Christopher Waller, the governor of the Federal Reserve, has challenged the recent strength of the US dollar. His dovish comments have raised interest in rate cuts. Additionally, his timing coincides with Fed Chair Jerome Powell facing increasing political pressure. In a speech titled “The case for cutting rates now,” Waller emphasized concerns about jobs and slowing growth.
Additionally, he emphasized the need to minimize the inflation risk associated with potential Trump tariffs. The speech has sparked discussion about the Fed’s internal dynamics and policy orientation. Investors are now doubting whether the dollar’s rally will last as the EUR/USD pulls up. Markets may regain momentum in the currency pair as they process this change.
Waller’s Fed Shift Could Shake US Dollar
Waller’s comments aligned with increasing calls for policy easing, which bolstered the notion that the Fed might act soon. He underlined that current rates are near neutral. His reference to 1% growth and declining private-sector employment sparked worries about potential negative consequences. Consequently, his remarks have significant sway as a voting member of the FOMC.
The political backdrop is too significant to overlook. Waller’s position might be viewed as strategic given Trump’s public criticism of Powell and potential consideration of his replacement. Additionally, his support for rate cuts might help him achieve his future leadership objectives. Markets have picked up on a more dovish Federal Reserve narrative. This is pressuring the US dollar and possibly lifting competitors like the currency pair in the upcoming weeks.
Can the US Dollar Rally Hold Ground?
The US Dollar Index displayed its 11th straight bullish candle. The rally is currently stalling below the 99.00 mark. After an overbought reading, momentum indicators are turning lower, and a bearish RSI divergence is flashing a warning.
The emergence of more dovish Fed signals could cause traders to watch for a reversal. As a result, the technical setup suggests that the US dollar rally may pause or even reverse. Traders may look to alternative assets and currency pair plays for opportunities as expectations begin to ease.
Is EUR/USD Ready to Break Resistance Again?
On the EUR/USD daily chart, despite intermittent weakness, the overall structure is bullish. It still has support near its April high, even though it is trading below the 20-day EMA. Following a bullish divergence that suggested a possible swing low, the 2-day RSI reached its most oversold reading since October.
This configuration might indicate that the currency pair is prepared for a recovery. The euro may overcome recent resistance as Waller’s pivot gains attention and Fed pressure increases. Additionally, a higher break could indicate that the US dollar’s momentum is waning.
Futures Traders Point Toward Weakening US Dollar
The bullish EUR/USD outlook is further supported by futures market data. The growing net-long positioning of asset managers and big speculators points to institutional optimism. However, the low level of gross-short euro positions indicates that few are placing bets on a substantial decline.
Additionally, this sentiment backdrop suggests that buyers may be drawn to shallow dips. The stage is set for the currency pair to continue rising as dovish Fed expectations gain traction. If the current political and economic climate continues, the euro may reach heights in opposition to a declining US dollar.
Will EUR/USD Keep Gaining?
The Fed’s future appears less certain as Waller’s move adds to the political noise. The US dollar rally might be deflated by a dovish turn. Thus, this would remind the market of other options, such as the EUR/USD. The euro has short-term momentum, but risks still exist. The upcoming weeks could determine if the dollar’s strength was only transitory.
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