US Dollar Strengthens Across the Board as Fed Holds Rates and Trade Tensions Ease

The US Dollar continues to rally, hitting a two-month high following the Federal Reserve’s hawkish hold and improving global trade sentiment. This upward momentum is pressuring the AUD/USD and NZD/USD pairs, while boosting USD/JPY toward key resistance levels.

🟩 Fed Pause and Global Trade Deals Fuel Dollar Rally

The Federal Reserve kept rates unchanged as expected, but Chair Jerome Powell’s firm tone dashed hopes for a September rate cut. This shift in sentiment helped push the US Dollar Index (DXY) toward 100, locking in its first monthly gain of 2025, up more than 3%.

Traders now see just 35 basis points of easing by year-end, down sharply from earlier expectations. Simultaneously, easing global trade risks—from fresh US agreements with the EU, Japan, and South Korea—have strengthened confidence in the dollar.

🔍 Key FX Movers: AUD/USD, NZD/USD, USD/JPY

AUD/USD – Vulnerable After Wedge Breakdown

AUD/USD trades within an ascending broadening wedge, now testing crucial support at 0.6440. A break below 0.6420 could open the door toward 0.6380 and 0.6320. However, RSI is oversold, hinting at a possible short-term bounce.

NZD/USD – Rebound from 0.5870 Support

NZD/USD rebounded off 0.5870, maintaining its bullish outlook as long as that level holds. A move above 0.6150 is needed for bullish continuation. Failure to hold current support may signal a deeper drop.

USD/JPY – Eyes Break Above 151

USD/JPY climbed past 148.30, targeting 151.00. A breakout here would validate the short-term inverted head and shoulders pattern and suggest further upside toward 153.00. For now, the pair remains in a consolidation zone.

💹 Equities Lose Steam as Yields Rise

Higher US yields, driven by the Fed’s stance, pressured equities. The Dow Jones dropped 0.4% while the S&P 500 edged lower, as investors rotated from stocks to the strengthening US dollar.

Bottom Line:
The combination of a data-driven Fed, trade diplomacy, and resilient US economic indicators is creating a supportive backdrop for the USD. Until a clear dovish pivot emerges, dollar strength may continue to dominate FX markets.

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Yasher Rizwan