Dollar resumes struggling mode, under pressure in European morning trade

As the Iran-Israel conflict fades into the background, the headwinds for the US dollar are starting to rear their heads once again. The focus turns back towards the loss of confidence in the dollar amid the policy incoherence by the Trump administration but also as there is now a stronger internal debate within the Fed about rate cuts. That is just adding to the stuttering US economy, which continues to grow softer by the day.

On the latter point, the US economic surprise index is sitting negative this year and highlights the struggles faced by the economy – more so than anticipated. That opposed to the euro area economy, which has surprised to the upside instead.

That’s just one divergence working against the dollar and a contributing factor for EUR/USD to break out to its highest since 2021. The pair has now jumped above 1.1700 and looks poised for its best week since April:

From a technical standpoint, there is little stopping the pair from a potential move towards 1.2000 next. That as the dollar is also getting pummeled across the board against the other major currencies.

USD/CHF is starting to break below the recent floor 0.8038-55 and that is spelling more danger for the pair as it cracks under 0.8000 for the first time since 2011. As the saying goes, you don’t quite want to be one to catch the falling knife when it comes to charts like these.

And then, you also have AUD/USD which looks poised to try and break out to the upside:

The pair is now contesting key daily resistance around 0.6537-50 and a firm break there will allow for much more room to maneuver on the part of buyers. There will be breathing room until the last November high at 0.6687 at least.

Elsewhere, you also have GBP/USD rising to 1.3750 – its highest since October 2021 with the pair eyeing a potential run at the 1.4000 mark next. So, the struggle for the dollar is definitely rathe broad based.

Looking to the days ahead, we’ll also have month-end flows to factor into play. So, just be wary of that. According to Barclays here, the greenback will be in for a rough time in the days ahead if you square that up with the technicals above.

This article was written by Justin Low at www.forexlive.com.