Insights 
VT 
Key Points:
- Dollar Index (USDX) eased to 97.91 as risk appetite returned.
- EUR/USD climbed to $1.1621, its highest since October 2021.
- US 2-year yield dropped to 3.7870%, a 1.5-month low.
The dollar continued its slide on Wednesday, unable to regain ground after markets embraced risk on news of a shaky ceasefire between Iran and Israel. U.S. President Donald Trump brokered the truce earlier this week, bringing a 12-day air conflict to a tentative halt.
Despite the conflict reprieve, macroeconomic signals in the US continue to paint a mixed picture. Fed Chair Jerome Powell, during his semi-annual testimony to Congress, reiterated the central bank’s cautious stance and showed no urgency to cut rates.
However, markets aren’t waiting. The CME FedWatch Tool now places an 18% chance of a rate cut as soon as July, and nearly 60 basis points of easing are priced in by December. A key driver of this shift is weakening consumer confidence—June data showed an unexpected drop as households voiced growing concerns over job availability.
This dovetails with softening yields. The two-year Treasury yield fell to a 1.5-month low of 3.7870%, reflecting lower near-term policy expectations. The benchmark 10-year yield hovered at 4.3043%.
Technical Analysis
The dollar extended its retreat, closing at 97.43, down from the 98.99 high seen just a day earlier. The chart shows a clear, sustained downtrend with the price unable to reclaim even the 97.70 zone. MACD remains weak, while the moving averages slope downward with little sign of reversal.
Picture: Bearish momentum dominates as dollar hovers near 97.30 lows, as seen on the VT Markets app
The session low at 97.28 now serves as short-term support, but pressure remains heavy.
Should economic data continue to underperform and inflation pressures ease despite tariffs, the Fed may shift toward rate cuts in Q3. This scenario would add further downside pressure on the dollar, particularly against the euro and risk-sensitive currencies.
