
- Bearish Bias – Sell Rallies: Consider short positions on a relief bounce toward 1.1600–1.1620 resistance. This area aligns with the recent breakdown zone, offering an attractive entry in the direction of the trend. A stop-loss could be placed just above 1.1660 (beyond Monday’s high), targeting a retest of the 1.1530 support. If that floor gives way, the short could be extended toward 1.1500 or even 1.1460, the next significant support level. The rationale is that the Euro’s downtrend and USD strength (fueled by Fed expectations and trade tailwinds) may cap any rebound.
- Countertrend Idea – Buy Support: Aggressive traders might look for a bounce-buy near 1.1540, if bullish reversal signals emerge. A tight stop below 1.1500 would protect against a deeper breakdown, while initial upside targets lie at 1.1620, then 1.1660. This contrarian setup bets that the support zone will hold and produce a corrective rebound (perhaps on profit-taking or a “dovish hold” by the Fed). However, any long should be nimble and mindful of the broader downtrend.
Outlook
Caution reigns as EUR/USD sits on the edge of a precipice. The Federal Reserve’s policy announcement later today looms large; the Fed is widely expected to hold rates steady, which in theory could pause the Dollar’s ascent. Any surprise hawkish tone, however, might exacerbate the Euro’s pain. Across the Atlantic, the focus turns to Eurozone CPI (flash estimate due Friday). Forecasts point to further cooling of inflation – a dynamic that could cement a dovish stance from the ECB and weigh on the Euro. In the background, the new U.S.-EU trade pact is being digested. While it eases trade tensions, it has so far favored the Dollar as traders perceive the U.S. gaining an edge. If EUR/USD manages to hold above 1.1500 through these events, a period of base-building or consolidation could ensue. Otherwise, a clear break under 1.15 would confirm a significant bearish trend reversal (from the Euro’s uptrend earlier in the year) and open the door to deeper losses. All told, the Euro enters the latter half of the week on the defensive, needing either a catalyst or a dose of relief in U.S. data to stem the bleeding.
USD/CAD
The U.S. Dollar/Canadian Dollar (USD/CAD) pair has maintained a bullish tilt, riding the wave of broad USD strength and edging toward its highest levels in weeks. In fact, USD/CAD is now approaching its late-June peak near 1.3780, hovering around a monthly high. Several forces are at play. Market sentiment turned cautious amid U.S.-Canada trade tensions: Washington has threatened hefty tariffs (up to 35%) on Canadian imports by an August 1 deadline, sparking investor concern. Canada’s Prime Minister (former central banker Mark Carney) dispatched an envoy to Washington for last-ditch talks, offering a glimmer of hope that a trade war can be averted. This uncertainty has undermined the Canadian Dollar, helping USD/CAD grind higher for four straight sessions into mid-week. At the same time, the Bank of Canada is meeting today but is expected to hold interest rates unchanged at 2.75%, which has kept monetary policy differentials stable in the USD’s favor (the Fed is also on hold). On a positive note for the Loonie, oil prices – a key driver for Canada’s petrocurrency – have been relatively firm. WTI crude is trading in the high-$60s to low-$70s per barrel, buoyed by supply concerns from new sanctions on Russian oil. The steady oil backdrop has provided some support to CAD and could cap USD/CAD’s upside if gains in crude persist.
Technical Analysis
USD/CAD, 5-minute chart as of 30 July 2025. The pair is in an uptrend, testing resistance near 1.3770 (top of its recent range). Short-term support levels are noted around 1.3720.
From a technical standpoint, USD/CAD has a bullish short-term structure, making higher lows and higher highs over the past few days. On the 5-minute chart above, the pair can be seen consolidating just below 1.3770, which corresponds to the upper boundary of a multi-week trading rectangle. This 1.3750–1.3780 zone has acted as resistance repeatedly – it represents the late-June high (around 1.3798) and the ceiling of the recent range. A break above 1.3800 would be technically significant, potentially triggering stop orders and opening the door toward the 1.3900 area (and beyond, the 2-month high near 1.3800+ and even 1.4015 from May). For now, though, the rally has paused at resistance, and momentum indicators on intraday timeframes show slight divergence (e.g. price made a higher high on Tuesday while RSI made a lower high), hinting at possible exhaustion.
