The US Dollar (USD) experienced broad weakness against major currencies on Friday, with the Euro (EUR) and New Zealand Dollar (NZD) both posting notable gains. EUR/USD traded around 1.1682 after briefly rising above 1.1700, marking its highest level since May 14 and heading for a fourth consecutive weekly gain. Strategists at Scotiabank attributed the Euro's strength to a broadly lower USD and noted that front-end spreads have narrowed since the end of June, supporting the EUR's fundamental improvement. Technical analysis shows EUR/USD reclaiming the 50-day, 100-day, and 200-day SMAs, with momentum indicators such as MACD remaining positive, though the RSI near 73 signals overbought conditions that could limit immediate upside. Initial resistance is at 1.1700, with further resistance at 1.1800, while support levels are at 1.1631, 1.1573, and 1.1475. The Euro was the strongest against the Swiss Franc, up 0.11% on the day [1].
The Swiss Franc (CHF) struggled as the USD/CHF pair held firm at 0.8013, despite recovering from a previous low of 0.7949. Dovish remarks from Swiss National Bank (SNB) Governing Board member Petra Tschudin, who stated that the SNB would consider negative rates if necessary to keep inflation between 0% and 2%, further dampened sentiment toward the Franc. Tschudin also linked the Franc's weakness to higher interest-rate expectations abroad. The US Dollar Index (DXY) traded at 98.81, recovering from an intraday low of 98.56, but remained close to a three-month low and was heading for a weekly loss of nearly 0.80%. US economic data showed the S&P Global Composite PMI rising to a 52-month high of 56.0 in August, with Services PMI at a 20-month high of 56.8, while Manufacturing PMI eased to 53.2. Despite upbeat data, fading expectations of a Federal Reserve rate hike weighed on the USD, with markets seeing a 65% probability that the Fed will leave rates unchanged next month. Attention is now turning to next week’s US PCE inflation data [2].
The New Zealand Dollar extended its rally against the USD, trading near 0.6000 and close to its highest level since end-May. Flash S&P Global PMIs showed accelerating private-sector activity in the US, but the Kiwi's advance was driven by its own momentum and risk-on sentiment, supported by China leaving its benchmark lending rates unchanged and strong demand for metals. Technical analysis indicated NZD/USD at 0.5979, holding above the 20-day and 100-day SMAs, with resistance at 0.5989 and RSI near 69, suggesting strong momentum but verging on overbought conditions. Immediate support levels are at 0.5939, 0.5930, and 0.5907 [3].
Strategists at Scotiabank commented that the USD remains the primary shock absorber for mounting US fiscal concerns, and efforts to suppress long-term yields mean the USD will bear a greater negative burden from US fiscal policy. The Greenback weakened earlier in the week after the US Treasury announced it would double liquidity-support buybacks for longer-dated government securities to at least $4 billion per operation [2].
CONCLUSION
The US Dollar's weakness has fueled rallies in the Euro and New Zealand Dollar, with both currencies reaching multi-month highs. Market sentiment is tilted against the USD due to fading Fed rate hike expectations and US fiscal concerns, while technical indicators for EUR/USD and NZD/USD suggest strong momentum but warn of overbought conditions. Investors are now watching upcoming US PCE inflation data for further direction.