The trading session begins quietly as major currencies show little movement amidst a lukewarm risk atmosphere. Traders are attempting to recover losses from last Friday, impacted by the underwhelming US ISM services PMI, which has resulted in a slow decline of the dollar.<\/p>\n
Changes in currency values today are minimal, marking a continuation of the dollar’s weakening trend following poor jobs data last week. Most dollar currency pair charts, except USD\/CHF affected by Swiss tariffs, display a bias towards selling the dollar, despite today’s subdued activity.<\/p>\n
EUR\/USD has risen by 0.6% this week, staying above its key hourly moving averages (100-hour at 1.1607, 200-hour at 1.1552). GBP\/USD increased by 1.3% this week, also above its crucial hourly averages (100-hour at 1.3337, 200-hour at 1.3307). In contrast, USD\/CHF is up 0.5%, sitting between its key averages (100-hour at 0.8073, 200-hour at 0.8082). AUD\/USD and NZD\/USD have gained 1.0% and 0.9% respectively, above their important hourly averages.<\/p>\n
The bias against the dollar is expected to persist until the upcoming US CPI report, a critical event for those hoping for a reversal in the dollar’s fortunes.<\/p>\n
The recent turn against the dollar seems justified given the latest data we have seen. The US economy added only 95,000 jobs in July 2025, falling far short of expectations and confirming a cooling labor market. This was compounded by the ISM services report dropping to 50.8, its lowest point in over a year.<\/p>\n
This gives us a clear near-term bias to position against the dollar leading into next week. Derivative traders could consider buying call options on pairs like EUR\/USD and AUD\/USD to gain upside exposure with limited risk. The technicals support this, with most major pairs holding firmly above their key short-term moving averages.<\/p>\n
The current quiet spell in the market presents an opportunity, as volatility appears cheap. The Cboe FX Volatility Index (FXVIX) has fallen to 6.5, suggesting options are not fully pricing in the potential fireworks around the upcoming CPI data. Buying straddles or strangles on EUR\/USD could be a way to play the event itself, profiting from a large move in either direction.<\/p>\n
This setup reminds us of the summer of 2023, when weaker inflation data triggered a significant and rapid dollar decline. That historical precedent suggests we should be wary of being caught on the wrong side if the CPI print next week comes in soft. A miss on the forecasted 0.3% month-over-month Core CPI for July could accelerate the current trend.<\/p>\n
While most dollar pairs look weak, we should be cautious with USD\/CHF due to the unique pressure from Swiss tariffs. The main event for all dollar pairs, however, remains the US inflation report next week. A number hotter than expected is the primary risk that could swiftly reverse this entire dollar-selling narrative.<\/p>\n
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