just now
- The US Dollar rally has played out, with the DXY rejecting from the Fair Value Gap supply and showing early signs of distribution.
- Macro headwinds - tariffs, debt risk, and de-dollarization - are back in focus, pressuring global confidence in the greenback.
- If DXY loses the 97.00 level, it may decelerate toward 95.50-96.00; only a strong catalyst can defend a bullish continuation.
Macro Narrative: Dollar’s Moment of Truth
The U.S. dollar’s bullish scenario, forecasted in our previous reports has now fully materialized. The U.S. dollar bounced off between 96.8-97.0 levels, tapping into a 4-Hour Bullish Fair Value Gap.
But now that bullish impulse is showing signs of exhaustion.
As shown in the chart below:
The rally reached into a 97.6 level, tapped the resistance, and is now printing early signs of distribution with weaker candles betwee 97.50-97.30.
Key Macro Drivers
1. Tariff Tensions Back On Radar
The U.S. is set to reintroduce tariffs by August 1, with targets including Japan, Korea, and BRICS allies.
→ Impact: Adds risk premium to global assets, but the dollar has not responded with its usual haven strength—a sign of weakening global faith in its status.
2. Central Banks De-risking From USD
UBS reports that 47% of central banks now foresee possible U.S. debt restructuring, while gold reserves are increasing, and USD allocation is falling.
→ Impact: Weakens structural demand for the dollar over time.
3. Fed Credibility & Policy Divergence
With Fed rate cuts expected later in the year, while other regions (e.g., ECB, RBA) hold firm, the interest rate narrative is no longer supporting USD strength.
→ Impact: Reduces carry the advantage of the dollar, especially against EUR and AUD.
4. China Monitors Dollar Risk
The PBOC reportedly queried institutions about dollar weakness, indicating Beijing may begin reducing USD exposure.
→ Impact: Fuels the broader de-dollarization movement in Asia.
Technical Outlook
While the U.S. dollar gained momentum since July 1, the overall structure remains bearish, with macro headwinds - including trade risks, reserve diversification, and fiscal concerns - still weighing heavily on the greenback and limiting the sustainability of any rebound.
After completing the projected bullish move toward 97.70, the U.S. Dollar Index (DXY) is now retracing into a 4H Fair Value Gap (FVG) resting between 97.30–97.10 - a key inflection zone that will likely determine whether the dollar resumes its push toward 98.20 or begins a deeper reversal targeting 96.37.
Bullish Scenario: FVG Bounce + 97.70 Breakout Toward 98.201
If the 4H Fair Value Gap (around 97.10–97.30) holds as support and price forms a higher low, we may see a continuation of the bullish structure and a second leg upward.
- Healthy retracement into demand after recent impulse leg
- Bullish reaction off FVG + strong engulfing candle or higher low formation
- Delayed tariffs, Fed pushback on rate cuts, or a shift back to risk-off sentiment
Target: 98.201 - unfilled inefficiency + prior liquidity level
Bearish Scenario: FVG + 96.80 Breakdown to 96.377
If the FVG fails to hold and price breaks back below 97.00, the structure would lean bearish, suggesting distribution at premium pricing and opening the door for deeper downside.
- Breakdown from FVG followed by lower high confirms seller strength
- Weak bounce or rejection near 97.20–97.40, followed by bearish engulfing setup
- Risk-on flows, de-dollarization pressure, or bearish Fed outlook
Target: 96.377 — 2025 All-Time Low and Key Low
Impact on Major Forex Pairs
With the dollar’s bullish scenario fully played out and macro risks regaining dominance, such as trade tensions, central bank reserve shifts, and a softening Fed narrative, the bias now shifts back to USD weakness unless the FVG holds and momentum resumes.
If DXY holds above the 97.10–97.30 zone and pushes toward 98.20, temporary USD strength may cap gains in the majors. But if the 97.00 level fails, the downside could accelerate across the board, fueling major FX breakouts.
