USD on Decline: Uncertainties Driving the US Dollar For Further Downside

Overview:

• US Dollar (DXY) Under Pressure:
  • Global uncertainties—including stagflation concerns and ambiguous Fed policy—are weighing on the Dollar.
  • Technical indicators (fair value gap reactions and swing breaks) signal a bearish follow-through, potentially pushing the Dollar down to around 105.420.
• Technical Dynamics & Market Sentiment:
  • The ongoing bearish scenario is confirmed by weak reactions at key technical levels, where price taps the gap without closing through.
  • Continued uncertainty and lack of reversal signs further validate the Dollar’s downside trajectory.
• Currency Impact & Highlights:
  • JPY: The Yen is on a parabolic ascent following a BoJ rate hike, with USD/JPY potentially nearing the 148.643 level.
  • AUD: Remains resilient, supported at 0.63305, with a target range of 0.64406 to 0.64951.
  • NZD: Exhibits a bullish breakout after filling its fair value gap, eyeing targets between 0.57928 and 0.58637.
  • EUR: Maintains bullish momentum; a breakout above 1.04412 could propel it to new highs near 1.05140–1.05331.
  • GBP: Despite inflation and tariff concerns, the Pound’s sustained move above 1.26345 hints at further gains toward 1.271–1.281.
  • CAD: Faces potential downside pressure if it breaks below the 1.41507 level.
  • CHF: Trading at a discount, the Swiss Franc may test lower levels (around 0.88985) if the Dollar continues to stall.

As global uncertainties persist, the US Dollar continues to face headwinds with no clear signs of a bullish recovery. Market dynamics remain tilted toward a further downside, fueled by concerns over stagflation, trade policies, and mixed technical signals.

On our previous post, ACY SecuritiesDollar on the Edge: Fed Rate Pause Sparks a Global Currency … and on our weekly market outlook, ACY SecuritiesDollar Outlook: Key Scenarios and Market Impacts This Week, we have outlined how the Dollar could react at the bearish volume imbalance or fair value gap. As of now, Scenario #1 is materialising, and we are not seeing strong signs of reversal.

Scenario 1: Bearish Follow-Through – Continued Weakness

The Dollar remains unattractive due to stagflation concerns and uncertainty around the Fed's next move. If the Dollar taps into the Fair Value Gaps (FVGs) without closing above them, we could see a continuation of the downside trend.

A good sign that an imbalance or fair value gap is going to materialise is:

1. There must be a reaction at the gap.

Common Reaction Patterns:

1. Tapping the gap and just “wicking” at it.
2. After reaching the gap, next candle engulfs the previous candle.
3. Price must trade to the FVG but not trading and closing through it.
4. For a confirmed continuation, the next move must break the immediate swing.
   1. Break of Immediate Low - Bearish Follow-Through Confirmation
   2. Break of Immediate High - Bullish Follow-Through Confirmation

After breaking the immediate swing, we now call this the “Break of Structure”.

If we continue to see no signs of recovery and uncertainties over the Dollar continues, we might see a potential draw of the Dollar to 105.420.

Impact on Majors: Continued Bullish Move on the Foreign Currencies

For reference of our previous analysis, check out the links below:

Weekly Market Outlook: ACY SecuritiesDollar Outlook: Key Scenarios and Market Impacts This Week​

The Daily Tick Feb 20: ACY SecuritiesDollar on the Edge: Fed Rate Pause Sparks a Global Currency …​

JPY: The Yen’s Parabolic Ascent

Following the Bank of Japan’s recent rate hike, the Yen has been on an impressive upward trajectory. With the BoJ’s cautious but firm stance, the USD/JPY pair could see further bearish pressure on the Dollar, potentially reaching the 148.643 level.

The Bank of Japan sees this rate hike of 0.5% as “appropriate” to achieve price stability target at 2%. To achieve this, BoJ will raise rates gradually but will remain vigilant about evolving economic conditions, including inflation expectations.

Nearing 148.643 Target

As Dollar continue its bearish stance and Yen raising rates, we could see further bearish potential with USDJPY and potentially, reaching 148.643 level.

AUD: Australian Dollar Holds Strong

Previous Forecast

After:

The AUD remains resilient, holding support at 0.63305 thanks to positive employment data and robust economic indicators. With continued strength, we expect the Aussie to target the 0.64406 - 0.64951 range.

NZD: Bullish Breakout Continues

Previous Forecast

After:

After filling its fair value gap, the NZD has broken out with momentum. Traders are eyeing an upside move, with potential targets between 0.57928 and 0.58637.

EUR: Imminent New Highs

The Euro continues to hold its bullish momentum, and a breakout above the 1.04412 level could see it climbing further, with new highs anticipated near 1.05140 - 1.05331.

GBP: Uptrend Amid Volatility

The pound had a positive reaction on the daily fair value gap and we broke out of the 1.26345 level.

Previous Forecast:

After:

Despite rising inflation and ongoing tariff threats, the GBP remains bullish. A sustained break above 1.26345 could push the pound toward the 1.271 - 1.281 range.

Keep an eye on upcoming news, particularly PMI data, which could inject some volatility.

CAD: Awaiting Break of Structure at 1.41507 Level

We now reacted positively on the daily FVG. The next thing we could anticipate in favor of the bears is the break of the 1.41507 level for further downside.

The Canadian Dollar continue to strengthen amidst Trump’s tariffs threats

“One thing remains clear: Any tariffs on Canada will mean higher prices on Americans and will cost American jobs. Our response is immediate and strong.” - Justin Trudeau

30-day tariff suspension is still in play. We might see further downside once the delay has been lifted unless it extends or there’s another alternative.

CHF: Few Pips for A Breakdown

The Swiss Franc is trading at a discount, with bearish potential still intact. Should the Dollar continue to stall, a breakdown below 0.89651 could see the CHF test the 0.88985 level.

Bearish potential is still in play since:

1. We are below equilibrium with imminent breakdown.
2. The dollar keeps stalling.

The current environment paints a picture of continued uncertainty for the US Dollar. With a confluence of geopolitical risks, economic policy debates, and technical downside, the market seems to favor a bearish outlook for the greenback. As foreign currencies gain strength in this backdrop, we could see further upside for the foreign currencies against the Dollar.

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