The dollar initially strengthened against the majority of G10 currencies but faced selling pressure in Europe, leading to a lower opening in the North American session, with the exception of its performance against the Japanese yen. Japan’s Prime Minister Takaichi has reassessed her previous hesitance and has endorsed a supplemental budget aimed at assisting households and businesses in navigating the challenges posed by the commodity shock. Following the conclusion of the US-China summit, President Trump has intensified his rhetoric regarding Iran in light of reports indicating that Iranian drones have targeted a nuclear facility in the UAE. Today, July WTI attained a contract high approaching $104.35. The definitive results of the Trump-Xi meeting are likely to remain unclear until the United States reaches a decision regarding the $14 billion arms package for Taiwan. However, to entertain the notion of the arms package as negotiable may not sit well in the capitals of US allies, particularly as the US has also declared a troop withdrawal from Germany and has suspended the rotation into Poland.

The dollar’s decline in Europe has extended the intraday momentum indicators, and North American investors may perceive the dip as a fresh buying opportunity. Today, there are several significant option expirations worth mentioning. First, there are nearly 1.3 billion euros at $1.1650, with today’s high reaching approximately $1.1645. There are slightly over 2 billion euros worth of options set to expire tomorrow. At a level of $1.1600, there exists a total of 3.75 billion euros in options set to expire today. Focusing on the Japanese yen, the market appears to be testing the resolve of Japanese officials, with $4.7 billion in options at JPY159 set to expire today. The euro traded under $1.1620 during the European morning ahead of the weekend, maintaining a position predominantly below $1.1640 throughout the North American session. The weekly decline of 1.4% represents the most significant drop in two months. It declined in each session last week. It reached new weekly lows in late trading ahead of the weekend and concluded below the lower Bollinger Band. The losses extended to just under $1.1610 during the Asia Pacific session before rebounding to $1.1645 in Europe. In the absence of a session high, it appears to be nearly so. The subsequent technical zone of support is $1.1580-$1.1600. Options amounting to 3.75 billion euros are set to expire at $1.1600 today, alongside nearly 1.3 billion euros at $1.1650. Tomorrow, options for just over 2.0 billion euros at $1.1650 will expire.

The dollar appreciated over the last five sessions against the Japanese yen, culminating at JPY158.85 prior to the weekend. The gains have been extended today to nearly JPY159.10, marking its highest level since the Bank of Japan reportedly intervened on April 30. The dollar exhibited a bullish outside up day last Thursday, trading on both sides of Wednesday’s range and closing above its previous high. Follow-through buying emerged on Friday, although the market is aware of the allure of potential material intervention once more. The dollar concluded the trading day above the 20-day moving average for the second consecutive session ahead of the weekend, exceeding the (61.8%) retracement of the losses prompted by intervention. Options for 4.7 billion at JPY159 expire today. The strengthening dollar coincides with political turmoil as Labour contemplates ousting Starmer, who guided them to a significant victory merely two years prior. Sterling, similar to the yen and euro, experienced a decline each day throughout the previous week. Sterling’s approximate 2.2% decline last week interrupted the five-week rally and represented the most significant weekly loss since November 2024. Sterling declined to $1.3315 prior to the weekend. It closed beneath the lower Bollinger Band for the second consecutive session. It inched nearer to $1.33 today before recovering to nearly $1.3385. The lower Bollinger Band is positioned around $1.3365 today. The pre-weekend high was marginally above $1.3400, which could potentially serve as a ceiling for today’s performance.

Despite being the top performer among G10 currencies against the US dollar last week, the Canadian dollar’s 0.55% decline resulted in it reaching its lowest level in a month. The US dollar slightly surpassed CAD1.3765 before the weekend, exceeding the (50%) retracement of its losses since the March 31 peak (~CAD1.3965). The greenback has remained below the pre-weekend high, currently trading around CAD1.3735. The Canadian dollar has experienced a decline over the last eight consecutive sessions. The US dollar concluded slightly above the upper Bollinger Band, approximately CAD1.3760 today. In January and March, when it appreciated, the greenback was approaching a peak. Initial support is observed around CAD1.37. Canadian markets are not operational today in observance of Victoria Day. The upward momentum had been faltering despite the Australian dollar achieving a new three-year peak on May 6 close to $0.7280. The substantial appreciation of the US dollar ultimately overwhelmed the Australian dollar, leading to its decline prior to the weekend. It reached 0.7140, the lowest level in 10 days. Continued selling pressure resulted in the Australian dollar reaching a new monthly low today, approaching $0.7120. The Australian dollar experienced an uptick, rising to nearly $0.7170. While a marginal new high is possible, the 0.7180 area may serve as a cap.