Shifting Tides: Global Currencies Surge as Dollar Loses Strength over Geopolitical Uncertainties

Shifting Tides: Global Currencies Surge as Dollar Loses Strength over Geopolitical Uncertainties

Overview

• USD – Dollar Under Pressure: Market uncertainty from aggressive U.S. trade policies, Fed holds rates with a cautious outlook, rising recession fears. Losing appeal, appeal, Fed holds rates, DXY near 103.00 - 102.50.
• JPY – Yen Gains as Risk Aversion Rises: Safe-haven demand pushes USDJPY lower, key break at 146.946.
• AUD – Aussie Holds Strength Above Equilibrium: Shifting global investor sentiment away from the USD. Bullish above 0.64083, risk below 0.62820.
• NZD – Kiwi Approaching Breakout Zone: Trading at premium, breakout above 0.57257, resistance at 0.57722.
• EUR – Euro Gains Momentum: EU benefits from increased defense spending and a stable economy as the U.S. considers NATO withdrawal. Bullish above 1.0888, key support at 1.08256, benefiting from EU stability.
• GBP – Pound Strengthens on Defense Spending: UK ramps up military budget as U.S. withdraws European support, reinforcing investor confidence. Testing 1.29445, downside risk below 1.28947.
• CAD – Tariff Uncertainty Weighs on Loonie: Newly elected Mark Carney enforces retaliatory tariffs, adding economic uncertainty. Bullish above 1.44263, bearish below 1.43399.
• CHF – Swiss Franc Outperforms USD: Strengthening, key support at 0.87649, further downside to 0.87341.

Global Investors Shift Focus Away from U.S. Markets

Over the past month, several major international stock indices have experienced notable gains:

• Euro Stoxx 50: Increased by approximately 9%, reaching record highs.
• Germany's DAX: Rose by 2.03%.
• France's CAC 40: Achieved a modest gain of 0.11%.
• Hong Kong's Hang Seng Tech Index: Surged by nearly 30%, driven by advancements in China's technology sector.

These trends indicate a shift in investor sentiment toward non-U.S. markets, influenced by factors such as trade tensions and economic policies.

Erosion of Safe-Haven Status

The combination of unpredictable economic policies and escalating trade tensions has diminished the dollar's traditional role as a safe-haven currency. Investors are increasingly seeking alternatives, such as the euro, which has strengthened due to favorable economic developments in the Eurozone.

Fed Maintains Interest Rates Amid Economic Uncertainty

Federal Reserve Chair Jerome Powell has indicated that the central bank will maintain current interest rates, adopting a cautious approach amid economic uncertainties stemming from recent policy changes. He emphasized that the Federal Reserve is in "no hurry" to adjust rates, choosing to await more definitive economic data before considering any changes.

Monetary Policy Outlook:

• The Fed remains cautious and patient, waiting for clearer data before making policy changes.
• If inflation stays high, rate cuts will be delayed. If inflation falls faster or the labor market weakens, the Fed is prepared to ease policy accordingly.
• The central bank is monitoring trade, immigration, fiscal, and regulatory policy changes under the new administration, as their combined impact on the economy remains uncertain.
• The Fed is not in a hurry to cut rates, signaling policy stability in the near term.
• Business investments and hiring decisions should factor in lingering inflation risks and potential trade policy shifts.
• Investors should watch inflation and labor market data closely, as these will determine when the Fed pivots to easing.

Divergent Views on U.S. Economic Outlook Amid Tariff Policies

Some experts caution about an impending recession. Factors such as elevated tariffs, rising consumer delinquencies, and declining business investments contribute to this concern. The Financial Times notes that these elements have introduced stagflationary forces and financial market risks, suggesting an economic contraction may be forthcoming

Concerns about stagflation have surfaced due to recent economic policies and market reactions.

The U.S. economic outlook remains uncertain, with opinions divided on the likelihood of a recession and the emergence of stagflation. While some indicators point toward potential economic slowdowns, official statements project confidence in continued growth. Monitoring upcoming economic data and policy developments will be crucial in assessing these risks.

Volatility Index Continue to Rise

As uncertainty rises in the US, VIX surpassed the 20 level which increases fear in the markets, making investors cautious.

Unemployment Rate Increased

In February 2025, the U.S. labor market experienced modest growth, with nonfarm payroll employment increasing by 151,000 jobs, slightly below the anticipated 160,000. This brought more pressure to the Dollar which the foreign currencies benefited from its bearish print.

Dollar Continues Its Downward Spiral Move

For comparison, check out the previous forecasts in this link.​

Dollar is now approaching the deep discount level after closing at a -3.40% last week.

As of now, we are not seeing any signs of recovery for the Dollar as uncertainty increases.

We could see Dollar to continue its downside move to 103.00 to 102.50 level.

Global Currencies Surge

JPY: On A Steady Upside Move

Yen continues to hold its position at the previous resistance turned support. We are not seeing any signs of reversal.

A break of the 772.8 level could trigger further upside for the Japanese Yen which could benefit trading shorts against USD, AUD, NZD, and CAD.

Due to Eurozone appeal, it would be hard for the Yen to pull EUR, GBP, and CHF.

4-Hour

The Gopher or the USDJPY continues its downside trend as Yen is gaining traction over the Dollar.

We are still in a bearish trend as the USDJPY trades below the moving averages for continued downside.

A break of 146.946 level could trigger continued weakness.