Check Out My Contents:
Strategies That You Can Use
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
How to Trade Breakouts Effectively in Day Trading with Smart Money Concepts
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Forex Trading Strategy for Beginners
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
Mastering Risk Management: Stop Loss, Take Profit, and Position Sizing
RSI Divergence Trading Strategy for Gold: How to Identify and Trade Trend Reversals
Stochastics Trading Secrets: How to Time Entries in Trending Markets using Stochastics
Gold Trading Stochastics Strategy: How to Trade Gold with 2R–3R Targets
RSI Hidden Divergence Explained: How to Spot Trend Continuations Like a Pro
How To Trade News
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Trade NFP Using Smart Money Concepts (SMC)-A Proven Strategy for Forex Traders
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Learn How to Trade US Indices
How to Start Trading Indices and Get into the Stock Market with Low Capital (2025 Guide)
Best Indices to Trade for Day Traders | NASDAQ, S&P 500, DAX + Best Times to Trade Them
How To Trade & Scalp Indices at the Open Using Smart Money Concepts (SMC)
NAS100 - How to Trade the Nasdaq Like a Pro (Smart Money Edition)
How to Trade CPI Like Smart Money - A Step-by-Step Guide Using SMC
Why Smart Money Concepts Work in News-Driven Markets - CPI, NFP, and More
How to Start Trading Gold
How to Swing Trade Gold (XAU/USD) Using Smart Money Concepts: A Simple Guide for Traders
Complete Step-by-Step Guide to Day Trading Gold (XAU/USD) with Smart Money Concepts (SMC)
The Ultimate Guide to Backtesting and Trading Gold (XAU/USD) Using Smart Money Concepts (SMC)
Why Gold Remains the Ultimate Security in a Shifting World
How to Trade Japanese Candlesticks
How to Trade Candlestick Patterns with High Probability: A Complete Guide for Beginners
The Top Japanese Candlestick Guide: What is an Engulfing Pattern and How to Trade It?
Piercing Pattern Candlestick Explained: How to Trade It - Step-By-Step Guide
Morning & Evening Star Candlestick Patterns – How to Trade Market Reversals with Confidence
How to Start Day Trading
5 Steps to Start Day Trading: A Strategic Guide for Beginners
8 Steps How to Start Forex Day Trading in 2025: A Beginner’s Step-by-Step Guide
3 Steps to Build a Trading Routine for Consistency and Discipline - Day Trading Edition
The Ultimate Guide to Understanding Market Trends and Price Action
Learn how to navigate yourself in times of turmoil
How to Identify Risk-On and Risk-Off Market Sentiment: A Complete Trader’s Guide
How to Trade Risk-On and Risk-Off Sentiment - With Technical Confirmation
The Ultimate Guide to Understanding Market Trends and Price Action
Want to learn how to trade like the Smart Money?
Why Smart Money Concepts Work: The Truth Behind Liquidity and Price Action
Mastering the Market with Smart Money Concepts: 5 Strategic Approaches
Mastering Candlestick Pattern Analysis with the SMC Strategy for Day Trading
Understanding Liquidity Sweep: How Smart Money Trades Liquidity Zones in Forex, Gold, US Indices
The SMC Playbook Series Part 4: How to Confirm Trend Reversal & Direction using SMC
The SMC Playbook Series Part 5: The Power of Multi-Timeframe Analysis in Smart Money Concepts (SMC)
Fair Value Gaps Explained: How Smart Money Leaves Footprints in the Market
The Best Time to Use Smart Money Concepts (SMC): Why Timing Is Everything in Trading SMC
How to Trade the London Session Using Smart Money Concepts (SMC)
Trading Psychology and Continuous Improvement Contents
The Mental Game of Execution - Debunking the Common Trading Psychology
5 Steps to Backtest a Trading Strategy with AI: A Step-by-Step Guide
Managing Trading Losses: Why You Can Be Wrong and Still Win Big in Trading
The Hidden Threat in Trading: How Performance Anxiety Sabotages Your Edge
Why You Fail in Trading: You Don’t Have Enough Capital to Survive
Why 90% of Retail Traders Fail Even with Profitable Trading Strategies
The Top 10 Best Trading Books That Changed My Mindset, Strategy & Performance
Discovering Your Trader Profile: What Kind of Trader Are You?
Follow me for more daily market insights!
Jasper Osita - LinkedIn - FXStreet - YouTube
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.
