Daily Forex Market Review: US Dollar Weakens to New Lows of the Year!

The US dollar index hit its lowest point since 2024 last week after dovish comments from Federal Reserve Chairman Jerome Powell led global currency markets to expect a more cautious Fed stance than previously thought.

This has led to continued selling pressure, causing the US Dollar to fall further and further today!

As August draws to a close, the dollar index has fallen 3.3% so far this month, marking the biggest monthly decline since November 2022.

Will the US dollar continue its recent decline, or could certain factors halt the decline and even turn things around?

The short-term outlook for the US dollar depends on several key factors.

First, the trade-off in the Japanese yen could put some pressure on the dollar. Second, the strength of the US labor market is crucial.

Robust employment figures will reduce the number of Federal Reserve interest rate cuts expected this year, further strengthening the dollar’s position.

The value of the dollar is often affected by the perception of China’s economy. When market participants are pessimistic about China’s economic performance, the dollar tends to strengthen.

But if China’s economy shows signs of improvement, the dollar could weaken.

When China’s economy improves, global investors tend to become more optimistic about growth prospects. This increased appetite for risk often leads to a shift away from safe-haven assets such as the US dollar, causing it to weaken.

This scenario aligns with the dollar smile theory, where heightened global economic optimism often underlies the “smile” – a period when the US dollar tends to be weaker as investors look for opportunities in growing economies such as China.

Overall, the dollar’s direction in the coming months will depend on a combination of domestic jobs data and global views on China’s economy.

Forex market movements

Let’s analyze the forex price action today.

Which currency pairs gained the most today?

NZD/USD was the leader of the pack, winning 0.77% or 41 kernels.

As our FX Market Movers page shows, GBP/USD and NZD/CAD won the silver and bronze medals today.

Looking at the NZD/USD trend following the valuation, it shows a Bullish rating.

The currency pair managed to climb back above ALL of its major moving averages, which are now acting as dynamic support areas.

But the NZD/USD overbought/oversold rating shows “Overbought“.

Which currency pairs lost the most today?

USD/CHF he was the biggest loser, falling 0.67% or 56 kernels.

Looking at USD/CHF pivots, price below ALL pivot support levels!

The power of currency

What was the overall strength or weakness of individual major currencies today?

Based on the currency strength meter on MarketMilk™, NZD was by far the strongest currency, while USD it was the weakest currency.

If we dig a little deeper and look at how the major currency pairs have moved over the past 24 hours, we can see how USD/CHF started to fall during the European session.

Short term currency trends

When it comes to the strength of short-term trends, NZD shows the greatest power.

The USD shows the greatest bear power.

Currency Trend Momentum

Trend momentum refers to the probability that the price will continue to move in the current direction. USD currently showing a very bearish momentum.

Currency Heatmap

If we take a look on our currency heat mapwe can see the weakness USD over time intervals.

Currency volatility

Which currency was the most volatile today?

Based on our currency volatility meter, it is JPY.

See today’s rise in volatility for major currencies. Notice how volatile JPY it was in the last 24 hours.

Which currency PAIR was the most volatile today?

given that JPY was the most volatile currency, which pair?

NZD/USD was the most volatile, moving 0.99% or 60 pips.