In a surprising turn of events, the dollar stumbled in trading yesterday, giving back a significant portion of the gains it had achieved on Monday. This decline occurred despite a resilient stock market and a rise in Treasury yields, prompting traders to refocus on the looming deficit and potential tax cuts, all while enjoying a momentary lull in trade tensions.

The dollar’s struggles come even as conditions in broader markets remain relatively strong. While some may attribute the dollar’s weakened position to a US CPI report that came in cooler than expected, it's essential to note that the anticipated impact of tariffs has yet to materialize. Overall, the dollar lost some ground, leading analysts to question its near-term technical levels.

Key Currency Pair Movements

Looking closely at currency pairs, EUR/USD is sitting less than 0.5% lower than the previous Friday’s close, edging back towards the critical 1.1200 mark. A break above this level and the associated 100-hour moving average at 1.1197 could shift the near-term sentiment to neutral. However, if the dollar remains weak, bearish tendencies may persist.

Meanwhile, USD/JPY is showing signs of weariness as it approaches the psychological 147.00 level. Its own 100-hour moving average currently sits at 146.45. This is a crucial point to monitor if the dollar continues its downward trajectory, particularly with yields on the rise.

Other Currency Gains