Dollar Slips on Moody’s Downgrade, Fed Caution, and Japan Talks:: Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY

Dollar Struggles as Bears Tighten Grip Near Critical Support

The U.S. Dollar Index (DXY) fell to 100.23 on Tuesday, extending its multi-week decline after a failed test of the 50-day SMA at 101.60. The move follows Moody’s downgrade of the U.S. sovereign rating and dovish Fed commentary that emphasized rising fiscal risks and limited scope for rate cuts. Technically, DXY is hovering just above a key support zone at 100.21, and momentum remains bearish. With sentiment skewed negative, any break below 100 could trigger a sharper sell-off.

Euro Bulls Regain Control as Dollar Weakness Deepens

EUR/USD advanced to 1.1250, riding a wave of dollar softness and market confidence in eurozone stability. The pair has reclaimed the 1.1200 level, now acting as support, and pierced resistance just below 1.1300. The 50-period SMA on the 4H chart has turned upward, with price action suggesting continuation toward the 1.1320 region. Unless DXY recovers meaningfully above its 50-day average, the euro may continue to attract buyers.

Sterling Pushes Higher on Trade Reset Tailwinds

The British pound is holding firm at 1.3367 after a 0.6% gain on Monday, following the UK’s post-Brexit defense and trade realignment with the EU. GBP/USD is pressing into resistance near 1.3400, with the 50-period SMA offering a platform at 1.3287. Bullish structure and recent bullish candles on the 4H chart suggest further upside is plausible, particularly if dollar softness persists and sentiment around UK growth stabilizes.

Yen Finds Strength as Japan Yields Surge Ahead of G7 Talks

USD/JPY dropped to 144.74, marking five losses in six sessions as Japanese government bond yields surged and speculation builds around U.S.-Japan currency talks. Verbal signals from Tokyo and elevated JGB yields have added weight to the yen, pushing USD/JPY below the 50-period SMA at 146.03. A close under 144.00 would likely invite momentum-driven selling toward 142.50.

Loonie Holds Its Ground Despite Dollar’s Slide

USD/CAD is treading water near 1.3945, having dipped below its 50-period SMA. The pair is caught between support at 1.3930 and resistance near 1.4000. Although broader dollar weakness continues, the loonie has not seen significant gains, partly due to subdued oil price action. A firm break below 1.3930 could attract bearish positioning with downside potential toward 1.3790.

More Information in our Economic Calendar.