The US Dollar (USD) strengthened significantly against major currencies, driving the AUD/USD and EUR/USD pairs to multi-month and one-year lows, respectively, as traders ramped up expectations for further Federal Reserve (Fed) rate hikes in response to persistent inflation. The AUD/USD pair fell for the third consecutive day, reaching its lowest level since April 7 and trading near the 0.6900 mark. This decline followed a muted market reaction to mixed Australian inflation data, with headline CPI falling 0.7% in May and the annual rate easing from 4.2% to 4.0%, the slowest pace in three months. However, the trimmed mean CPI rose 0.4% in May, lifting the annual core rate to 3.6% [1]. Despite the Reserve Bank of Australia's (RBA) readiness to tighten policy further if inflation remains above its 2%-3% target, and traders pricing in about 15 basis points of additional tightening for the year, the AUD remained under pressure due to a firmer USD and global equity selloff [1].
The EUR/USD pair also extended its decline for a third straight day, dropping to a one-year low around 1.1365, down nearly 0.15% for the day. This move was attributed to the bullish USD, which was buoyed by expectations of at least one more Fed rate hike this year—either in September or December—as nine of the Fed's 19 committee members indicated the need for further tightening [1][3]. The USD Index (DXY) reached a 13-month high, overshadowing the European Central Bank's (ECB) hawkish stance and exerting further pressure on the euro. Technical indicators for EUR/USD, including a Relative Strength Index (RSI) near 21 and a negative MACD, suggest persistent downside pressure, though the oversold conditions may prompt a near-term consolidation or modest bounce. Any recovery would likely face resistance at the 100-day SMA at 1.1544 [3].
Meanwhile, the EUR/JPY cross extended its losses for a third consecutive day, trading around 183.60 and testing the lower boundary of a symmetrical triangle near 183.50. The pair remains below key moving averages and the session VWAP, with the 14-day RSI near 36, indicating that downside momentum may be losing intensity but still favors the bears. A confirmed breakdown below the triangle's support could trigger further selling, while a recovery above the VWAP at 184.28 would signal a potential reversal. Until then, the immediate bias remains to the downside [2].
Currency performance tables reinforce the USD's dominance, with the greenback showing the strongest gains against the New Zealand Dollar over the past week (+3.16%) and notable strength against the Australian Dollar (+2.36%) and Euro (+2.16%) [3]. The Australian Dollar was the weakest against the USD this week, declining by 1.44% [1].
Geopolitical tensions, particularly mixed US-Iran messages regarding Tehran's nuclear program, contributed to elevated risk premiums and further supported the USD's safe-haven appeal [1][3].
CONCLUSION
The US Dollar's broad-based strength, fueled by hawkish Fed expectations and geopolitical risks, has driven the AUD/USD and EUR/USD pairs to multi-month and one-year lows, respectively, while also pressuring EUR/JPY. Despite some oversold technical signals, the immediate market bias remains bearish for these pairs unless key resistance levels are reclaimed. The market's focus remains on upcoming Fed decisions and global risk sentiment, with further USD gains possible if current trends persist.