The dollar has started the week on the back foot, even though many global markets remain closed due to holidays. Notably, currencies across the Asia-Pacific region are showing strength, with the offshore yuan, Japanese yen, Taiwanese dollar, and Australian dollar all making gains. This pressure is largely attributed to speculation over impending U.S. semiconductor tariffs and renewed chatter about a currency coordination deal. While such a pact seems unlikely, expectations for the U.S. to push for currency revaluations during trade discussions persist. Markets in many regions are set to reopen tomorrow, while political stability in Australia has further boosted the local dollar.

Asia Pacific Markets

In the Asia-Pacific region, the Japanese yen and Australian dollar stood out as top performers. The yen benefited from last week's dovish Bank of Japan stance, which helped the dollar establish a base before reversing direction. Technically, a breakout above key levels points to further upside potential for the dollar, though resistance remains strong. In Australia, a decisive win by the Labor Party has lifted the local currency to new five-month highs. The result, which echoed recent trends rejecting populist politics, has reassured markets. The Australian dollar is now trading just below its next resistance target of $0.6500, supported by political clarity and resilient market sentiment.

European Markets

In Europe, market attention is focused on technical indicators rather than economic data, as final services and composite PMIs are not expected to shift sentiment. For the euro, recent movements have clouded the outlook, with a potential topping pattern still in question. A break below $1.1260 would confirm the bearish setup, while a move above $1.1400 would cancel it out.
Meanwhile, in the UK, markets are quiet due to a bank holiday, but all eyes are on the upcoming Bank of England meeting. A rate cut of 25 basis points is widely expected, marking the third reduction since August 2024. The pound is hovering near key technical levels, with a break lower possibly signaling a move toward $1.3035.

American Markets

In the U.S., the dollar's recent performance is mixed despite last week's bullish signals. While it seemed to be forming a bottom, the failure to build on gains before the weekend has left traders cautious. The current consolidation reflects a complex backdrop: robust labor market data and expectations for a hawkish pause from the Federal Reserve on Wednesday support the greenback, but falling yields and weaker equity and oil markets weigh on sentiment. Traders are watching for an announcement on semiconductor tariffs, but economic data like today’s PMI figures are seen as less impactful. Instead, the focus remains on broader indicators and their implications for the Fed’s future moves.