Dollar Rebounds, Risk FX Holds Strong | 2nd July, 2025

Dollar Rebounds, FX Resilient

On July 2, 2025, the US Dollar remains under pressure as expectations for a September rate cut build, driving gains across major currencies. Silver (XAG/USD) hovers near $36.00, slipping slightly as the USD stages a modest rebound. GBP/USD flirts with fresh highs above 1.3750, buoyed by broad-based dollar weakness. NZD/USD extends above 0.6100, supported by dovish Fed bets and strong risk appetite. The Japanese Yen trades weaker near 146.20, giving up earlier strength as US yields recover. Meanwhile, the Australian Dollar sees limited upside after May retail sales missed forecasts, rising only 0.2% versus 0.4% expected. Focus now turns to US jobs data and Fed commentary for direction heading into the July 4 holiday period.

Silver Price Forecast (XAG/USD)

Current Price and Context

Silver (XAG/USD) trades just below $36.00, slipping modestly amid a slight recovery in the US Dollar. The metal remains rangebound, reflecting indecision among traders awaiting clearer signals on US interest rate policy. While broader USD weakness has recently supported silver, today’s mild dollar bounce and lack of fresh geopolitical drivers have limited upward momentum.

Key Drivers

Geopolitical Risks: A calmer global backdrop reduces safe-haven demand for silver, keeping the metal in consolidation mode.

US Economic Data: Rising expectations for Fed rate cuts in Q3 have recently helped silver hold above $35.80, but today’s dollar strength weighs slightly.

FOMC Outcome: The Fed remains data-dependent. Markets are pricing in a 75% chance of a September rate cut, keeping silver supported despite today’s pause.

Trade Policy: With minimal trade disruption headlines, industrial demand factors are taking precedence in driving silver sentiment.

Monetary Policy: Real yields are softening, which typically favors silver, but the current pullback reflects market hesitation ahead of US data.

Technical Outlook

Trend: Neutral to slightly bearish near-term.

Resistance: $36.20, then $36.55 and $37.00.

Support: $35.80, then $35.40 and $34.90.

Forecast: Silver may consolidate in the $35.80–$36.55 range. A breakout above $36.55 could trigger a push toward $37.00, while stronger USD data may push it back below $35.50.

Sentiment and Catalysts

Market Sentiment: Mixed; traders await more decisive Fed signals. Social chatter highlights tight silver ranges and dollar-watch focus.

Catalysts: US ADP and NFP jobs data, ISM Services PMI, Fed speakers, and Treasury yield direction.

Sterling Forecast (GBP/USD)

Current Price and Context

GBP/USD trades above 1.3750, nearing multi-month highs as the US Dollar continues to weaken under the weight of rising Fed rate cut expectations. Sterling is benefiting from strong risk-on flows and a stable UK economic backdrop. With limited domestic data this week, GBP is riding global macro sentiment and dollar softness to maintain its bullish momentum.

Key Drivers

Geopolitical Risks: Reduced global tensions support risk-on sentiment, indirectly benefiting high-beta currencies like the pound.

US Economic Data: Weaker US data and dovish Fed commentary are driving USD lower, allowing GBP/USD to extend gains.

FOMC Outcome: The Fed’s softening tone and rising probability of a rate cut in September support further GBP strength as policy divergence narrows.

Trade Policy: No major UK-EU headlines today; sterling remains insulated from trade drama and focuses on USD movement.

Monetary Policy: The BoE maintains a cautious hold; with UK inflation slowly easing, policy is steady, giving sterling relative stability.

Technical Outlook

Trend: Strong bullish momentum; price is pressing against key resistance levels.

Resistance: 1.3770, then 1.3830 and 1.3860.

Support: 1.3700, followed by 1.3650 and 1.3600.

Forecast: GBP/USD may extend toward 1.3830 if USD remains under pressure. Any hawkish Fed surprise or strong US data could trigger a pullback to 1.3700.

Sentiment and Catalysts

Market Sentiment: Bullish; traders on X and forums are increasingly calling for a test of 1.3800+ as dollar sentiment fades.

Catalysts: US labor data, Fed speakers, global equity sentiment, and UK services PMI (due later this week).

NZD/USD Forecast

Current Price and Context

NZD/USD trades above 0.6120, extending its rally as market expectations for a September Fed rate cut fuel demand for risk-sensitive assets. The New Zealand Dollar is further supported by improving global risk sentiment and a weaker US Dollar, despite the absence of fresh domestic catalysts. The pair is approaching short-term resistance amid strong bullish momentum.

Key Drivers

Geopolitical Risks: Calmer global conditions support commodity-linked and high-beta currencies like the Kiwi, especially in a weak-USD environment.

US Economic Data: Recent data has fallen short of expectations, driving down the US Dollar and lifting NZD/USD toward a three-week high.

FOMC Outcome: Fed officials have maintained a dovish tone, reinforcing market bets for at least one rate cut before year-end.

