On Wednesday, the US Dollar (USD) maintained a firm stance against major currencies, supported by a hawkish repricing of the US Federal Reserve's (Fed) rate outlook and ongoing geopolitical tensions involving the United States and Iran. The USD/CAD pair consolidated gains above 1.3800, trading at 1.3815 after a 1.7% rally over the previous three weeks, as a pullback in crude oil prices weighed on the Canadian Dollar (CAD) and the Bank of Canada (BoC) faced a challenging economic environment marked by a 'low fire, low hire' labor market [2]. The Fed is now expected to hike rates at least once this year, providing additional support to the Greenback [2].
Meanwhile, the AUD/JPY cross declined to around 113.95 in early European trading after Australia's Consumer Price Index (CPI) inflation for April rose by 4.2% year-on-year, below both the previous month's 4.6% and the market expectation of 4.4%. The monthly CPI was 0.4% in April, down from 1.1% in March. This softer inflation print led financial markets to price in a 93% probability that the Reserve Bank of Australia (RBA) will hold its Official Cash Rate steady at the June policy meeting, according to the ASX RBA Rate Tracker [1]. Despite the decline, technical analysis suggests the broader bullish trend for AUD/JPY remains intact as the pair holds above key moving averages [1].
The GBP/USD pair traded cautiously near 1.3450, pressured by both geopolitical uncertainty surrounding US-Iran relations and declining UK gilt yields. On Tuesday, Iran condemned US attacks on Iranian boats and missile-launching strikes, while the US described these as 'defensive' actions. Iran's IRGC also reported intercepting a hostile MQ-9 drone. US Secretary of State Marco Rubio indicated that a deal with Iran may take a few more days, dampening hopes for an early breakthrough [3]. Additionally, 10-year UK gilt yields fell to 4.82%, the lowest in over a month, as expectations for a near-term Bank of England (BoE) rate hike diminished [3].
Technical indicators across the major pairs reflect mixed or sideways momentum. For USD/CAD, the Relative Strength Index (RSI) is around 60, suggesting constructive momentum, while the MACD is slightly negative, hinting at consolidation [2]. GBP/USD remains below its 20-day EMA at 1.3470, with the RSI in a neutral 40-60 range, indicating indecisiveness [3]. For AUD/JPY, the RSI is at 54, showing positive but not overstretched momentum [1].
A currency heat map for the week shows the US Dollar was strongest against the Japanese Yen, with a 0.32% gain, and posted modest gains against other majors, including a 0.17% rise versus the Canadian Dollar and a 0.18% rise versus the Australian Dollar [2].
CONCLUSION
The US Dollar's resilience is underpinned by expectations of further Fed tightening and safe-haven demand amid geopolitical tensions, while commodity-linked and risk-sensitive currencies face headwinds from softer economic data and central bank caution. Technical signals suggest consolidation and indecision across major pairs, with no clear breakout in sight. Market participants remain attentive to upcoming economic data and geopolitical developments for further direction.