Forex Today: Dollar recovery loses steam as focus shifts to Fed

Eren Sengezer FXStreet

Here is what you need to know on Wednesday, July 27:

The US Dollar Index (DXY) seems to have gone into a consolidation phase following Tuesday's decisive rebound. The DXY fluctuates in a tight range near 107.00 in the European morning after having gained 0.7% on Tuesday. Investors stay on the sidelines while waiting for the Federal Reserve to announce its policy decisions. US stock index futures trade in positive territory in the early European session, pointing to an improving market mood. The US economic docket will also feature June Durable Goods Orders, Pending Home Sales and Goods Trade Balance data.

Fed Preview: Powell to reignite dollar rally with promise to crush inflation, whatever the cost.

The risk-averse market environment provided a boost to the dollar on Tuesday. The Kremlin said on Tuesday that Nord Stream's gas supply capacity to Europe would be reduced to 20% from Wednesday because one of the gas turbines had not yet arrived after maintenance in Canada and another one was showing defects. Meanwhile, the city of Wuhan shut public transportation and ordered businesses to close to curb the spread of the coronavirus. City officials also decided to ban large gatherings in Wuhan's Jiangxia district also, where nearly 1 million people reside.

The Fed is expected to hike its policy rate by 75 basis points (bps) later in the day. Investors will look for fresh clues regarding the September rate decision. As it currently stands, the CME Group Fed's Watch Tool shows that markets are pricing in a 50% chance the Fed will opt for a 50 bps hike in September.

Fed Preview: Dollar’s fate hinges on Powell’s policy guidance.

EUR/USD lost more than 100 pips and retreated toward 1.0100 on Tuesday. The pair stays relatively quiet and clings to modest recovery gains near 1.0130 early Wednesday. The European Central Bank will release Private Loans data for June during the European session.

GBP/USD continues to move sideways above 1.2000. The British pound manages to stay resilient against the greenback with market participants pricing in a 50 bps Bank of England rate hike in August.

AUD/USD declined toward 0.6900 during the Asian trading hours on Wednesday. The data from Australia showed that the Consumer Price Index (CPI) jumped to 6.1% on a yearly basis in the second quarter from 5.1% in the first quarter. This reading, however, came in slightly below the market expectation of 6.2%.

After having suffered heavy losses in the second half of the previous week, USD/JPY closed the first two trading days of the week in positive territory and recovered above 137.00.

Gold is having a difficult time making a decisive move in either direction and moving up and down in a tight channel around $1,720. The benchmark 10-year US Treasury bond yield stays calm at around 2.8%, failing to provide a directional clue to XAU/USD.

Bitcoin posts small daily losses but manages to stay afloat above $21,000 early Wednesday. Ethereum trades flat on the day near $1,500.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD remains depressed near 0.6950 after RBA minutes

AUD/USD attracts follow-through selling during Tuesday’s Asian session, looking to extend the overnight rejection slide from 0.7000, or a two-week top, following the release of RBA meeting Minutes. The US Dollar retains a bullish undertone near its highest level since April 2025 as energy-driven inflation risks keep December Fed rate hike bets firmly on the table. Adding to this, geopolitical risks further underpin the safe-haven USD.

USD/JPY eases from two-week top, hovers near 158.50 amid looming intervention risk

USD/JPY edges lower during the Asian session on Tuesday, snapping a two-day winning streak and pulling back from an over two-week top touched the previous day, despite Japan's soft PPI print. Bulls turn cautious amid speculation that authorities will step in to prop up the Japanese Yen, which, in turn, weighs on the currency pair. The downside, however, seems limited as the US Dollar stands firm near its highest level since April 2025, bolstered by the hawkish Fed and geopolitical uncertainties.

Gold struggles above $4.150 as bullish USD and elevated bond yields weigh

Gold remains depressed during the Asian session on Tuesday as elevated US Treasury yields and a hawkish Fed keep the US Dollar near its highest level since April 2025. Adding to this, persistent geopolitical uncertainties stemming from Middle East conflicts continue to underpin the safe-haven buck, which, in turn, is seen as weighing on the bullion. Traders now look to US inflation figures for some impetus ahead of Fed Chair Kevin Warsh's appearance on Friday.

Bitcoin shows bottoming signs despite recent macro pressures

Bitcoin remained range-bound above $82,000 on Monday as upcoming US economic data and onchain indicators weigh on market sentiment. Crypto trading firm QCP Group stated in its Monday report that Bitcoin has maintained a firmer footing a year after the market’s largest single-day liquidation event.

Earnings preview US and Europe: Can the stock market rally continue?

Stocks have been remarkably resilient this year. They have navigated geopolitical turmoil, an energy price spike and surging global bond yields which is rapidly pushing up the cost of borrowing. US blue chip stocks are now in their 4th year of a bull market, however, they now face their toughest test of Q4 so far, the latest earnings updates.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?