FX markets on edge: Euro breakout, Loonie resilience, Dow struggles to rebound

Market overview

The dollar’s tentative rebound has lost momentum on Wednesday as traders weigh White House influence over the Federal Reserve, the fallout from disappointing U.S. data, and a barrage of fresh corporate earnings. With President Trump poised to name a new Fed governor and stoking fresh tariff threats on key sectors, FX markets remain locked in a fragile holding pattern, while global stocks struggle to sustain their bounce.

The Dollar Index is hovering near four-month lows, unable to recover from last week’s sharp slide following the weakest jobs print of the year and an abrupt stalling in U.S. services activity. S&P 500 and Dow futures edged higher, but risk appetite remains brittle with tariffs and policy uncertainty clouding the macro-outlook. Meanwhile, oil has snapped a four-day losing streak as traders braced for potential U.S. sanctions on Russian flows, while the euro and loonie are trying to find modest support on improving regional data and resilient commodity prices.

Macro and sentiment drivers

Fed uncertainty, White House pressure

Markets are fixated on who President Trump will nominate to the Fed’s Board, after open attacks on the Bureau of Labor Statistics and persistent criticism of Chair Jerome Powell. With a 90% probability priced for a Fed cut in September and nearly 60 bps of easing by year-end, traders are hedging for a dovish pivot—especially as political drama swirls around the FOMC’s independence.

Tariff threats escalate

The administration’s latest salvo targets pharmaceutical and semiconductor imports, alongside renewed warnings of triple-digit tariffs on Russian oil. These moves are pressuring corporate guidance, with earnings misses and weaker outlooks in tariff-sensitive sectors (chips, industrials, and consumer) highlighting the real-economy impact. Notably, Disney beat estimates but still traded lower, while AMD and Uber both disappointed.

Mixed global data, Dollar on the defensive

Eurozone PMIs beat expectations, the UK construction sector continues to struggle, and Canadian trade data are stabilizing. Yet the core story is dollar weakness—last week’s payrolls shock was compounded by a sharp jump in U.S. input costs and a flatlining services sector, all of which keep the greenback on the back foot even as rates volatility picks up.

Technical outlook: Key FX and Index pairs

EUR/USD

The pair extends its post-NFP rally, trading near 1.1610 on the 4H chart after a period of tight consolidation. The breakout above 1.1596 signals a bullish continuation, targeting 1.1615 and 1.1638 (127–161% Fib extension). Oscillators are stretched but not extreme, and RSI (60) remains in positive territory. As long as price holds above 1.1570, the bias stays upward; a move below 1.1560 would challenge this structure.

USD/CAD

The loonie is gaining ground, as USDCAD breaks below its rising trendline and consolidates near 1.3750. With MACD and RSI both turning negative and price riding the lower Bollinger band, a test of 1.3740 (127% Fib) and 1.3725 (161% Fib) appears likely. Only a recovery above 1.3780 would delay this downside.

Dow Jones (US30)

The index is attempting a technical recovery, but momentum is waning as the S&P and Dow face resistance near 44,400–44,550. Stochastics and MACD signal overbought conditions in the short term, and RSI is drifting sideways. If risk sentiment sours on Fed or tariff news, support at 44,150 and 43,912 comes into focus.

What’s next: Key risks and opportunities

With traders eyeing Fed commentary, the White House’s next move on tariffs, and global efforts to finalize U.S. trade deals, volatility is set to remain elevated. FX markets are particularly sensitive to surprises in Fed nominations and further signs of political interference in policy setting. Dollar bears will be watching for any cracks in global risk sentiment, while bulls need to see a hawkish turn from the Fed or easing of trade threats.

Meanwhile, commodity currencies and indices will respond quickly to swings in oil and industrial metals, as supply headlines and OPEC+ moves collide with slowing demand indicators.

Bottom line

Policy uncertainty, political risk, and shifting rate expectations are driving near-term price action in FX and commodities. The dollar remains vulnerable while global markets recalibrate to the new landscape, one shaped by trade wars, central bank politics, and the relentless search for yield.