AUD: Break of Equilibrium

Daily

We already surpassed the 50% level of the range coming from a discount level. Staying above the 50% line, Australian Dollar could potential remain its strength.

4-Hour

Scenarios:

1. Bullish

• Break of 0.63639 level
• Break of 0.64083 level

1. Bearish

• US Dollar Catalyst
• Break of 0.62820 level

NZD: On A Premium Level, Potential Breakout

Daily

New Zealand Dollar is now trading at the 0.56920 - 0.57597 range after breaking the 50% level of the bigger range.

4-Hour

A break of the 0.57257 level could trigger a further upside to 0.57597 - 0.57722 level.

European Governments Ramp Up Defense Budget

As the U.S. pauses military support to Ukraine and considers withdrawing from NATO, the EU and UK take the lead in strengthening security and stability in Europe.

This led to a buff on the defense spending where Germany leads the way.

EUR: Surge as Eurozone Gains Appeal over USD

Daily

EUR continues to move on momentum as it benefits from the fade of the American Exceptionalism and support in Europe.

We are also trading above the moving averages which indicates strength for the Euro.

4-Hour

1-Hour

We are also in-sync with 4-hour and 1-hour as moving averages are acting as a support for upside continuation.

Scenarios:

1. Bullish

• Break of 1.0888 could further propel price to 1.09372 level

1. Bearish

• Break of 1.08256 could trigger weakness for EUR
• Break of 1.07655 could trigger a potential reversal

GBP: Maintains an Upside Strength

Seconded Germany, UK is also bumping up its defense budget in preparation for the exit of US from NATO.

1-Hour

1.29445 high is now being tested for a potential upside continuation.

We are still in a steady stance for continued bullish potential as we are staying above the moving averages.

Scenarios:

1. Bullish

• Trade to and through by closing above 1.29445 level.
• Support at 1.29445 level

1. Bearish

• Break of 1.28947 level
• Break of 10-20-50 moving averages could spark weakness
• Break of 1.28657 level could trigger a potential reversal

CAD: Back and Forth Tariff Exchanges Make the Loonie Uncertain

Newly elected Mark Carney remains firm on implementing retaliatory tariffs as countermeasures against U.S. tariffs.

“We re-iterate that Canada’s retaliatory moves are economically counterproductive and limits monetary policy response, which hurts Canadian consumers, producers, and government finances.” Bryan Yu, chief economist, wrote in Central 1 Credit Union report

1-Hour

This retaliatory stance adds uncertainty to the CAD, keeping its price movement indecisive.

Scenario:

1. Bullish

• US Bearish Catalyst
• Break of 1.44263

1. Bearish

• Break of the 1-Hour range at 1.43399
• Trade below the moving averages

CHF: Bullish Traction Overcomes US Dollar

Daily

After reacting at the Daily Fair Value Gap, and price resists at the 10-day moving average, Swissie continues to invalidate USD to the downside.

1-Hour

Bearish Scenario

• Break of 0.87649 level could trigger further downside at 0.87341

With the US dollar losing strength due to policy uncertainties, shifting global sentiment, and rising trade tensions, traders need a strategic approach that aligns with both technical setups and macroeconomic fundamentals.

1. Prioritize Stronger Currencies Over USD

• Given the dollar's weakness, favor currencies with bullish momentum (EUR, JPY, CHF).
• Look for fundamentally supported strength, such as central bank policies and economic resilience in these regions.

2. Follow the Global Capital Flow

• With investors shifting away from US markets, money is flowing into European equities, defensive assets, and Asian markets.
• Monitor bond yields, equity indices, and commodity correlations to anticipate currency movements.

3. Trade with a Defensive Mindset (Risk Management)

• The rising VIX index signals heightened market uncertainty—expect increased volatility.
• Reduce position sizes, use wider stop losses, and avoid overleveraging.
• Be mindful of event-driven volatility (NFP, CPI, FOMC meetings).

4. Use a Trend-Following Bias

• USD bearish bias remains intact, so focus on setups that align with this macro trend.
• Identify breakout trades in stronger currencies (EUR, JPY, CHF).
• Trade pullbacks into key levels for optimal risk-reward entries.

5. Stay Adaptive to Policy Shifts

• Monitor Fed’s stance on interest rates—any shift from the "no hurry" stance could change USD direction.
• Watch for retaliatory trade measures (CAD, China) and their impact on risk sentiment.
• Keep an eye on fiscal policies in the Eurozone, UK, and Japan for sustained bullish trends.

"Trade what you see, not what you think." Stick to data-driven decisions, align trades with market sentiment, and manage risk accordingly.

Weekly Trading Quote

"Amateurs think about how much money they can make. Professionals think about how much money they could lose." — Jack Schwager – Market Wizards

Actionable Approach Based on the Narrative

1. Risk First, Profits Second – With rising global volatility, prioritize risk management before seeking high returns.
2. Adapt to Market Shifts – The dollar's decline and policy changes signal a structural shift. Adjust trading strategies accordingly, favoring strong markets.
3. Avoid Overleveraging in Uncertain Markets – Increased market volatility requires disciplined position sizing to prevent unnecessary losses.
4. Wait for High-Probability Trades – Instead of chasing price, let setups come to you by focusing on strong technical and fundamental confluences.
5. Reassess Bias Regularly – Market conditions evolve. Keep reviewing key macroeconomic data and geopolitical developments to stay ahead of potential reversals.

Trading with a professional mindset means prioritizing capital preservation, adapting to trends, and executing only when the risk is justified.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.