The US Dollar might fall below the previous week’s low of 146.60, though it is not expected to hit 145.80. The longer-term outlook for the Dollar remains negative, yet it is unclear if it has sufficient momentum to reach 145.80.
In the past 24 hours, the US Dollar dropped to a low of 147.07, contradicting prior expectations that it would stay above 147.20. With increasing momentum, a dip below 146.60 is plausible, though further declines to 145.80 are not anticipated. Any recovery is expected to remain under 147.65, with minor resistance at 147.35.
Short Term Trading Range
Over the next one to three weeks, the Dollar is likely to trade between 147.20 and 149.20. Previously revised to a neutral stance, the view is now back to negative given the recent sharp drop to 147.07. It is uncertain if the Dollar will reach the 145.80 level, but a strong resistance remains at 147.95.
The US Dollar’s recent slide is mainly due to the July 2025 Consumer Price Index report, released this week, which came in cooler than economists had predicted. This has led us to believe the Federal Reserve might hold interest rates steady, putting downward pressure on the dollar. Consequently, we see a potential break below the 146.60 support level in the coming days.
For traders using derivatives, we are considering bear put spreads to capitalize on this expected decline toward, but not necessarily through, the 146.00 area. This could involve buying a put option with a strike price near 147.00 and selling a put with a lower strike, perhaps around 146.00. This strategy defines the risk while targeting the modest downward move we anticipate.
We must watch the resistance at 147.65 and 147.95 very carefully. Looking back, we saw similar dollar weakness in late 2023 when markets first began to price in future rate cuts from the Fed. Any unexpectedly strong US economic data, like the upcoming retail sales report, could cause a sharp reversal and test those upper bounds.
Monetary Policy Speculation
Adding to the pressure is persistent speculation that the Bank of Japan may be shifting away from its historically loose monetary policy. Recent commentary from Tokyo has hinted at a growing tolerance for a stronger yen to combat their own domestic inflation, which recently hit a multi-year high. This dual pressure from a potentially dovish Fed and a less-dovish BoJ reinforces our negative dollar view for the next few weeks.
Implied volatility in options has ticked up, reflecting the market’s uncertainty about whether the 145.80 level will be reached. Given the strong resistance at 147.95, selling out-of-the-money call options with strike prices at or above 148.50 could be a viable strategy. This approach is designed to collect premium, profiting from time decay and the dollar failing to stage a significant recovery.