On the downside, initial support is seen at 1.3725–1.3730, coinciding with the 50-day EMA (around 1.3728) on the daily chart and recent intraday pullback lows. Below that, the 1.3680–1.3700 area (near the 9-day EMA and a prior breakout zone) should act as the next support. If sellers push USD/CAD under 1.3680, it would break the sequence of higher lows, suggesting a deeper correction toward the mid-1.35s. Notably, the broader pattern on the daily chart is a sideways rectangle roughly between 1.3560 and 1.3770. As such, a failure to clear 1.3800 could keep the pair range-bound, while a confirmed breakout would mark a bullish continuation. In summary, the path of least resistance is upward but constrained by stiff resistance overhead, whereas any pullbacks are likely to find buyers unless trade news or oil prices swing decisively in Canada’s favor.
Trade Ideas
- Bullish Breakout – Buy Dips / Break of 1.3800: With the uptrend intact, bulls may look to buy USD/CAD on minor dips or on a clear breakout above 1.3800. For instance, a pullback to the 1.3720–1.3730 support zone (recent lows) could offer a better entry, with a stop-loss under 1.3680 (just below the short-term support band and 9-day EMA). Initial upside targets would be 1.3820–1.3850 (on a breakout), followed by the 1.3900 region. A decisive close above 1.3800 would likely confirm the breakout, potentially accelerating the move. The bullish rationale: USD/CAD has positive momentum amid trade uncertainty and a strong USD backdrop, so a resolution of the range to the upside is plausible if no positive catalyst emerges for the CAD.
- Fade the High – Short at Resistance: Alternatively, if USD/CAD struggles to breach 1.3775/1.3800, a contrarian short opportunity arises. One could initiate a short position near 1.3770 (the range top), using a tight stop above 1.3820 to manage risk. The take-profit objective would be a retreat toward 1.3700 or even 1.3650. The thesis here is that good news for CAD – such as a last-minute U.S.-Canada tariff truce or a rally in oil – could spark a pullback from overbought levels. Given the pair’s repeated failure at the high end of its range, a corrective dip is feasible if buyers lose momentum. This counter-trend idea should be monitored closely, as any hawkish surprise from the Fed or worsening trade rifts could quickly invalidate the trade.
Outlook
USD/CAD’s outlook for the coming days hinges on both central bank signals and trade developments. Later today, the Bank of Canada’s rate decision will be in focus, though markets overwhelmingly expect no change in policy. A surprise hike is highly unlikely in the current soft economic climate, but any shifts in tone (e.g. BoC acknowledging sticky inflation or conversely sounding more dovish on growth) could nudge the Loonie. The Federal Reserve, announcing just hours after the BoC, is likewise expected to stand pat – if the Fed echoes a cautious stance, it might slightly temper the USD’s strength, offering CAD some breathing room. Beyond central banks, the U.S.-Canada trade spat remains a wildcard. Traders are eyeing the approach of August 1; a resolution or extension of the tariff truce could spark a relief rally in CAD (pressuring USD/CAD lower), whereas an escalation (tariffs kicking in) would be a downside risk for the Canadian Dollar. Also, keep an eye on oil prices – any breakout above recent highs in crude could lend support to the Loonie, while a sharp drop in oil would weaken it. Finally, the week’s big data – notably U.S. Nonfarm Payrolls on Friday – will also feed into USD/CAD. Current forecasts call for only a modest slowdown in U.S. job growth (July payrolls expected to remain relatively robust. If the jobs data surprise strongly one way or the other, the USD could react accordingly, influencing this pair. In summary, USD/CAD retains a bullish bias going into the latter half of the week, but it faces event risk from Ottawa to Washington. A balanced approach is warranted: prepare for volatility around the Fed/BoC announcements and trade headlines, and watch those technical lines (1.38 and 1.37) for clues to the next directional move.
AUD/USD
The Australian Dollar has been on a roller-coaster, starting the week near multi-month highs before succumbing to renewed USD strength. Last week, AUD/USD briefly hit an 8-month peak around 0.6625 on a wave of optimism, but momentum quickly reversed as the U.S. Dollar rebounded broadly. By Tuesday, the Aussie had weakened four days in a row, even dipping below the key 0.6500 level during U.S. trading hours. What’s weighing on AUD? Primarily, the same forces lifting the USD: a fresh U.S.-EU trade deal (struck over the weekend) eased global trade tensions but paradoxically boosted demand for the U.S. Dollar, and anticipation of the Fed’s steady policy is keeping the Greenback bid. Additionally, Australia’s own backdrop includes expectations that inflation is cooling and the Reserve Bank of Australia (RBA) might have peaked rates. Indeed, Australia’s Q2 CPI released this morning rose just +0.7% QoQ (vs 0.8% expected), with annual inflation easing to 2.1% – a sign that price pressures are moderating. This slightly weaker CPI means the RBA can afford to stay on hold or even consider eventual cuts, which had been pressuring AUD earlier in the week. However, the narrative shifted somewhat today: China’s government announced plans for more fiscal support to boost its economy, and high-level U.S.-China trade talks showed a constructive tone with an extension of tariff pauses likely. Given Australia’s close trade ties with China, these developments gave the Aussie a modest lift. By Wednesday, AUD/USD managed to halt its slide, stabilizing just above 0.6500 as traders digest the mix of softer Aussie inflation and improved risk sentiment from China.
