USD: Downside risks this week – ING
Source Fxstreet
Central banks and macro data have taken an unusual secondary role for FX markets as US politics, stock markets turmoil and some sizeable positioning adjustments generated volatility in some pairs inconsistent with macro developments, ING’s FX strategist Francesco Pesole notes.
A move below 104.0 for DXY is imminent
“In the US, the two main events of the week are the FOMC rate announcement on Wednesday and the July jobs report on Friday. The June dot plot projections look unreasonably hawkish given the recent data flow and market pricing, and we expect the Fed to pivot towards a more dovish stance in line with recent commentary and in anticipation of a potential September cut.”
“Markets are already pricing in easing quite aggressively in the US. A September cut is fully factored in and 68bp in total is expected by year-end. We can surely see markets adding easing bets across the curve following a dovish hold but we admit there is a chance that Fed Chair Jerome Powell errs on the side of caution and delivers a less dovish (and USD-positive) communication package this week.”
“Anyway, when adding the downside risks from jobs figures on Friday and a potential surprise hike by the BoJ, we have a bearish bias on DXY this week, and wouldn’t be surprised to see a move below 104.0.”
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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Notably, Bitcoin is not alone in its struggles, as Ethereum and Solana have also recorded declines of 7.95% and 28.3%, respectively, since the start of the year, while numerous altcoins have faced even steeper losses.
Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
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The downturn occurred despite the reopening of the U.S. government on Thursday, which many had hoped would provide essential support for crypto markets. This year initially appeared promising for cryptocurrencies, particularly after the inauguration of President Donald Trump, who has established the most pro-crypto administration thus far. However, ongoing political tensions—including Trump's tariff strategies and the recent government shutdown, lasting a historic 43 days—have contributed to several rapid price pullbacks for Bitcoin throughout the year.
Market dynamics are also being influenced by Bitcoin whales—investors holding large amounts of Bitcoin—who have been offloading portions of their assets, consequently stalling price rallies even as positive regulatory developments emerge. Despite these sell-offs, analysts from Glassnode argue that this behavior aligns with typical patterns seen among long-term investors during the concluding stages of bull markets, suggesting it is not indicative of a mass exodus.
Notably, Bitcoin is not alone in its struggles, as Ethereum and Solana have also recorded declines of 7.95% and 28.3%, respectively, since the start of the year, while numerous altcoins have faced even steeper losses.
Looking ahead, questions linger regarding the viability of the four-year cycle thesis, particularly given the increasing institutional support and regulatory frameworks now in place in the crypto landscape. Matt Hougan, chief investment officer at Bitwise, remains optimistic, suggesting a potential Bitcoin resurgence in 2026 driven by the “debasement trade” thesis and a broader trend toward increased adoption of stablecoins, tokenization, and decentralized finance. Hougan emphasized the soundness of the underlying fundamentals, pointing to a positive outlook for the sector in the longer term.
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