Trading forex isn’t just about charts and indicators—it’s also about understanding what’s moving the market this week. Here’s a look at how the fundamentals are shaping the behavior of major currencies, from the US dollar to the Aussie. This overview helps traders like you on Vestrado make smarter, more confident trading decisions.
USD: Delay in Rate Cut Does Not Support the Dollar
Although the Federal Reserve’s next rate cut is now projected for Q4, this hasn’t lifted the dollar’s strength. One reason? Market participants are demanding a higher interest rate premium to hold on to USD. Why? Uncertainty. Or as analysts like to call it, “strategic ambiguity.” When things feel uncertain, traders require more reward for the risk.
Key Insight for Vestrado Traders: Just because the Fed delayed cuts doesn’t mean USD will automatically gain strength. Stay alert for changes in sentiment and Fed tone.
EUR: Benefiting from Diversification Out of USD
The euro is attracting strong buying interest, especially as investors look to diversify away from US dollar assets. Futures traders now hold their largest net long position in EUR since September 2024—around 100,000 contracts.
The pullback in EUR/USD recently approached the $1.1050 level, and strong buying emerged, signaling that traders view euro dips as buying opportunities.
Key Insight for Vestrado Traders: Euro’s performance is supported by long-term positioning. Consider EUR/USD buy setups on retracements.
JPY: Correlation with Dollar Index at Historic Highs
The Japanese yen may not be reacting as strongly to the US 10-year bond yields anymore, but it’s showing a strong relationship with shorter-term US yields. In fact, the JPY’s correlation with the US 2-year yield is around 0.50, which is high. Even more striking, over the last 30 days, the exchange rate and the Dollar Index have shown a 0.90+ correlation, the highest since the 1990s.
Key Insight for Vestrado Traders: If you’re trading USD/JPY, keep an eye on the Dollar Index and short-term US yields. These are driving yen movements now more than ever.
GBP: Mixed Signals Amid Political and Economic Pressure
The British pound (GBP) is facing a complicated picture. At first glance, stronger Q1 growth and a jump in April’s CPI suggest that the Bank of England might delay a rate cut. But look deeper and both numbers are likely overstated. Expectations are that growth and inflation will slow.
On top of that, Prime Minister Starmer’s approval is sliding, and his political gamble to counter Reform Party messaging has caused backlash in his own Labour ranks. Meanwhile, a limited trade deal with the US might give a small boost to UK car exports—but at the cost of some regulatory control.
Despite this turbulence, GBP held steady against the euro last week, even after tariff threats stirred the market.
Key Insight for Vestrado Traders: GBP trades may face volatility from domestic politics and US-EU tariff risks, so monitor headlines closely.
CAD: Following the Dollar, Not Oil
The Canadian dollar (CAD) is acting differently than usual. Typically, you’d expect it to track oil prices or risk sentiment. But lately, CAD is following the US Dollar Index more closely.
Its 30-day correlation with the Dollar Index is around 0.72, the highest all year. Interestingly, CAD usually moves in the opposite direction of the S&P 500, but over the last month, they’ve been positively correlated—something we haven’t seen since late 2021.
Key Insight for Vestrado Traders: If you’re trading CAD pairs, don’t just watch oil—keep an eye on the USD Index and S&P 500 as well.
AUD: Driven by Rate Cuts and Global Equities
The Reserve Bank of Australia (RBA) just cut rates by 25 basis points, as expected. Markets are already pricing in another cut in August.
However, AUD traders should be aware that the exchange rate isn’t moving much on economic data. Instead, it’s reacting more to the general direction of the USD and the performance of the Canadian dollar.
Even more interesting—AUD has been tracking global equities, especially the S&P 500 and China’s CSI 300 index, over the last 60 sessions.
Key Insight for Vestrado Traders: If you’re in AUD trades, equity sentiment and cross-rate performance (AUD/CAD) may offer more clues than traditional Aussie macro reports.
Summary Table: Weekly Currency Drivers at a Glance
| Currency | Key Drivers This Week | Vestrado Trading Takeaway |
| USD | Fed delay, strategic ambiguity | Don’t expect a rally—watch yield spreads |
| EUR | Diversification inflows, pullback buying | Consider long positions on dips |
| JPY | Correlation with Dollar Index, short-term yields | Monitor Dollar Index strength closely |
| GBP | Slowing growth/inflation, political risk | Stay nimble, headlines may move markets |
| CAD | Correlation with DXY and S&P 500 | Watch USD direction and equities |
| AUD | RBA cut, equity correlation | Consider AUD plays vs CAD or equity indices |
What Should Vestrado Traders Do Now?
In this kind of market, flexibility and focus on intermarket correlations are key. You don’t need to memorize all the fundamentals—but knowing which currencies are sensitive to what can help you make smarter entries and exits.
Here’s what you can do now:
- Stay updated with Fed and RBA policy updates
- Use economic calendars to track CPI, growth, and trade releases
- Watch global indices like the S&P 500 and CSI 300
- Consider using a demo account on Vestrado to test new strategies before going live
Trade Smarter With Vestrado
Whether you’re trading the US dollar or looking for opportunities in euro or yen pairs, Vestrado gives you the tools, education, and support to trade confidently. From beginner-friendly platforms to deep market insights like this one, we’ve got you covered.
Ready to take action? Open your live or demo account with Vestrado today and stay one step ahead in the forex market.
