The US dollar rose on Monday as currency traders, disregarding US President Donald Trump’s recent threat of imposing high tariffs on China, turned their attention to the progress of a possible trade deal between the world’s two largest economies.
Trump’s unexpected threat on Friday to “significantly raise” tariffs on Chinese goods dealt a heavy blow to the US dollar and the stock market, reminiscent of the situation earlier this year when the White House’s trade policy statement overturned the market and dragged the US dollar down to its worst first half in 50 years.
Jordan Rochester, head of macro strategy for Europe, the Middle East and Africa at Mizuho Bank, said, “Although the market had to react to the US tariff news on Friday, I suspect many people will try to view this as a TACO in the making.” The Trump administration aims to open up more rare earth exports from China in the upcoming negotiations. He cited a deal called “Trump is Always Timid”.
“This is not a repeat of April,” Rochester added, referring to the 4% drop in the dollar after Trump announced the Emancipation Day tax, marking its worst monthly performance in more than two years. First of all, the market consensus has already been bearish on the US dollar. In addition, hedging measures against currency depreciation have been in place.
Standard Chartered Bank strategists Nicholas Chia and Steven Englander raised their expectations for the US dollar in 2026 on Monday, believing that traders will increase their bets on the Federal Reserve cutting interest rates in the coming months. They expect that around the middle of next year, the euro will reach $1.13 against the US dollar, which is about 2.5% lower than the current spot level.
Sonja Marten, head of foreign exchange and monetary policy at the German Central Cooperative Bank, told Bloomberg Monitoring: “We are seeing more and more people realize that for many investors, there are not many options other than the US market.” In the short term, the euro against the US dollar is bound to face some additional downside risks.
Admittedly, the latest currency options position data indicates that traders are bearish on the US dollar in the short term, although they remain optimistic about the long-term prospects of the dollar. Some Wall Street giants, including Goldman Sachs and jpmorgan Chase, stated in a research report on October 10 that they still hold a negative view of the US dollar.
As the federal government shutdown has entered its 13th day and there is a lack of key data to drive the market, investors will closely watch the quarterly earnings results of enterprises to be released this week to understand the state of the US economy.
Strategists say the government shutdown has instead supported the dollar as it has limited traders’ response to macro data – especially before the Fed announces its next policy decision later this month. Swap traders currently expect that Federal Reserve officials led by Jerome Powell will cut interest rates by 25 basis points on October 29.
Jane Foley, head of currency strategy at Rabobank, said: “Once official U.S. data is restored, short covering should enable the dollar to better assess the outlook for the U.S. economy and the Federal Reserve.”
Technical analysis
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Gold: Yesterday, the buy limit reminder in the green area of our plugin perfectly achieved a 10 times profit-loss ratio. It is recommended to reduce positions, promote protection and then continue holding. At the same time, pay attention to the low buying opportunities around 4130/4120 within the day. It is recommended to try 1-2 times here. Both buy limit and scan liquidity should be noted. If you want to continue chasing the signal of breaking momentum at a high level, it is recommended that the profit-to-loss ratio contract to 1:1. For detailed locations, please consult the plugin.
(15-minute chart of gold
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Nasdaq: The operation in the blue area reminded by the plugin yesterday, “buy stop”, can achieve a profit and loss ratio of more than 1. The price is currently blocked and retreating above 24,850. If it breaks below the overnight low of 24,540/50, it may further decline. Within the day, we suggest waiting for a low scan of liquidity around 24,000/24100 before seeking long signals for operation. For detailed locations, please consult the plugin.
(Nasdaq 15-minute chart
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Crude oil: Yesterday, the trend of buying after a pullback following the breakthrough of the blue momentum did not occur. Today, we will continue to maintain yesterday’s strategy for another day. The yellow color below can be temporarily removed today to observe the effect. If it rebounds and rises after a decline, then you can continue to try for a bullish signal in the second half of the week. For detailed locations, please consult the plugin.
(Crude oil 15-minute chart
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Key financial data and events to focus on today:
The unemployment rate in the UK for August at 14:00
The ZEW Economic Sentiment Index for October in Germany is released at 17:00
At 20:45, Federal Reserve Governor Bowman delivered a speech
At 23:30, US Federal Reserve Chair Powell delivered a speech at an event hosted by the National Association for Business Economics
