Good morning traders from a warm and bright Amsterdam, where it is around 20°C near IntelliTrade HQ before extra cloud moves in and temperatures climb toward 27°C this afternoon. The Sunday coffee is ready, the charts are quieter, and I think this week comes down to one simple question: was last week’s dollar decline the beginning of something broader, or just a reaction to central-bank uncertainty and official support for the yen?
Overall Market Sentiment:
The market regime is balanced, but fragile.
Technology shares recovered sharply on Friday and the dollar ended the week softer. At the same time, long-term U.S. yields reached fresh multi-year highs, oil closed above $90 and official action in the yen created another source of FX volatility.
That is not clean risk-on. It is a market where the surface looks calmer than the structure underneath.
Weekly Thesis:
Can U.S. employment data confirm the dollar’s recent loss of momentum without causing a bigger growth scare? My base case is that the labour market cools gradually, which keeps immediate Fed pressure contained but does not remove the dollar’s yield support completely. USD weakness should remain selective, while USD/JPY, EUR/USD, gold and high-valuation technology shares are the clearest places where this week’s data tension should show up.
Scenario Map:
- Base case, 55%: U.S. employment and services data show slower but still positive activity, keeping September policy expectations alive without producing a fresh surge in yields. The dollar remains mixed, EUR and GBP hold most of their recent recovery, and JPY stays unusually volatile because official support clashes with the yield gap.
- Risk-on scenario, 25%: U.S. jobs, openings and service-sector pricing cool more clearly while oil remains near or below $90. Treasury yields retreat, USD weakness becomes broader, and equities, AUD, NZD and crypto receive a cleaner liquidity backdrop.
- Risk-off escalation scenario, 20%: U.S. data remain firm or shipping disruption pushes oil higher again, lifting inflation expectations and long-term yields. The dollar and CHF regain defensive support, technology volatility returns and the yen becomes difficult to read because weak fundamentals collide with the threat of further official action.
What Changed Since Last Week:
The dollar index dropped roughly 1.6%, but the U.S. 10-year yield still finished near 4.71% and the 30-year yield reached about 5.25%. That split weakened the simple strong-dollar story without removing the wider U.S. yield advantage.
Official intervention also forced USD/JPY down from the 164 area into the high 150s, while technology shares staged a sharp Friday recovery after an extreme regional decline. Brent finished near $90 and gained around 24% during July, so the energy risk entering August is still much larger than it was one month ago.
Geopolitics:
Shipping through the Strait of Hormuz remains disrupted, while threats around the Bab el-Mandeb route and incidents near the Suez Canal have widened the number of vulnerable energy corridors. Some vessels are moving through these routes, but traffic has not returned to normal.
That matters because the market is now reacting to physical shipping flows rather than every political statement. Oil near $90 is manageable compared with the recent move above $100, but it is still high enough to affect inflation expectations and central-bank thinking.
Macro Calendar:
The week ahead
- Monday, global manufacturing PMIs and U.S. ISM manufacturing: These reports will show whether the weakness seen in China is part of a wider industrial slowdown. The prices-paid components matter because softer output combined with higher input costs would be an uncomfortable mix for central banks.
- Tuesday, U.S. job openings and trade data: Job openings provide an early test of labour demand before Friday’s employment report. A continued decline would support the idea that the labour market is cooling, while resilience would keep the Fed’s September debate active.
- Wednesday, New Zealand labour data: Employment, unemployment and wage growth will decide whether the RBNZ’s restrictive stance is cooling demand without creating a sharper downturn. This is the main domestic event for NZD.
- Wednesday, U.S. ISM services: Services remain the larger part of the U.S. economy and one of the areas where inflation has been harder to remove. Activity, employment and prices need to be read together rather than focusing only on the headline index.
- Thursday, U.S. productivity, labour costs and jobless claims: These numbers can change how markets interpret Friday’s employment report. Stronger productivity would make wage growth less inflationary, while rising labour costs would strengthen the case for keeping policy restrictive.
- Friday, U.S. and Canadian employment: This is the week’s main FX event. The U.S. report will shape Fed expectations, while the Canadian release creates a direct relative growth and rate comparison for USD and CAD.
Currency Outlooks:
⚖️ USD - The dollar fell, but long-term yields did not
The dollar index ended Friday close to 99.9, with EUR/USD around 1.1530 and the greenback heading for its largest weekly decline since January. That looks like a meaningful change after several weeks of stronger USD momentum.
