TD Securities reports that the US Dollar (USD) remains resilient, supported by favorable rate differentials, resilient economic growth, and strong equity performance. However, the firm sees limited upside for the USD, as recent US data, including a soft Non-Farm Payrolls (NFP) report, indicates that the US labor market is not overheating. As a result, TD Securities has pushed back its forecast for the next Federal Reserve (Fed) rate hikes to December 2026 and March 2027, stating, 'We have likely already seen the peak in market pricing for Fed hawkishness, and the Fed is unlikely to hike beyond what the market has already priced in.' They note that persistently bullish signals for the USD from Fed policy and economic data are hard to justify at this stage, even though their scorecard still ranks the USD highest among major currencies. Market positioning is now long dollars, making short positions in low-yielding G10 currencies such as SEK, CAD, and NZD appear crowded [1].
Meanwhile, United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann observe that the USD/JPY currency pair remains range-bound, lacking clear directional cues in the short term. Intraday price action is expected to stay between 157.55 and 158.45, with a broader trading range of 156.35–158.70 anticipated over the next one to three weeks. On a one to three month horizon, UOB highlights building downward momentum and the potential for further USD/JPY weakness [2].
Both sources indicate a lack of strong bullish momentum for the USD in the near term. While TD Securities acknowledges the USD's resilience, it also emphasizes that the peak in Fed hawkishness has likely passed, capping further upside. UOB's analysis of USD/JPY aligns with this view, suggesting that the pair is likely to remain range-bound in the short term, with risks skewed toward potential weakness over the medium term [1][2].
CONCLUSION
The US Dollar remains resilient but faces limited upside as market expectations for further Fed rate hikes have likely peaked. The USD/JPY pair is expected to trade within a defined range in the near term, with analysts highlighting the potential for medium-term weakness. Overall, market sentiment is neutral to slightly positive for the USD, but significant further gains appear constrained by current economic and policy dynamics.