The US dollar has come under pressure again after a brief technical rebound, as falling long-dated Treasury yields erode the rate support that had helped underpin the currency. Expectations that the US Treasury could expand its bond buyback operations have added support to the Treasury market and pushed yields lower, narrowing the dollar’s advantage in rate-sensitive FX trades and sending USD/CAD and USD/CHF back into decline.
Safe-haven demand linked to tensions around Iran is still offering the dollar some support, but so far that has not been enough to reverse the broader near-term softening. The next test now comes from a heavy run of US data and comments from Federal Reserve officials, which could determine whether the dollar can regain momentum.
Lower Treasury yields undercut the dollar's recovery
The recent bounce in the dollar increasingly looks like a corrective move rather than a change in trend. As longer-term US Treasury yields ease, demand for the greenback has cooled.
One of the main drivers has been market focus on the possibility of larger Treasury buyback operations. A broader buyback programme would typically improve liquidity in the government bond market and help support prices, which in turn tends to put downward pressure on yields.
For currency markets, lower yields directly reduce the dollar’s appeal against other major currencies, particularly at a time when investors remain alert to signs of a slowdown in US growth. That has left the dollar with less room to extend its rebound.
GDP revision, core PCE and spending data take center stage
Markets are due to digest a dense slate of US macroeconomic releases, including the revised second-quarter GDP reading, core personal consumption expenditures price index data, personal income and spending figures, and durable goods orders.
Current expectations point to second-quarter US GDP growth being revised down to 1.5% from 2.1%. If that downgrade is confirmed, it would reinforce the view that growth momentum is slowing. At the same time, core PCE is expected to rise 3.3% year on year and 0.2% month on month.
A combination of softer growth and still-sticky inflation would complicate the policy picture for the Fed. Cooling activity would make markets more sensitive to the prospect of eventual easing, while elevated core inflation would limit the room for any policy shift. For the dollar, that mix may not produce a clean one-way move, but it could raise intraday volatility significantly.
Fed communication could reshape rate expectations
Alongside the data, traders will be watching how Fed officials assess inflation risks and signs of slower growth. If policymakers strike a cautious tone, markets could reprice expectations around how long rates may need to stay high. If their comments lean more heavily toward growth concerns, the dollar’s near-term pullback could deepen.
At this stage, the dollar’s direction is not just about whether one data point beats or misses forecasts. What matters more is whether the overall mix changes the market’s view of the Fed’s policy path.
USD/CHF gives back last week's gains and tests 0.8000 again
USD/CHF rebounded to 0.8045 last week, but the move has since faded, with the pair slipping back toward the 0.8000 level. On the daily chart, the rebound was followed by a dark cloud cover pattern, suggesting selling pressure has re-emerged and that the short-term bullish push lacked follow-through.
If the dollar weakens further, USD/CHF could break below 0.7980 and move toward the previous low near 0.7950. That area is likely to be an important test of whether bearish momentum remains intact.
On the other hand, if the pair can re-establish itself above 0.8045, the current negative technical structure would be weakened and the market could start to price in another corrective rebound.
Key events for USD/CHF include Switzerland’s ZEW economic expectations index as well as US core PCE and GDP data. That leaves the pair exposed not only to the dollar side of the equation, but also to shifts in Swiss sentiment data.
USD/CAD turns lower again, with 1.3740 to 1.3780 back in focus
USD/CAD is showing a similar pattern. After attempting to extend its previous recovery, the pair has turned lower once more. The daily chart also points to a dark cloud cover formation, indicating clear resistance during the rebound phase.
If the current decline continues, USD/CAD could retreat further toward the 1.3740 to 1.3780 zone. That range will be a key reference point for judging whether the short-term downswing is broadening.
For a renewed corrective rebound to take shape, USD/CAD would first need to regain and hold above 1.3870. Only a convincing move through that level would suggest the earlier drop is shifting into a temporary adjustment rather than simply continuing the broader trend.
Canada wholesale sales, US crude inventories and Barkin remarks in view
In addition to US data, USD/CAD will also be sensitive to Canada’s wholesale sales figures. A firmer domestic reading could provide the Canadian dollar with added support.
US crude inventory data is another item to watch. Because the Canadian dollar tends to track moves in oil prices, volatility in the crude market can filter through to USD/CAD via both commodity-linked flows and broader risk sentiment.
Markets are also monitoring comments from Federal Open Market Committee member Thomas Barkin. If he maintains a firm focus on inflation risks, the dollar could find some support. If he places greater emphasis on slowing growth, that could add to near-term selling pressure on the greenback.
Dollar's next move hinges on whether data confirms slowing growth and sticky inflation
The dollar’s rebound has clearly lost momentum, with lower Treasury yields acting as the main drag. Geopolitical tensions are still generating some safe-haven demand, but not enough for now to deliver a sustained upside move.
The next move in USD/CAD and USD/CHF will depend heavily on whether the US GDP revision, core PCE, consumption figures and durable goods data confirm a picture of slowing growth without meaningful relief on inflation. If the releases come in weaker than expected, the dollar could remain under pressure and both pairs may extend their declines. If the numbers prove resilient or beat forecasts, the greenback may attract renewed buying and stage another corrective recovery. For markets, the key issue is not just the data level itself, but whether it changes expectations for the Fed’s policy balance.