United States
The US dollar has entered the week displaying mixed directional momentum across the G10 complex. After extending gains through much of the Asian and early European sessions, the greenback encountered selling pressure as European traders came online, setting up a potentially lower open for North American participants. The exception remains the Japanese yen, where the dollar has maintained its bid despite technical overextension that threatens to trigger official intervention responses.
From a policy perspective, the week presents a lighter schedule for US economic data releases. The May New York Federal Reserve’s service survey carries minimal market impact beyond headline risk, following a notable softening in the manufacturing component to 7.3 from the previous 11.0. Services sector momentum already showed weakness in April at -14.0, suggesting underlying economic resilience may be questioned as the year progresses. The March Treasury International Capital (TIC) flows data will be released toward the end of the session, offering insights into foreign capital positioning in US financial assets.
Contrary to widespread market narrative regarding foreign investor retreat from US equities and fixed income, recent TIC data reveals a more constructive picture. Foreign investors purchased a net $1.41 trillion of US paper assets during 2025, representing an increase from $1.22 trillion in 2024 and substantially above the $840 billion recorded in 2023. The TIC series remains volatile, with every quarter in 2024 recording at least one month of net liquidation. However, Q1 2026 data showed January experiencing net outflows that were more than offset by a robust $184.50 billion net inflow in February, suggesting foreign demand for US assets remains resilient despite headline concerns.
The US Treasury market has experienced significant repricing at the long end of the curve. The 10-year Treasury yield has risen to its highest level in more than a year, gaining approximately 18 basis points at the close of last week—the second-largest weekly move among G10 sovereigns. The 10-year yield is trading near 4.60%, while the 30-year Treasury yield has moved firmer to approximately 5.13%. These moves reflect broader global yield pressures and represent a meaningful repricing of inflation and growth expectations for the US economy.
Geopolitical developments continue to influence market risk sentiment. Following the conclusion of the US-China summit, President Trump’s rhetoric toward Iran has escalated following reports of Iranian drone activity targeting a nuclear facility in the United Arab Emirates. The concrete outcomes of the Trump-Xi meeting may not become clear until the administration makes a decision regarding the proposed $14 billion arms package to Taiwan. The willingness to consider this package as negotiable has created diplomatic tensions with US allies, while simultaneous announcements of troop withdrawals from Germany and a halt to rotations into Poland have compounded concerns about the US security commitment to NATO members.
The dollar index reflects these cross-currents, with the greenback positioned to open the North American session on a softer footing after European selling, though the technical setup suggests dip-buying may emerge from North American traders viewing weakness as a tactical opportunity.
Eurozone
The euro has experienced pronounced weakness throughout the trading week, with EUR/USD establishing a distinctly bearish technical pattern. The single currency was sold below $1.1620 during the European morning session and subsequently spent the majority of the North American session trading below $1.1640. The euro’s weekly decline of approximately 1.4% represents the largest weekly loss in two months, with the currency falling on every trading session throughout last week.
Technical deterioration has accelerated, with the euro making new weekly lows in late dealings ahead of the weekend before settling decisively below the lower Bollinger Band. This breakdown extended into the Asia Pacific session, where EUR/USD probed as low as slightly below $1.1610 before recovering to reach $1.1645 in European trading. While this intraday rebound may represent near-term support, the technical picture remains decidedly negative with the next meaningful support zone identified at $1.1580–$1.1600.
Option expiry dynamics warrant close attention from traders managing EUR/USD positions. There are 3.75 billion euros of options expiring at the $1.1600 strike today, which represents a significant clustering of institutional positioning. Additionally, nearly 1.3 billion euros of options are concentrated at the $1.1650 strike, with an additional 2.0+ billion euros of options expiring tomorrow at this same level. These option expirations create potential pinning opportunities and may influence intraday price action, particularly as European traders look to manage gamma exposure into the close.
The euro’s weakness reflects both technical momentum deterioration and fundamental concerns regarding eurozone economic resilience. European benchmark yields are mostly firmer, though without the magnitude of moves seen in the US or Japan, suggesting ECB policy remains relatively constrained compared to other central banks. The Stoxx 600 equity index has declined approximately 0.25% in early European trading after dropping nearly 1.5% before the weekend, indicating broader risk-off sentiment impacting the region.
