USD: Focus on money markets – ING

💡 DMK Insight

The lack of a risk currency rally post-trade truce signals deeper market concerns. Typically, agreements like the US-China trade truce would lead to a surge in risk assets, but the dollar remains strong, hinting at underlying fears. Traders should consider that the dollar’s dominance is being fueled by factors like persistent inflation and potential Fed rate hikes, which overshadow any optimism from trade agreements. This could lead to a stronger dollar in the short term, affecting pairs like EUR/USD and AUD/USD. Watch for key resistance levels around 1.10 for EUR/USD and 0.65 for AUD/USD; a failure to break these could indicate continued dollar strength. On the flip side, if risk currencies don’t respond positively soon, it might suggest a broader risk-off sentiment among investors. Keep an eye on economic indicators from both the US and China in the coming weeks, as they could shift the narrative significantly. The real story is whether the dollar can maintain its strength against a backdrop of global economic uncertainty.