Technical Analysis
AUD/USD, 5-minute chart as of 30 July 2025. The pair has rebounded modestly after touching lows below 0.6500. Key support at 0.6500 (yellow line) is holding for now, while immediate resistance lies in the 0.6570 area (recent swing high).
Technically, AUD/USD has shifted from an uptrend into a short-term corrective downtrend, but there are signs it is trying to carve out a base above 0.6500. The 0.6500 level is a major psychological support that was briefly breached on Tuesday; the pair fell to ~0.6485 at the lows before quickly recovering back above 0.65. This price action suggests strong demand lurking just below 0.6500. In fact, analysts point to 0.6485 as a “mini support” and 0.6450 as the next line of defense if 0.65 fails. For now, buyers have stepped in aggressively around those levels, resulting in a V-shaped intraday bounce. The immediate pivot zone to watch is roughly 0.6515–0.6535 – staying above this range would indicate the Aussie is bottoming out, whereas a slip back below 0.6515 could re-open downside pressure.
On the upside, initial resistance comes in at 0.6570–0.6590, which was a support-turned-resistance from last week’s range and aligns with the underside of the previous rising channel. Notably, 0.6570 was a pivot on Monday and also near the 20-day moving average, so a break above ~0.6590 would be an encouraging sign that bulls are regaining traction. Beyond that, the recent high at 0.6625 (set late last week) is the next hurdle – that was the peak of the prior rally and an 8-month high. For the bearish trend to truly reverse, AUD/USD would need to clear 0.6625 and eventually the broader daily resistance band around 0.6670-0.6740, which currently seems distant. In the near term, momentum indicators are mixed: 1-hour charts show momentum turning up from oversold territory, while the larger trend (daily chart) still shows a mild bearish bias with the Aussie below its 50-day MA (~0.6510). It’s worth noting that the 50-Day moving average around 0.6510 acted as support and is roughly where the pair is hovering now. This means the bulls and bears are battling at a crucial inflection point. If 0.6500 holds through today and fresh catalysts emerge, AUD/USD could transition into a sideways range instead of continuing straight down. However, failure to hold 0.6500 on a daily closing basis would likely invite a deeper decline, with 0.6450 and 0.6400 as next supports. Overall, keep an eye on 0.6500 below and 0.6570 above for clues – a break of either boundary could set the next short-term direction.
Trade Ideas
- Buy the Dip – Long at Support: Given the importance of the 0.6480–0.6500 support region, a potential trade is to go long if prices retrace to that zone and show stabilization. For instance, entering around 0.6500 with a stop-loss below 0.6470 (just under Tuesday’s low) could yield a favorable risk/reward. The first target would be a rebound to 0.6570, the immediate resistance. A secondary target could be 0.6620 if positive momentum builds (for example, on encouraging China news or broad USD pullback). The justification: the Aussie has fundamental tailwinds (China stimulus, less hawkish Fed) that might help it hold the line at 0.65, and the pair already demonstrated buyer interest at those lows. This trade banks on a short-term relief rally after an overextended drop.
- Sell the Rally – Short under .6600: Conversely, the prevailing trend still favors the USD, so one could fade any significant bounce. A short sale in the 0.6570–0.6600 resistance area is conceivable, with a stop above 0.6625 (above last week’s high). The profit goal would be a return to 0.6500 or lower (e.g. 0.6450 if breakdown resumes). The rationale: if risk sentiment sours again or the Fed comes off more hawkish than expected, AUD/USD’s recovery could falter. By selling near .6580, you align with the intermediate downtrend at a point where upside is limited by strong resistance. Just ensure to monitor news – a major positive surprise (like a full US-China trade deal or significantly weak U.S. data) could quickly propel AUD higher, which is why a tight stop above 0.6625 is prudent.