But I would not call the dollar broken.
The front of the U.S. yield curve lost support after the Fed held rates unchanged and June inflation cooled. The longer end moved the other way. A 10-year yield near 4.7% and a 30-year yield around 5.25% still create a serious hurdle for currencies with lower returns.
This week’s jobs data decide which side of that split matters more. Clear labour cooling would make the dollar decline look broader and more sustainable. Firm employment, wages and service-sector prices would remind markets why September policy expectations have not disappeared.
The cleaner read for me is mixed, with a slight softer bias against currencies that have their own policy support. That view weakens quickly if U.S. yields rise again.
🔺 EUR - The recovery has more than one source now
EUR/USD finished near 1.1530, helped by the softer dollar, modestly better European growth and euro-area inflation rising to 2.9% in July. The euro is no longer relying entirely on weakness from the other side of the pair.
Still, Europe’s energy exposure has not gone away. Brent near $90 raises import costs and makes it harder for households and manufacturers to benefit fully from improving sentiment.
Risks lean modestly toward EUR strength while the pair remains supported above the recent 1.14 reference area and U.S. short-term yields stay contained. That tilt weakens if oil rises sharply or this week’s European business surveys show that growth is fading again.
🔺 GBP - A divided BoE preserves some rate support
GBP/USD ended the week around the mid-1.34 area after the Bank of England kept Bank Rate at 3.75%. The more useful detail was the 6-3 vote, with three policymakers preferring a higher rate.
That split tells us the bank is patient, not relaxed. UK inflation is expected to rise again later this year, and policymakers are still worried about whether domestic pricing pressure will remain persistent.
Sterling risks lean toward relative strength while the BoE remains divided and the dollar’s front-end yield support stays softer. The bias weakens if incoming UK activity data show that restrictive policy and expensive energy are doing more damage than expected.
⚖️ CAD - Better growth meets a complicated oil story
Canada’s economy expanded 0.3% in May, with both goods and services contributing. That gives CAD a better domestic foundation than it had a few weeks ago.
Oil near $90 is also supportive, but the reason for the price matters. A supply-driven rise helps Canada’s export income while weakening the global growth outlook at the same time.
Friday’s Canadian employment report should decide whether CAD can turn stronger GDP and expensive crude into more consistent support. Risks remain balanced until the labour market confirms that the economy is stabilising.
⚖️ CHF - Still defensive, but no longer the only haven story
The franc retains support from geopolitical uncertainty and unstable global bond markets. It should remain relevant if the technology rebound fades or shipping risks worsen.
The problem is that CHF is competing with a dollar that still offers much higher yields. The yen also has unusual official support underneath it, which makes the defensive currency picture less straightforward than normal.
CHF risks remain balanced. Its case is cleaner against cyclical currencies than against USD.
🔺 JPY - Official support has changed the weekly balance
USD/JPY ended Friday near 158 to 159 after falling sharply from the 164 area. Japanese intervention began the move, and the possibility of coordinated U.S. support has made the threat much more credible.
The BOJ also kept its rate at 1% but delivered a firmer message on inflation. One policymaker preferred 1.25%, and the bank signalled that it could move faster if inflation risks keep increasing.
That combination changes the short-term balance for JPY. Risks now lean toward strength because officials appear determined to prevent another disorderly decline.
But the mistake here would be thinking the underlying problem has disappeared. Japan still has a large yield disadvantage, and intervention does not remove it. The cleaner read is that USD/JPY can remain under official pressure without becoming a simple long-term yen-strength story.
⚖️ AUD - Equity relief helps, China still limits confidence
AUD/USD recovered toward the 0.70 area as technology shares rebounded and the dollar weakened. Softer Australian inflation has reduced the immediate RBA argument, however, and the next policy decision does not arrive until August 11.
That leaves AUD trading more as a China and global-risk currency this week. Weak Chinese business surveys are a warning, even if AI-related demand continues supporting parts of the regional export sector.
Risks remain balanced. AUD’s outlook improves if U.S. yields fall and global PMIs stabilise, but it weakens if China’s slowdown becomes the larger market story.
⚖️ NZD - Labour data must settle the domestic argument
NZD begins the week near the upper 0.58 area after benefiting from the softer dollar and Friday’s recovery in risk appetite. New Zealand’s inflation data still justify restrictive policy, but unemployment was already 5.3% in the March quarter.