United Kingdom
Sterling has joined the broader G10 currency weakness, with cable experiencing significant losses throughout the trading week. GBP/USD fell on every trading session last week, with the pound recording a weekly decline of approximately 2.2%—the largest weekly loss since November 2024 and breaking a five-week rally that had preceded this deterioration. The pound reached $1.3315 before the weekend, settling decisively below the lower Bollinger Band for the second consecutive session.
The technical breakdown in sterling has been accompanied by domestic political drama, as the Labour party navigates internal turbulence despite leading the country into what was perceived as a strong electoral victory merely two years ago. This political uncertainty adds a layer of complexity to sterling’s technical picture, potentially weighing on investor confidence in the currency.
Cable has edged closer to $1.33 in early trading today before rebounding to almost $1.3385. The lower Bollinger Band is positioned near $1.3365 today, representing a key technical reference point for traders. The pre-weekend high was slightly above $1.3400, which may prove sufficient to cap any attempted rally today. The technical setup suggests limited upside potential in the near term, with the pound vulnerable to further losses if support at $1.3315 fails to hold.
UK benchmark yields have moved modestly lower, with the 10-year Gilt yield off approximately 2 basis points, underperforming the broader global yield rally seen last week. This relative underperformance suggests the Bank of England’s policy stance may be perceived as less restrictive than peers, potentially contributing to sterling’s currency weakness. The pound’s technical deterioration and political backdrop create a challenging environment for cable bulls in the near term.
Canada
The Canadian dollar presented a paradox last week, delivering the strongest performance among G10 currencies against the US dollar while simultaneously reaching its lowest level in a month. The loonie’s 0.55% weekly decline, despite being the best performer in the group, underscores the severity of broad-based US dollar strength across the currency complex.
USD/CAD has demonstrated persistent strength, with the greenback trading slightly through CAD1.3765 before the weekend—a level that represents a minor overshoot of the 50% retracement of the dollar’s losses since the March 31 high near CAD1.3965. The US dollar has held below the pre-weekend high and currently trades around CAD1.3735. The Canadian dollar has now fallen for eight consecutive trading sessions, reflecting the relentless nature of the dollar’s rally.
From a technical perspective, the US dollar has settled slightly above the upper Bollinger Band at approximately CAD1.3760 today. Historical precedent from January and March suggests that when the dollar reaches above the upper Bollinger Band in this pair, the greenback typically trades near cyclical highs, indicating potential for consolidation or pullback. Initial support for USD/CAD is identified near CAD1.37.
It is worth noting that Canadian markets are closed today for Victoria Day, which will limit trading volumes and potentially reduce the ability to establish new technical signals. This holiday closure may result in thinner liquidity and wider spreads for traders seeking to adjust positions in USD/CAD.
Australia
The Australian dollar has experienced a notable technical breakdown after establishing a new three-year high on May 6 near $0.7280. Despite the upside momentum that had characterized the aussie’s performance, the broad-based strength of the US dollar proved too formidable an obstacle, forcing a retracement of recent gains.
AUD/USD reached $0.7140, marking the lowest level in ten trading days, before follow-through selling accelerated the decline. The aussie probed a new low for the month today near $0.7120, indicating that technical support levels have been decisively breached. A bid subsequently emerged that lifted the currency back to almost $0.7170, though this recovery appears tentative.
While a marginal new high remains technically possible given the intraday volatility, the $0.7180 area may prove sufficient to cap any attempted rally. The technical picture suggests the aussie remains vulnerable to further losses, with the breakdown from the May highs establishing a new downtrend that could extend toward lower support levels if momentum deteriorates further. The combination of US dollar strength and broader risk-off sentiment in global equities has proven detrimental to the commodity-linked Australian dollar.
China
The Chinese yuan has faced headwinds from broader US dollar strength, though the People’s Bank of China appears willing to accept modest currency weakness as part of its policy framework. The greenback reached CNH6.8165 before the weekend, establishing its best level since May 6 and positioning slightly ahead of the 20-day moving average. The dollar’s pre-weekend advance snapped an 11-session decline in the offshore yuan, suggesting the PBOC’s tolerance for weakness has limits.
