FX Daily: USD rally getting tired?
At a Glance
The desk posits that the recent USD rally appears to be losing momentum, driven by a lack of upward traction despite a backdrop of shaky risk sentiment. Per the full note source, even with a mixed signals from US data, including a downward revision on Q1 personal spending to 0.5%, the dollar's recent gains may be over-extended, suggesting a potential correction ahead. While the upcoming days remain devoid of high-impact data, the upcoming payroll release on July 4 and CPI on July 14 could alter the USD's trajectory. Our FX consensus remains modest, indicating a divergence in views across firms that forecast strengthening against the EUR and JPY.
Key Takeaways
Full Analysis
What the desk is arguing
The desk argues that the USD's recent bullish trend shows signs of fatigue, especially as equity corrections in Asia don't bolster the dollar as one might expect. Per the commentary, the mix of risk factors suggests that the USD is pricing in too many positives which may not materialize in the medium term.
The data landscape is mixed, with the Q1 personal spending revision pointing to lower consumer activity at 0.5%, while GDP is slightly better at 2.1%. These contradictions highlight the fragility of broader dollar support, increasing the case for a potential USD correction.
Where it sits in our coverage
For the EUR/USD, our consensus target stands at 1.2000, with range estimates spanning from 1.1200 to 1.2000 as reported by the firms: - citi: Dec26 target of 1.1200 - deutschebank: Dec26 target of 1.2500 - hsbc: Dec26 target of 1.1800
This places our current coverage near the upper end of the range. The desk's bearish outlook for the USD diverges from the more optimistic targets held by deutschebank and hsbc.
How other firms see it
Several firms maintain a bearish stance on the USD, indicating a view that suggests further downside could be realized. Notably, citi has a target of 1.1300 for March 2026, reflecting skepticism about sustained upward momentum in the near term. Conversely, firms like deutschebank and hsbc foresee stronger performance from the EUR.
This narrative intersects with the USD/JPY dynamics, as the market establishes 162.0 as a key threshold for potential intervention by the BoJ to manage yen depreciation, highlighting the significant challenges for USD strength moving forward.
Market Implications
Traders should monitor the USD's ability to maintain support around current levels, particularly against EUR/USD and USD/JPY. Upcoming payroll data on July 4 is critical and could act as a pivotal event for positioning ahead of potential reversals.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2027 |
|---|---|---|
Goldman Sachs | Bearish | 1.1200 |
UOB | Neutral | 1.1450 |
Citi | Bearish | 1.1000 |
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Articles FX Daily: USD rally getting tired? 08:08 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Risk sentiment remains shaky, but the dollar hasn't taken advantage of the latest correction in Asian equities. That may fit our view that USD is pric
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