Wednesday’s labour report should show whether the economy is cooling gradually or whether weakness is becoming harder to dismiss. Wage growth will matter almost as much as employment because it helps explain whether domestic inflation can remain persistent.
NZD risks are balanced before the release. A resilient labour market would preserve its rate support, while a clear deterioration would leave it more dependent on global sentiment and China.
Cross-Asset Wrap:
- 🪙 Gold: Gold finished Friday around $4,050 per ounce, falling during the session but recording its first monthly gain in five months. Softer short-term U.S. rate expectations and geopolitical uncertainty remain supportive, while the firm dollar rebound on Friday and elevated real yields are limiting momentum. Watch whether U.S. employment data pull the 10-year yield away from its recent multi-year high. [USD] [REAL YIELDS] [JOBS]
- 🥈 Silver: XAG/USD ended near $57.75, dropping more than 2% on Friday and underperforming gold during the final session of July. Dollar conditions and yields remain important, while Chinese activity, solar demand and the wider manufacturing cycle drive the industrial side. Watch global PMIs and whether the technology rebound improves confidence in industrial demand. [USD] [YIELDS] [INDUSTRIAL DEMAND]
- 🛢 Oil (Brent): Brent settled around $90.10 per barrel, rising more than 1% on Friday and gaining approximately 24% during July. Disrupted traffic through the Strait of Hormuz, threats around alternative shipping routes and low U.S. inventories are supporting prices, while weaker consumption is limiting the demand story. Watch physical tanker movements through Hormuz, Bab el-Mandeb and Suez-linked routes. [SUPPLY] [GEOPOLITICS] [INFLATION]
- 📈 Stocks: The S&P 500 closed near 7,490, up about 0.7% on Friday, while the Nasdaq gained 1% and South Korea’s market staged an unusually large recovery. Strong cloud earnings restored some confidence in AI investment, but Apple’s weaker outlook and U.S. long-term yields near multi-year highs kept the move selective. Watch whether the recovery broadens beyond the largest technology names as economic data take over from earnings. [EARNINGS] [YIELDS] [AI]
- ₿ Crypto: Bitcoin is trading around $63,400 this Sunday, after moving between roughly $62,300 and $63,500 during the current session. The weekend tone is stable, but elevated real yields and uncertainty around U.S. employment are limiting the liquidity backdrop. Watch whether Bitcoin continues holding separately from bond volatility or reconnects with high-beta technology shares. [LIQUIDITY] [REAL YIELDS] [RISK]
The main thing I care about this week is whether the dollar’s decline spreads beyond the currencies that received very specific support.
The euro had firmer inflation and slightly better growth. Sterling had three BoE members arguing for tighter policy. The yen had direct official intervention and a firmer BOJ message. Those are real reasons for USD to weaken against those currencies.
That does not automatically mean the dollar is weak everywhere.
AUD and NZD still need help from global risk sentiment. CAD needs its labour data to confirm the improvement in GDP. CHF is defensive, but it continues to compete with much higher U.S. yields.
That is where traders can get trapped. The dollar index can fall while the wider dollar picture remains selective. A large move in USD/JPY also has an outsized effect on the index, especially when that move has been pushed by official action rather than a complete change in macro fundamentals.
I would not overcomplicate this.
Tuesday’s job openings tell us whether labour demand is cooling. Wednesday’s services report tells us whether that cooling is reaching the largest part of the economy. Friday’s payrolls, unemployment and wage growth decide whether the Fed can continue waiting.
My actual view is that the dollar begins the week softer, but not structurally broken. Long-term yields are too high for that conclusion, and the U.S. economy still has to confirm a meaningful slowdown.
The view becomes more dollar-negative if jobs, services and wage pressure cool together while oil remains contained. It becomes more dollar-supportive if employment remains resilient and long-term yields continue rising.
JPY is the exception because official support has changed the immediate risk around the currency. The yen’s fundamentals remain difficult, but authorities have made clear that speed and disorder matter as much as the final level.
So the week is really about two tests.
The U.S. data tell us whether dollar weakness has a genuine macro foundation. The yen tells us how far official action can push against an unresolved yield gap.
Want to turn this market context into a trading plan?
Check today’s Currency Strength Meter and Economic Calendar inside IntelliTrade Pro.
This is general, educational macro and FX commentary. It is not investment advice and not a trading signal.
Need help decoding this article? Get our free Macro Decoder ebook when signing up to our newsletter using the sign up button below! No spam, just value.