The US dollar softened across several pairs on 29–30 July after the Federal Reserve kept rates at 3.5–3.75%. Markets had still priced around a one-third chance of a hike via CME FedWatch up to the decision, and three FOMC members dissented in favour of tightening. Expectations for a move on 16 September remained, while the implied probability edged to about 60%; attention turns to the 7 August NFP and July inflation on 12 August. US advance Q2 GDP printed 1.5% versus a 2.1% consensus and 2.1% in Q1, with slower investment and government spending offset by firmer consumption. Imports rose as exports cooled, and the 1.5% figure is expected to be revised. In the Gulf, peace talks stayed unresolved as the US struck targets in Iran; American light oil held around $80–85.
Sterling rebounded from about $1.327 as the Bank of England’s MPC voted 6–3 to hold at 3.75%, rather than the 7–2 consensus. Traders also tracked technical levels including the 20 SMA, with the 100 and 200 SMAs above, while ATR and volume were little changed. USD/CAD fell, even as the Bank of Canada flagged easing inflation; tariff risks and haven demand remained in view. A 20/50 SMA “death cross” and a $1.40 support area were watched, alongside $1.425 as a medium-term reference into the 7 August jobs data.
—Summer Liquidity and Key US Data Events
As we enter the historically quieter month of August, we advise derivative traders to prepare for lower market liquidity, which historically drops by 10% to 15% during the summer holiday season. Despite this seasonal slowdown, our focus must remain on the upcoming US non-farm payroll (NFP) report on August 7 and the inflation data on August 12. These key events will likely dictate the US dollar’s direction after its recent decline following the Federal Reserve’s decision to hold rates at 3.5-3.75%.
GBP/USD and USD/CAD Technical Levels and Energy Market Impact
For GBP/USD (Cable), we suggest watching the 20-day Simple Moving Average (SMA) as the pair bounces from its recent low near $1.327. Since the Bank of England showed a hawkish tilt with a surprise 6-3 vote to hold rates at 3.75%, sterling has found strong support, though heavy dynamic resistance lies ahead at the 100 and 200 SMAs. We recommend setting tight stop-losses on sterling longs, as any escalation in the Gulf region could quickly revive safe-haven demand for the greenback.
We see a similar range-bound pattern for USD/CAD, which is currently testing the critical psychological support level of $1.40. Historically, USD/CAD tends to find strong buyers near this threshold, and the monetary policy divergence between the Fed and the more dovish Bank of Canada supports our medium-term target of $1.425. Traders should look to buy on dips near $1.40, especially if the August 7 dual employment data from both the US and Canada favors the American economy.
We must also closely monitor energy markets, where US light oil is holding steady between $80 and $85 per barrel amid ongoing military tensions in the Gulf. This price stability suggests that while geopolitical risks remain, inflation expectations for the Fed’s September 16 meeting are currently capped. With the market currently pricing in a 60% chance of a rate hike in September, any sudden spike in oil prices could quickly shift these odds and trigger sharp moves in currency derivatives.
