Dollar Drops, Risk-On Pops: How I’m Trading the Fed Shift

The Fed’s shifting tone changes everything. In the past 48 hours, we’ve had no surprises from the Middle East—nothing new from Trump, Israel, or Iran. But from the U.S., Federal Reserve member Jim Bullard's recent comments have shifted market sentiment. He notes that falling oil prices are helping to moderate inflation, which boosts expectations for a September rate cut. FedWatch now shows a 68% chance of a 25bps cut up sharply from 47% just a month ago.

That change triggers a sharp selloff in the U.S. dollar. DXY breaks key lows, and risk-on currencies rally. The Australian dollar, New Zealand dollar, euro, and yen all gain. I’m positioned long EUR/USD and AUD/USD, and I continue to watch gold closely. We're approaching my ideal entry at $3,350 for a short setup.

US dollar/yen gets stopped out on the first entry, but the second, more patient setup plays out cleanly. Euro/USD hits profit. The trade ideas I posted on Telegram early yesterday morning are now in play or have already delivered solid gains.

As long as the dollar weakens and oil prices stay low, I stay long AUD, NZD, and EUR, and short USD. I’ll reassess if we see a new catalyst—especially from the Fed, inflation data, or any surprise geopolitical risk.

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