USD/CNH reached CNH6.8215 earlier today before pulling back to almost CNH6.7975, indicating some consolidation after the initial thrust higher. The dollar can potentially rise toward CNH6.85 without inflicting substantial technical damage to the longer-term trend structure. The PBOC set the official daily fix at CNY6.8435, compared to CNY6.8415 the previous day and the multi-year low of CNY6.8401 recorded last Thursday. This pattern of gradual fix adjustments suggests the central bank is managing the currency’s depreciation in an orderly fashion rather than allowing sharp, disruptive moves.
China’s real sector data released earlier today revealed concerning momentum. The economy expanded by 1.3% quarter-over-quarter in Q1 2026 for a year-over-year pace of 5.0%, but Q2 began poorly. Retail sales growth decelerated sharply to 0.2% year-over-year in April from 1.7% in March, indicating consumer spending is struggling to maintain momentum. Industrial production growth slowed to 4.1% year-over-year, down from 5.7% in March, suggesting manufacturing activity is losing steam.
Fixed asset investment dynamics have deteriorated as well, with the measure falling 1.6% on a year-to-date year-over-year basis after rising 1.7% in March. This reversal suggests the recent stabilization in investment activity was short-lived and vulnerable to renewed weakness. The property sector continues to act as a significant drag on the Chinese economy. House prices remain under downward pressure, property investment is contracting, and residential property sales are running almost 16% below last year’s sales through April. Despite years of policy efforts to stabilize the housing market, the structural challenges persist, weighing on both consumer confidence and business investment decisions.
Japan
The Japanese yen has become the focal point of market attention as the US dollar has extended its rally to levels that threaten to trigger official intervention from Japanese authorities. USD/JPY has risen for five consecutive sessions and reached JPY158.85 before the weekend, with gains extended today to almost JPY159.10—the strongest level since the Bank of Japan reportedly intervened to support the yen on April 30. The market is openly testing Japanese officials’ resolve, knowing that intervention at these levels would represent a significant policy statement.
The technical picture has turned decidedly bullish for dollar strength. The dollar recorded a bullish outside up day last Thursday by trading on both sides of Wednesday’s range and settling above Wednesday’s high, establishing a pattern that typically presages further upside. Follow-through buying materialized on Friday, and despite awareness that the market is tempting intervention, momentum has continued to build. The dollar has closed above the 20-day moving average for the second consecutive session before the weekend and has surpassed the 61.8% Fibonacci retracement of the losses incurred during the April intervention episode, suggesting the intervention-driven decline has been substantially reversed.
Option expiry dynamics add another layer of complexity to the yen picture. There are $4.7 billion of options expiring at JPY159 today, creating a significant cluster of positioning at a level that has proven psychologically important to both the market and Japanese policymakers. This option expiry may influence intraday price action as traders manage gamma exposure and institutional flows.
Japan’s Prime Minister Takaichi has reconsidered her initial reluctance regarding fiscal stimulus and has now endorsed a supplemental budget to help households and businesses cope with the commodity price shock. This policy shift has implications for long-term Japanese government bond supply, as the additional spending will require funding. The 10-year Japanese Government Bond yield has edged up to 2.71%, while the longer end of the curve has experienced more pronounced moves, with 30-year and 40-year yields rising 6–9 basis points. The 10-year JGB yield increase of 20 basis points last week was the largest among all G10 sovereigns, reflecting both the supply concerns from the supplemental budget and broader global yield pressures.
Japan will report Q1 2026 GDP data first thing tomorrow. With less of a drag from inventory adjustments and a small positive contribution from net exports, the Japanese economy is expected to have expanded by approximately 0.4% quarter-over-quarter after 0.3% growth in Q4 2025. On an annualized basis, the pace is projected to accelerate to 1.6% from 1.3%. However, consumption and business spending are expected to slow, suggesting momentum may be moderating. The GDP deflator may moderate to around 3.1% from 3.4% according to median forecasts in Bloomberg’s survey, indicating that inflation pressures may be easing somewhat.
The intervention risk in USD/JPY remains elevated given the technical strength and the psychological importance of the JPY159 level. Japanese policymakers have demonstrated a willingness to intervene when they perceive yen weakness as disorderly or excessive, and the current technical setup suggests the market is pushing the boundaries of their tolerance.