Outlook
The Australian Dollar’s fate in the near term will hinge on how global risk sentiment and central bank expectations evolve through the week. On the domestic front, today’s softer-than-expected inflation data underscores that the RBA has breathing room – indeed the RBA is not set to meet until August 12, and markets have even priced in the possibility of rate cuts later this year. Easing inflation is a double-edged sword: it curtails rate hike bets (which can weaken AUD), but it also bolsters real incomes and could support the economy. The international backdrop is arguably more critical for AUD/USD now. Developments in China are a key variable: Beijing’s signals of more proactive fiscal support and the extension of the US-China tariff truce have improved risk appetite. Should China follow through with stimulus measures to stabilize growth, the Aussie (often seen as a proxy for China’s economy) may find a floor and even rally. Conversely, any deterioration in U.S.-China relations (e.g. if the tariff pause isn’t extended by the August 12 deadline) would rekindle downside pressure on AUD.
Meanwhile, the Fed’s stance will be revealed today. A dovish Fed (emphasizing patience or downside risks) could knock the U.S. dollar off its highs and lend support to AUD/USD. In contrast, if the Fed surprises with any hawkish hints or balance sheet tightening talk, the USD could strengthen further, pushing AUD lower. Finally, the global markets will take cues from major data releases – not only the U.S. Nonfarm Payrolls on Friday (where a solid outcome might reinforce USD strength), but also China’s PMIs and any commodity price moves. The Aussie enters the latter half of the week tentatively stable after a steep slide. It has room to recover if the news flow turns favorable (e.g. no negative shocks from the Fed and encouraging headlines from China). However, traders remain cautious; as one analyst quipped, this week is a “pivotal” one for the Aussie with multiple cross-currents. Expect AUD/USD to trade event-driven in the coming sessions – quick to strengthen on any sign of risk-on mood, yet vulnerable to further losses if the U.S. dollar’s dominance extends.
Market News Impact
Recent political and economic news is having an outsized impact on currency markets, effectively setting the stage for the moves we’ve analyzed above. The USD’s broad surge can be traced in part to geopolitical developments: a high-profile U.S.-EU trade accord over the weekend has bolstered confidence in the U.S. outlook and lifted the Dollar to one-month highs. Ironically, what might normally be “risk-on” news (trade peace) has translated into Euro weakness and USD strength, as traders perceive the deal to favor American interests. Similarly, ongoing trade tensions elsewhere have injected volatility – the U.S.-Canada tariff dispute has weakened the Canadian Dollar, while tentative progress in U.S.-China trade talks (maintaining tariff freezes) helped support risk-sensitive currencies like the AUD. In essence, trade policy brinkmanship is acting as a key driver: positive resolutions tend to boost the USD (via U.S. economic optimism), whereas unresolved conflicts create uncertainty that can either lift safe-haven flows into USD or selectively hurt the currencies directly involved (CAD in the case of a U.S.-Canada spat).
On the economic front, central bank expectations are another critical piece. This week features a rare twin billing of the Fed and BoC decisions on the same day. Both are widely expected to hold rates steady, given recent data. The mere prospect of a steady Fed – possibly the last hike of this cycle behind us – has not derailed the Dollar; in fact, the USD’s strength suggests markets believe the U.S. economy remains comparatively resilient (allowing the Fed to hold higher rates for longer). Meanwhile, currencies like the Euro and Aussie are contending with evidence of cooling inflation and slower growth at home, which keeps their central banks either on hold or dovish. For example, the Euro’s slide has been exacerbated by expectations that Eurozone inflation (data due Friday) will continue to ease, limiting the ECB’s hiking scope. Australia’s soft CPI print today reinforces that the RBA might be done tightening, undercutting AUD until offset by other news.
Looking ahead, the impact of upcoming data cannot be overstated. The market is already positioning for Friday’s U.S. Nonfarm Payrolls, which are expected to show only a slight cooling in job growth from last month. A significant upside surprise in jobs (or wages) could reignite bets on further Fed tightening, supercharging the Dollar and potentially breaking key levels (like EUR/USD below 1.1500 or USD/CAD above 1.3800). Conversely, a downside miss in NFP might be the catalyst needed for a Dollar pullback and relief rally in beaten-down pairs like AUD/USD. Political news will remain a wildcard as well – any headlines on the U.S. debt situation, fiscal policy, or even surprise developments from the war in Ukraine (notably affecting oil and the CAD) could spur abrupt moves.