The dollar index is consolidating near session highs as a familiar divergence grips G10 FX: the euro and sterling remain under pressure while commodity currencies attempt to stabilise. USD/JPY’s quiet grind to 162.32 masks growing anxiety in yen crosses, but the real story this session is the breakdown in EUR/USD below a key technical level and cable’s struggle to hold above 1.3450.
DXY: Index Stalls, But Risk Tilt Remains Bullish
The dollar index is trading just below the 104.00 handle, supported by a modest bid in US yields and cautious risk appetite. While the index has not made a decisive new high today, the intraday structure favours further gains. The 103.80 area—prior resistance from last week—has now flipped to support, and a close above 104.10 would open the door to a test of 104.35.
The catalyst remains the same: resilient US data and hawkish Fed rhetoric continue to cap expectations for early easing. Today’s US jobless claims and industrial production figures will be scrutinised, but the broader macro narrative has not shifted. A break below 103.60 would be needed to suggest the dollar’s recent rally is losing steam.
EUR/USD: Trendline Break Puts 1.1400 in Play
EUR/USD is trading at 1.1436, down 0.07% on the session, but the price action tells a more bearish story than the headline suggests. The pair has broken below the rising trendline drawn from the July 2 low, and the failure to hold above 1.1450—a level that acted as support twice last week—signals a shift in momentum.
The immediate support is 1.1420, a Fibonacci retracement level from the June-July rally. A clean break below that would expose 1.1400, then the July 10 low at 1.1385. On the topside, resistance is now layered at 1.1450 and 1.1480. The euro is also underperforming against the pound, with EUR/GBP rising 0.09% to 0.8500, suggesting the single currency’s weakness is broad-based rather than dollar-specific.
The European Central Bank’s cautious tone last week, combined with soft eurozone industrial production data, has left the euro vulnerable. Unless US data disappoints significantly, the path of least resistance remains lower.
GBP/USD: Cable Fails at 1.3500, Bears in Control
Cable is trading at 1.3451, down 0.21%, after failing to sustain a move above the psychologically important 1.3500 barrier. The rejection was sharp, and the pair has now slipped back below the 20-day moving average at 1.3470.
The technical picture is deteriorating. The RSI on the 4-hour chart has rolled over from overbought territory, and the bearish engulfing candle from Monday’s high is still exerting influence. Support at 1.3420 is the first line of defence; a break below that would target the 1.3380 area, where the 50-day moving average sits. Resistance is now at 1.3480 and then 1.3520.
Sterling is also being weighed down by political uncertainty ahead of next week’s by-elections and lingering concerns about UK growth momentum. The GBP/JPY cross, trading at 218.35, is also losing altitude, which typically correlates with a weaker cable.
Cross-Market Dynamics: Gold Holds Steady, Crude Rallies
Gold is trading at 3999.98 USD/oz, down 0.30%, but the precious metal is holding above the 4000 level even as the dollar strengthens. This suggests some safe-haven demand is offsetting dollar strength, likely tied to geopolitical concerns. Silver is outperforming, up 0.77% at 56.33 USD/oz, while breaching resistance near 56.00.
Crude oil is the standout mover today. WTI crude has rallied 1.59% to 83.80 USD/bbl, and Brent crude has surged 2.59% to 90.38 USD/bbl. The rally is supporting commodity currencies to some extent—AUD/USD is down only 0.19% at 0.6986, and NZD/USD is flat at 0.5842—but the bid in crude is not enough to offset the broader dollar strength.
The divergence between energy and precious metals is notable: crude is rallying on supply concerns and inventory draws, while gold is struggling to gain traction despite the geopolitical bid. This suggests the market is pricing in a “higher-for-longer” Fed narrative, which is negative for gold but supportive for oil demand.
Scenarios and Key Levels
DXY: A close above 104.10 targets 104.35; a break below 103.60 would neutralise the bullish bias.
EUR/USD: A break below 1.1420 targets 1.1400 and 1.1385; a recovery above 1.1480 would suggest the trendline break was false.
GBP/USD: A break below 1.3420 targets 1.3380; a move above 1.3520 would reignite bullish momentum.
The correlation between EUR/USD and GBP/USD remains strong, and any catalyst that breaks one pair out of its range is likely to drag the other. The dollar’s direction remains the key variable, and with no major data surprises expected today, technical levels will dictate the near-term flow.
Desk View
- DXY is well-supported above 103.60, and a push toward 104.35 is likely unless US data misses badly.
- EUR/USD has broken a key trendline; short positions are favoured below 1.1450 with a target of 1.1400.
- GBP/USD is struggling at 1.3500 and momentum is fading; a move below 1.3420 would confirm a deeper correction.
- Crude’s rally is providing a floor for commodity FX but is not enough to reverse the dollar’s broader strength.
Risk Disclaimer: This article is for informational purposes only and does not constitute investment advice. Trading foreign exchange carries significant risk. Past performance is not indicative of future results.