Risk Rebound Fails to Shake Dollar's Grip on Markets

Global forex markets went quiet on Thursday after a sharp risk rally. Asian equities surged on Micron's blockbuster earnings – the Nikkei rose 4.61%, the KOSPI 5.42%. Currency traders barely blinked. The dollar held onto its gains across the board, unshaken by the rebound in risk appetite.

The reason sat in the data. May's personal consumption expenditures report showed inflation staying well above the Fed's target, personal income accelerating, and consumer spending remaining resilient. Swap pricing now favors a September rate hike as the next move. The most hawkish forecasts see three additional increases beginning in September. Even the more moderate view points to another quarter-point increase before year-end.

That tone has reshaped markets from commodities to currencies. Gold broke below $4,000 a troy ounce, a level that had held for weeks. Silver slid under $60. Some analysts see the real test for silver around $50, where technical support and industrial demand intersect. A surging dollar and a hawkish Fed make that line look fragile.

Currency rankings tell the story cleanly. The dollar is this week's strongest major. The yen ranks second, with USD/JPY pressing against the multi-decade high at 161.94 – a level that puts Japanese intervention risk back on the table. Sterling sits third, helped by Prime Minister Keir Starmer's resignation, which markets read as a shift in the political landscape.

At the opposite end, the New Zealand dollar is the weakest. Falling oil prices reduce the urgency for further Reserve Bank of New Zealand tightening. The Australian dollar is the second-weakest. Mixed inflation and employment data keeps an August Reserve Bank of Australia hike possible, while spending figures add uncertainty. The euro and Canadian dollar traded in the middle, with the Swiss franc hovering near. Traders looking for positioning data can check the weekly COT data for speculative flows across major pairs.

USD/JPY intraday bias remains neutral for now. A decisive break below support at 160.58 would signal a short-term top, opening a fall toward the 55-day EMA near 159.46. On the upside, a clear push through 161.94 would resume the larger uptrend toward 163.47, based on the technical target from the 2024-to-2025 corrective pattern.

With no top-tier releases scheduled before the weekend, activity may stay subdued. Traders are already looking ahead to July and next week's US nonfarm payrolls report. A strong print would reinforce the dollar's strength; a weak one could finally shift the momentum. The next major test comes with that report.