U.S. Dollar Snaps Back, EUR/USD Rallies After Trump Inauguration
U.S. Dollar, EUR/USD Talking Points:
- The U.S. Dollar sold off on Monday and then tried to bounce on Tuesday, with sellers coming in to hold DXY back down.
- EUR/USD is showing a push towards a turn and the volatility in USD/CAD has been notable, as Trump threatened 25% tariffs to begin on February 1st.
- In the webinar, I looked at a wide range of markets from USD-pairs to gold and bitcoin to SPX at the end. The SPX setup has been particularly interesting of late, as the first zone of support from the 2025 forecast came into play and led to a vigorous bounce last week. This was also the setup in my top trade idea for 2025.
The U.S. Dollar started the session with an attempt to bounce. But at this point almost the entirety of the gain has been wiped away and sellers are threatening to make a larger move in the currency. On a bigger picture basis, this brings to light mean reversion scenarios and I looked at that in this webinar through the lens of a few different FX pairs.
U.S. Dollar Daily Chart
U.S. Dollar Weekly
The weekly chart is of note here as the range that was active for most of the past two years sits a little-lower on the chart. And the prior bullish trend in the DXY before that came along with an underperforming equity market.
As I shared in the webinar, my expectation and opinion is that the U.S. Dollar will be prone to mean reversion this year as equities continue to spark gains, such as we’ve seen over the past week. To gauge that in the USD, we can look to the prior range resistance from around 106.52-107.35 to look for a move back into that prior range.
U.S. Dollar Weekly Chart
EUR/USD
The Euro makes up a whopping 57.6% of the DXY quote, so if we are going to see DXY mean-revert, it will probably need some help from the Euro.
EUR/USD hit a major support level to start last week at 1.0200, and while last week wasn’t exactly bulls burning the bid, there were higher-lows for every day of last week, and that’s so far led into a breakout extension in early-week trade this week.
I looked at EUR/USD as part of our weekend forecasts and highlighted this backdrop there.
As highlighted in the webinar, the prior swing at 1.0344 has so far held the daily lows for the pair, and this would be the level that bulls would need to retain to push bullish continuation scenarios.
EUR/USD Daily Price Chart
USD/CAD
I’ve been writing quite a bit about USD/CAD of late as I think it’s a fantastic manifestation of the USD-strength theme around President Trump. The pair broke-out above 1.4000 in late 2024 trade as driven by the fear of tariffs, but that may be a negotiation tactic from Trump as actual tariffs on Canadian imports could bring along an upper push on inflation, which could then endanger the equity markets as inflation would lead to both a more difficult backdrop for corporates and less likelihood of rate cuts from the Fed; two factors that could hinder stock performance in Trump’s opening months.
I’ve been highlighting the 1.4500 level in the pair which traded briefly earlier today. But that was followed by an aggressive reversal in the pair and at this point, the daily bar has almost given up the entirety of the days gains.
Nonetheless, the focus is on the same support zone I looked at this weekend, from 1.4280 to 1.4300, which has so far held the daily lows. If or when bears can push below that, a test at 1.4200 would bring some important information.
For longer-term mean reversion it’s the 1.4000 level that bears would need to take-over before the door can open into a big picture range continuation scenarios.
USD/CAD Daily Price Chart
--- written by James Stanley, Senior Strategist
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2025