The dollar is experiencing a drop as European morning trade starts. The greenback continues to lose popularity due to ongoing uncertainty from Trump’s tariff policy. EUR/USD has risen by 0.5%, moving above the 1.1400 mark. This aligns with the technical breakout observed last week, indicating an upward trend.
Current market sentiments indicate stability in trends until major changes occur in the trade war scenario. USD/JPY has decreased by 0.8%, now at 142.38, reflecting a smaller gain for the yen. Additionally, USD/CHF has declined from 0.8190 earlier, now down by 0.2% to 0.8135, showing slight strengthening of the Swiss franc against the dollar.
Momentum Shift In Currency Markets
We’re now seeing traders lean further into positions favouring currencies like the euro and the Swiss franc, buoyed by the dollar’s ongoing slide. The move above 1.1400 in the euro-dollar pair reinforces momentum that started building after it broke resistance last week. That prior resistance level had capped gains for several sessions, so we interpret this week’s move as a follow-through supported by broader sentiment rather than just technical buying.
What is key here is not only the dollar’s continued softness, but how the market is responding to it across other currency pairs. The drop in USD/JPY to 142.38 shows that safe-haven flows into the yen are being renewed, though not aggressively so. Traders seem to be pricing in the ongoing risks around global trade dynamics in a measured way, particularly when it comes to Asia-Pacific exposures.
The franc, holding modest strength around 0.8135 against the dollar, suggests that the Swiss currency is becoming a preferred store over the short-term. That move isn’t abrupt, but it’s steady—indicative of a quiet but growing shift in sentiment. More importantly, these levels are not short-term blips; rather, they reflect growing fatigue with the dollar as a reliable hold during such policy-driven turbulence.
From our view, shorter-dated volatilities in major currency pairs could remain elevated, but we’re not expecting this to be one-way traffic. For those actively positioned in futures or swaps, sudden retracements from overbought EUR/USD or slightly oversold USD/JPY shouldn’t be ruled out. Positions that have performed well on this dollar drift may need reassessment, particularly if we see even minor adjustments in geopolitical rhetoric.
Instruments with higher sensitivity to rate divergence or trade policy expectations are especially worth watching now. We are watching basis spreads and options skews with added interest—there may be pricing inefficiencies as traders refocus their risk after this week’s shift. That said, there’s not much appetite at the moment for taking on fresh dollar exposure unless paired with high carry or tied to idiosyncratic flows.
Calibrating For Continued Trends
The pace matters. This isn’t a panic reaction, but a consistent adjustment. The divergence between European currencies and those with closer trade ties to the US is painting an increasingly clear picture for the week ahead. There may be opportunities in near-term range setups if momentum stalls after this stretch. Tightening stops or rotating into delta-neutral structures could preserve recent gains while allowing exposure in case trends resume.
In the background, we’re seeing interest rate expectations being repriced marginally, largely around non-dollar economies. The inflation and growth outlooks being published across Europe and parts of Asia are now ranking higher in pricing models, which means decisions driven purely by US data may be sidestepped temporarily.
As always, we’ll keep an eye on underlying positioning metrics. The pace at which traders rotate out of long-dollar bets is giving us the information we need to recalibrate short-term exposure.
