The US dollar commenced trading on a stronger note, coinciding with Japan’s holiday observance. However, the announcement that the Justice Department issued grand jury subpoenas to the Federal Reserve on Friday regarding the renovations of the Fed’s headquarters unsettled the markets. Fed Chair Powell issued a concise statement rejecting the charges, asserting they were a “pretext” for dissatisfaction with the Fed’s interest rate policy. The dollar, US Treasuries, and equities have experienced selling pressure, resulting in a steepening of the yield curve. These developments have curtailed our expectations for an additional recovery of the dollar following its decline from late November to late December. We expected it to be bolstered by the favorable jobs report and this week’s projected strong CPI along with enhanced retail sales and industrial production. In the geopolitical landscape, the ongoing protests in Iran pose a significant risk to the stability of the regime, overshadowing the situation in Venezuela.

The Dollar Index is breaking a four-day upward trend today. Since Christmas Eve day, we have experienced the second consecutive session of losses. It achieved a peak of 99.26 prior to the weekend, marking its highest point since December 9. It has been sold to 98.70 today, retreating below the 200-day moving average (98.80). The euro’s 0.40% increase during the European morning marks its most significant rise since December 22. There may have been some purchasing activity linked to options, as options worth nearly 1.1 billion euros at $1.1650 are set to expire today. The euro approached the $1.1700 mark during the initial trading session in Europe. Intraday support is positioned within the $1.1670–75 range. The pre-weekend high was marginally above $1.1660.

The dollar reached a new peak against the yen, approaching JPY158.20 early today, before experiencing widespread selling pressure. The value decreased to nearly JPY157.50. It attempted to advance but established a lower high. The dollar has remained below JPY158 during European trading hours. Options for $1.45 billion expire in North America today. Sterling is exhibiting characteristics of a potential bullish outside up day. It fluctuated around last Friday’s range and is currently above its high (~$1.3450). The session high was observed near $1.3475 during the European morning hours. Resistance is observed in the $1.3480–$1.3500 range. The greenback has remained within the pre-weekend range against the Canadian dollar (~CAD1.3860–CAD1.3920). Support could be observed around CAD1.3840, coinciding with the expiration of nearly $560 million in options. The Australian dollar has rebounded from last Friday’s low around $0.6665 to approximately $0.6715. The intraday momentum indicators are currently stretched; however, there is potential for an upside extension towards the $0.6730 region in North America.

The dollar faced resistance before the weekend, hovering around MXN18.04. It closed under MXN18.00 and was traded at MXN17.8965 today. A shelf was established in the initial days of the year around MXN17.87. The PBOC established the dollar’s fix today at CNY7.0108, marking a new low since October 2024. The greenback was traded at CNH7.9660 against the offshore yuan, marking a new low since May 2023, with a possibility of a decline to CNH6.80. Indications suggest the dollar initially appreciated by approximately 4.1% against the Venezuelan bolivar last week, marking its 23rd consecutive weekly gain. The dollar experienced a decline of nearly 0.70% against the Argentine peso last week, its first weekly drop in five weeks, after Treasury Secretary Bessent announced that Argentina repaid its swap line borrowings, eliminating the Exchange Stabilization Fund’s exposure to the peso.