The dollar index extended its decline as weak U.S. retail sales data raised doubts about economic resilience, reinforcing expectations of Fed rate cuts. Treasury 10-year yields fell to 4.45%, pressuring the greenback further. Trade tensions eased, with tariffs now seen as a negotiation tactic, while Ukraine peace talks gained momentum, lifting market sentiment.

Euro Climbs on Persistent Short Covering

The euro rallied, with EUR/USD rising from 1.0125 to 1.0514, driven by real money flows rather than speculative bets. Positioning data shows net short positions remain high, suggesting further upside potential as traders unwind shorts.

Yen Strengthens as U.S. Yields Decline

USD/JPY extended losses, falling from 154.66 to 151.40, pressured by lower Treasury yields and increased bearish positioning. Key support lies at 151.20/150.93, with psychological 150.00 seen as a potential trigger for further declines.

Pound Rises but Faces Upside Resistance

GBP/USD hit 1.2630, rebounding from 1.2100, though limited short positioning suggests further upside may be capped. With UK data weak and BoE rate cuts expected, GBP/USD may struggle to break above 1.26, inviting potential selling pressure.

Aussie Dollar Eyes RBA Decision

AUD/USD hovers near 0.6400, with 88% odds of an RBA rate cut priced in. If the RBA holds a cautious stance, further gains toward 0.6430 resistance are possible.

Market Outlook: Dollar Weakness Likely to Persist

With U.S. economic data softening and Fed easing expectations growing, the dollar remains under pressure. Risk sentiment is improving, while tariff risks and geopolitical concerns are easing, setting the stage for continued FX volatility in the coming sessions.