1) The US Dollar remains the weakest major Forex currency in 2025
The US dollar has had a difficult year on the foreign exchange market (Forex), recording a decline of over 9% against the world's major currencies, despite the Federal Reserve's continuing rigid monetary policy. Technically speaking, the DXY index has reached several theoretical bearish targets, notably according to Elliot analysis, but has not yet touched the key objective of the A=C movement. This dynamic is also evident in the strong chartist compression in weekly data, placing the USD at a potential breakout point. The EUR/USD and USD/JPY pairs are also in long-term hinge configurations, and institutional positions remain broadly bearish on the US dollar against a basket of major currencies.
Two interesting charts on the current situation are presented below: the first shows Japanese candlesticks in monthly data, and the second is a theoretical reminder of how Elliott waves work.
As long as the US dollar against a basket of major currencies (DXY) remains below the indicated pivot line, the trend remains bearish, with a target of 95/96 points. Conversely, a rebound above the hinged pivot line would put an end to the US dollar's annual correction, with the starting point for a technical recovery.
2) A weakening dollar despite an inflexible Fed: how to explain this paradox?
The apparent paradox of a falling US dollar while US interest rates remain high and the Fed does not expect to cut rates before September/October, goes beyond simple rate differentials. At a time when the ECB has already embarked on a policy of monetary easing, the rate differential with the Fed should normally support the USD. However, other factors are taking over: the markets' growing mistrust of US assets, fuelled by trade tensions and uncertainty over Trump's fiscal policy, is weakening demand for dollars. Added to this is a major liquidity factor: the recent increase in the money supply (M2) in the United States and the decline in reverse repo operations, which reflect an implicit easing of financial conditions. This easing is encouraging persistent downward pressure on the greenback, despite a Fed that remains intransigent on rates.
The next release of US PCE inflation, scheduled for Friday May 30, could play an important catalytic role: a higher-than-expected figure would strengthen the case for an even firmer Fed, which could offer the USD a temporary technical rebound. Conversely, confirmation of disinflation would fuel bets on future easing and accentuate selling pressure. In short, the US dollar is not only at a technical crossroads, but also a fundamental one, suspended between forthcoming monetary action and deeper signals from the global liquidity market.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
The US dollar has had a difficult year on the foreign exchange market (Forex), recording a decline of over 9% against the world's major currencies, despite the Federal Reserve's continuing rigid monetary policy. Technically speaking, the DXY index has reached several theoretical bearish targets, notably according to Elliot analysis, but has not yet touched the key objective of the A=C movement. This dynamic is also evident in the strong chartist compression in weekly data, placing the USD at a potential breakout point. The EUR/USD and USD/JPY pairs are also in long-term hinge configurations, and institutional positions remain broadly bearish on the US dollar against a basket of major currencies.
Two interesting charts on the current situation are presented below: the first shows Japanese candlesticks in monthly data, and the second is a theoretical reminder of how Elliott waves work.
As long as the US dollar against a basket of major currencies (DXY) remains below the indicated pivot line, the trend remains bearish, with a target of 95/96 points. Conversely, a rebound above the hinged pivot line would put an end to the US dollar's annual correction, with the starting point for a technical recovery.
2) A weakening dollar despite an inflexible Fed: how to explain this paradox?
The apparent paradox of a falling US dollar while US interest rates remain high and the Fed does not expect to cut rates before September/October, goes beyond simple rate differentials. At a time when the ECB has already embarked on a policy of monetary easing, the rate differential with the Fed should normally support the USD. However, other factors are taking over: the markets' growing mistrust of US assets, fuelled by trade tensions and uncertainty over Trump's fiscal policy, is weakening demand for dollars. Added to this is a major liquidity factor: the recent increase in the money supply (M2) in the United States and the decline in reverse repo operations, which reflect an implicit easing of financial conditions. This easing is encouraging persistent downward pressure on the greenback, despite a Fed that remains intransigent on rates.
The next release of US PCE inflation, scheduled for Friday May 30, could play an important catalytic role: a higher-than-expected figure would strengthen the case for an even firmer Fed, which could offer the USD a temporary technical rebound. Conversely, confirmation of disinflation would fuel bets on future easing and accentuate selling pressure. In short, the US dollar is not only at a technical crossroads, but also a fundamental one, suspended between forthcoming monetary action and deeper signals from the global liquidity market.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.