2025-03-06 12:00:36
The US dollar continues to face downward pressure following a series of volatile geopolitical and economic decisions. The latest tariffs on Canada, Mexico, and China have triggered retaliatory actions, raising concerns on a global scale. Investors and analysts are closely watching the ripple effects across financial markets.
On Tuesday, March 5, the US officially imposed tariffs on key trading partners, leading to an immediate drop in the dollar. In response:
President Trump, in a speech, reaffirmed his stance: “They tariff us, we tariff them.” Additionally, he suggested Canada should be integrated into the US and proposed Denmark transfer control of Greenland to the US, adding further geopolitical uncertainties.
Concerns over tariffs and the dollar’s declining appeal have led to a pullback in government bond yields, reflecting investor unease.
The VIX index, commonly referred to as the “fear gauge,” spiked above 20, signaling growing uncertainty among investors.
From the previous post: USD Rally Explained Key Drivers & Outlook, suggested the dollar could continue its rally, but recent developments indicate otherwise:
The AUD has shown strength after breaking above its equilibrium level. Key conditions for continued upside include:
NZD has outperformed, currently trading near the 75% level of its range.
Positive reactions at Fair Value Gaps support further upside potential.
We are not seeing momentum in favor for the Aussie. If we are looking for longs, New Zealand Dollar will benefit more on the upside direction vs AUD.
The euro has surged 1.5% to $1.0789, its largest three-day gain since 2015. Key factors supporting the euro include:
Potential Bullish Scenarios:
As long as we stay above the moving average 10, 20, 50, we are looking for a continued upside.
The UK, under Prime Minister Keir Starmer, is taking a leading role in forming a "coalition of the willing" to support Ukraine. This signals a major shift in European defense strategy, especially as the U.S. scales back aid under President Trump.
The GBP is in strong bullish momentum, with no signs of slowing down.
Key technical levels: Pullback at 1.28632 - 1.28430 with a potential breakout at 1.29081.
Potential Scenario:
2. 1.29081 Breakout
In response to President Donald Trump's implementation of 25% tariffs on Canadian goods, Canada has enacted retaliatory measures to protect its economic interests.
Canada's Retaliatory Actions:
Prime Minister Trudeau's Stance:
Economic and Political Implications:
Canadian Dollar is still in a crossfire zone as retaliation between the 2 countries create uncertainties and increase risks.
Potential Approaches
Swiss on the other hand is still on a bearish move.
Swiss Franc Safe-Haven Demand: The Swiss franc continues to attract investors seeking safe-haven assets amid global economic uncertainties.
We are now below the moving average. For bearish continuation, a reaction at the Daily FVG could further trigger a downside move.
The US dollar is facing continued weakness due to economic and geopolitical uncertainty. Meanwhile, foreign currencies such as the EUR, GBP, AUD, and NZD are strengthening, supported by global policy shifts and technical breakouts.
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