The US dollar experienced a decline to new session lows against multiple currency pairs late in the North American afternoon yesterday; however, there has been minimal continuation of this trend today. The dollar shows strength against the majority of G10 currencies today amid low trading volumes. The key points feature an unanticipated dovish stance maintained by the Reserve Bank of New Zealand alongside a weaker UK Consumer Price Index. A number of financial hubs in the Asia Pacific area are currently observing prolonged holidays. The ongoing negotiations between the US and Iran, as well as those between Russia and Ukraine, have heightened geopolitical tensions. Japan has committed to the initial portion of the $550 investment initiative established to circumvent increased US tariffs. However, the specifics regarding the allocation of new funds compared to loans and loan guarantees remain uncertain. The market response appears to be limited; however, it likely paves the way for a cordial meeting next month between President Trump and Prime Minister Takaichi. Today’s US economic calendar is packed, but the key events of the week, such as the initial estimate of Q4 GDP and a potential Supreme Court decision regarding the president’s tariff authority, are yet to come. The euro experienced a decline, reaching a seven-day low yesterday, just above $1.1800. The asset rebounded to establish a new session peak in the New York afternoon, approaching $1.1855, which may indicate the formation of a bullish hammer candlestick pattern.

However, there was virtually no continuation of buying activity today. Preliminary support appears to be established around $1.1830; however, a revisit to the lows observed yesterday remains a possibility. The five-day moving average is crossing below the 20-day moving average for the first time in almost a month. The dollar achieved a four-day peak against the yen yesterday, just below JPY154.00. The price retreated to around JPY153 today but has since recovered, moving closer to JPY154.00. A breach of the JPY154.35 level will enhance the dollar’s technical outlook. This may indicate a progression towards JPY155, which serves as a technical retracement target and aligns with the 20-day moving average. The United States and Japan have finalized a deal involving a $36 billion investment in US oil, gas, and essential materials, which is part of the broader $550 billion commitment established in response to the potential for increased tariffs. The trade minister has indicated that merely 1-2% will be in cash, while loans and loan guarantees will serve as the primary funding mechanism.

The underwhelming UK employment figures have been succeeded by lackluster inflation statistics. The probability of a rate cut next month has increased to just above 80%, up from approximately 70% a week prior, as indicated by the swaps market. Yesterday, the British pound declined to below $1.35 for the first time since January 23. The price rebounded to nearly $1.3560 following the close in London; however, the technical damage has been inflicted. On Monday, the five-day moving average fell below the 20-day moving average for the first time in nearly a month. The current trading activity reflects a subtle movement, positioned approximately one-third of a cent above the $1.3350 mark. A decisive move beyond $1.3500 may aim for the $1.3440-60 zone. The US dollar continued its upward trajectory against the Canadian dollar yesterday. The greenback reached its lowest point last Wednesday near CAD1.35, marking a significant outside up day. It approached CAD1.37 yesterday before retracing to the session low around CAD1.3635 during the North American afternoon. A bearish shooting star pattern appears to have developed; however, follow-through selling was limited today, and the US dollar has rebounded to the CAD1.3665 region. The peak for the month approached CAD1.3725 on February 6.

A support zone is identified within the CAD1.3575-CAD1.3600 range. There exists a total of $1.4 billion in options at CAD1.36 set to expire today, alongside an additional amount nearing $680 million that will expire tomorrow. The Australian dollar experienced downward pressure, reaching a six-day low yesterday and briefly dipping below $0.7030 before recovering to achieve new session highs close to $0.7090. The area has remained stable today, with the Australian dollar being pressured downward by the overall strength of the US dollar and the surprising dovish stance taken by the Reserve Bank of New Zealand, which resulted in the New Zealand dollar reaching a new eight-day low close to $0.5990. Options totaling nearly A$500 million at a price of $0.7000 are set to expire tomorrow.