Emerging Markets
Emerging market currencies have faced significant pressure from the combination of rising global interest rates and broad-based US dollar strength. The Mexican peso has established a base around MXN17.16 before the greenback sprang higher ahead of the weekend. USD/MXN traded slightly above MXN17.40, marking the dollar’s best level since May 5. The pair is consolidating quietly today between approximately MXN17.29 and MXN17.37. The MXN17.4225 area corresponds to the 61.8% Fibonacci retracement of this month’s decline, suggesting this level may attract technical selling if the dollar attempts to push higher.
The Brazilian real has experienced particularly severe weakness, with USD/BRL establishing a base around BRL4.88 before jumping higher beginning in the middle of last week. The greenback reached nearly BRL5.0820 before the weekend, marking its strongest level since April 9. A new funding scandal has emerged involving the Bolsonaro family, adding to domestic political uncertainty. The next technical area of note for USD/BRL is positioned around BRL5.1050–BRL5.1200, suggesting further weakness in the real remains possible if technical support fails to hold.
The Colombian peso has experienced consistent selling pressure for the past three weeks, driven by domestic political concerns and doubts regarding the independence of the central bank. The dollar rose in each trading session last week and reached almost COP3821 before the weekend. The high for the year was established in early January near COP3839, suggesting the current weakness in the peso may have further to run if the political backdrop continues to deteriorate.
The Indian rupee has weakened considerably, with rising oil prices and higher global interest rates continuing to drag the currency lower. Counting today, the rupee has fallen for seven consecutive sessions, establishing a clear downtrend. The dollar reached a record high of approximately INR96.3925 in late dealings, establishing new ground in the USD/INR pair. The Reserve Bank of India has begun investigating foreign investments by Indian companies, potentially adding another layer of complexity to capital flow dynamics and currency pressures.
Global Markets
Equity markets have experienced significant selling pressure, with nearly all bourses in the Asia Pacific region declining, with the notable exceptions of South Korea, Singapore, and India. Europe’s Stoxx 600 is trading off approximately 0.25% after dropping nearly 1.5% before the weekend, indicating that the selloff has extended into the European session. US Nasdaq futures are off slightly, while S&P 500 futures are down approximately 0.3%, suggesting that North American equities may open on a softer footing as well.
The fixed income complex has experienced significant repricing, particularly at the long end of the curve. The US, Germany, Japan, and UK have all seen their benchmark 10-year yields rise to the highest levels in more than a year. The 10-year US Treasury yield gained approximately 18 basis points at the close of last week, representing the second-largest weekly move among G10 sovereigns after Japan’s 20 basis point increase in the 10-year JGB yield. Yields have begun the week with a firmer bias, suggesting the repricing may continue. The 10-year Treasury yield is trading near 4.60%, while the 30-year Treasury yield is a bit firmer at 5.13%.
Precious metals have experienced significant selling pressure as a result of rising real interest rates and broad US dollar strength. Gold reached almost $4774 last Tuesday before probing $4512 ahead of the weekend. The metal slipped below $4500 today for the first time since the end of March, establishing new technical lows. Gold recovered to almost $4560 in early European activity but momentum stalled, suggesting further weakness remains possible. A close below $4500 could target $4400, representing a significant technical breakdown if this support level fails to hold.
Silver has experienced similarly pronounced weakness, having been turned back after approaching $90 in the middle of last week. The metal settled the previous week below $77 before follow-through selling drove it below $74 today. Silver has subsequently steadied, but the technical picture remains decidedly negative with the metal vulnerable to further losses if momentum deteriorates.
Crude oil has experienced significant strength, with July WTI crude settling at two-week highs slightly above $101 before establishing a new contract high today around $104.35. The previous contract high was recorded on April 30 at approximately $103.80—notably the same day that the Bank of Japan reportedly intervened to support the yen. The recent surge in oil prices reflects heightened geopolitical tensions following reports of Iranian drone activity targeting nuclear facilities in the United Arab Emirates, as well as broader supply concerns. The energy complex’s strength contrasts sharply with weakness in precious metals and equities, reflecting the complex risk-on/risk-off dynamics currently at play in global markets.