Trade Policy: No major trade disruptions; steady New Zealand-China trade ties support export sentiment and the NZD outlook.

Monetary Policy: RBNZ remains in a wait-and-see mode, but relative dovishness from the Fed is driving the policy divergence in favor of NZD. 

Technical Outlook

Trend: Bullish continuation; breakout confirmed above 0.6100.

Resistance: 0.6135, then 0.6170 and 0.6200.

Support: 0.6080, then 0.6050 and 0.6015.

Forecast: NZD/USD may push toward 0.6170 if USD remains weak and risk appetite persists. A stronger-than-expected US NFP report could cap upside near 0.6135.

Sentiment and Catalysts

Market Sentiment: Bullish; traders highlight NZD’s technical breakout and short-squeeze potential above 0.6150.

Catalysts: US labor market data, Fed speakers, risk sentiment across APAC equities, and China-related macro releases.

USD/JPY Forecast

Current Price and Context

USD/JPY trades near 146.20, recovering modestly from one-month lows as the US Dollar stabilizes and Treasury yields bounce. The Japanese Yen remains under pressure due to the Bank of Japan’s continued dovish stance and reduced safe-haven flows. Despite lingering concerns over global trade tensions, the pair lacks strong directional conviction, caught between a weakening USD and ultra-loose BoJ policy.

Key Drivers

Geopolitical Risks: A lull in global tensions weakens the Yen’s safe-haven appeal, allowing USD/JPY to bounce from recent lows.

US Economic Data: Mixed data has led to short-term USD softness, but upcoming labor market reports could revive rate volatility and impact the pair.

FOMC Outcome: The Fed’s dovish lean has pressured the USD broadly, but the BoJ’s ultra-loose stance keeps USD/JPY supported on dips.

Trade Policy: Concerns over US tariffs remain in the background, but no escalation has been observed, leaving limited impact on JPY flows.

Monetary Policy: The Fed is pricing in a rate cut, while the BoJ remains firmly dovish — reinforcing a persistent policy divergence that supports the upside for USD/JPY.

Technical Outlook

Trend: Sideways to mildly bullish; supported above 145.50.

Resistance: 146.60, then 147.20 and 147.80.

Support: 145.80, then 145.20 and 144.70.

Forecast: USD/JPY may range between 145.80–146.60. A break above 146.60 could signal a push toward 147.20, while a drop below 145.80 reopens downside toward 145.20.

Sentiment and Catalysts

Market Sentiment: Neutral to slightly bullish; traders are cautious ahead of US NFP and watching for further movement in US yields.

Catalysts: US NFP and ISM data, Japanese wage and inflation figures, US-Japan trade commentary, and Fed-BoJ divergence updates.

AUD/USD Forecast

Current Price and Context

AUD/USD trades near 0.6820, consolidating recent gains as Australian retail sales for May rose only 0.2% versus 0.4% expected. While the weaker data tempers bullish momentum, the pair remains supported by broader US Dollar weakness and improved global risk sentiment. Traders are now focusing on upcoming US jobs data and China’s macro signals for further direction.

Key Drivers

Geopolitical Risks: With geopolitical tensions easing, risk sentiment supports the Aussie, though momentum is dampened by soft domestic data.

US Economic Data: Dovish Fed expectations continue to weigh on the greenback, helping AUD hold near recent highs despite weaker local economic figures.

FOMC Outcome: The market expects the Fed to cut rates in Q3, narrowing the policy divergence and benefiting AUD/USD.

Trade Policy: Stable China-Australia relations and steady commodity demand offer a moderate tailwind for the Aussie.

Monetary Policy: RBA is likely to hold rates steady in July, especially after today’s soft retail sales, which reduce any near-term hawkish bias.

Technical Outlook

Trend: Mildly bullish; supported above 0.6780 but capped below 0.6850.

Resistance: 0.6845, then 0.6880 and 0.6900.

Support: 0.6795, then 0.6760 and 0.6725.

Forecast: AUD/USD may remain rangebound between 0.6795–0.6845 ahead of US NFP. A clean break above 0.6845 could trigger a push to 0.6880+ if risk-on sentiment strengthens.

Sentiment and Catalysts

Market Sentiment: Neutral to mildly bullish; sentiment remains tied to USD performance and Chinese demand indicators.

Catalysts: US nonfarm payrolls, China Caixin services PMI, RBA policy guidance, and risk sentiment in Asia-Pacific equities.

Wrap-up

Markets on July 2, 2025, are driven by shifting Fed rate expectations and a softer US Dollar. Sterling and the Kiwi outperform on risk optimism, while the Yen weakens against the recovering greenback. Silver drifts slightly lower but remains resilient, while AUD lags following weaker retail sales data. With nonfarm payrolls and ISM services due later this week, traders remain cautiously positioned ahead of a potentially volatile US holiday backdrop.

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