Dollar Climbs as Trump Targets Canada, But Aussie Outshines – Action Forex

Dollar advanced broadly after US President Donald Trump escalated trade war again with a fresh 35% tariff on Canadian imports. The announcement cited Canadian retaliation and the fentanyl crisis as justification, while threatening even steeper duties if Ottawa imposes further countermeasures.

Trump’s sweeping tone extended beyond Canada. While 22 countries have received formal letters setting tariffs between 20% and 50%, Trump said countries not on that list could face “blanket” tariffs of 15% to 20%.

Despite Dollar’s strength, FX traders showed limited urgency, with USD/CAD drifting higher but lacking strong follow-through. It’s Aussie that overtook the spot of top-performing currency of the week, hitting a nine-month high against the greenback.

Aussie’s rally reflects strong risk appetite as seen in record breaking stocks in the US and Europe. Expectations that Australia will fall on the lower end of Trump’s sweeping tariff measures are also lifting the Aussie. Additionally, RBA’s cautiousness, which defied market expectations for a rate cut and opted for a hold this week, also provides some support.

RBA is likely to resume rate reduction in August, after getting the quarterly CPI report due July 30. Yet, given the complexity for US tariffs to ripple through the global supply chains, RBA would tread cautious ahead, and only ease policy in a measured pace.

On the broader performance chart, Yen continues to lag as the weakest currency this week, followed by Euro and Kiwi. The Swiss franc is quietly firm, ranking third behind Aussie and Dollar. Sterling and the Canadian Dollar are in the middle of the pack.

USD/CAD edged higher after the tariff nears but there is no clear follow through momentum. Technically, price actions from 1.3538 are seen as a corrective pattern, with rise from 1.3555 as the third leg. Further rally could be seen to 1.3797 and possibly above. However, break of 1.3637 will turn bias back to the downside for retesting 1.3538/3555 support zone instead.

In Asia, at the time of writing, Nikkei is up 0.02%. Hong Kong HSI is up 1.66%. China Shanghai SSE is up 0.87%. Singapore Strait Times is up 0.53%. Japan 10-year JGB yield is up 0.001 at 1.498. Overnight, DOW rose 0.43%. S&P 500 rose 0.27%. NASDAQ rose 0.09%. 10-year yield rose 0.004 to 4.346.

Fed’s Waller backs July cut, rejects political motive in push for easing

Fed Governor Christopher Waller made a rare call for immediate easing, stating that inflation has fallen far enough to support a rate cut as early as this month. Speaking in Dallas overnight, Waller said the policy rate is “too tight” given current inflation dynamics and that July presents a viable window for action. “I just made the argument… we could consider cutting,” he said, while acknowledging he’s “kind of in the minority on this”.

Waller dismissed concerns that recent tariffs should delay easing, noting that their impact has so far been narrow and contained. He emphasized that the Fed’s job is to respond to broad inflation trends, not isolated price spikes. “If inflation is coming down, you don’t need to be as restrictive anymore,” he said.

He also emphasized “it’s not political”, saying his position was grounded in economics. With inflation easing, a steady labor market, and the Fed’s rate still well above its long-run neutral level, Waller said a July move would be justified based on data alone.

Fed’s Daly sees two cuts in 2025, says tariff-driven inflation may not materialize

San Francisco Fed President Mary Daly said overnight that the time has come to seriously consider lowering interest rates, citing the need to preserve the current strength of the US economy. “I really am of the view that it’s time,” she said, adding that two rate cuts this year now look like a “likely outcome.” Nevertheless, Daly noted that her preferred timing points to a potential move in the fall, aligning her with the broader consensus on the FOMC, even if some colleagues are advocating for action as early as July.

Daly downplayed concerns that the latest wave of tariffs would necessarily spark inflation, arguing that companies are increasingly absorbing costs or adapting rather than fully passing them on. “It’s possible it just doesn’t materialize,” she said, referring to fears of lasting inflation driven by trade policy.

Cautioning against excessive delay, Daly warned that waiting for persistent inflation before acting could result in a policy mistake. “It’s useful now to sort of recognize that waiting for inflation to rise or become persistent could leave us behind,” she said, emphasizing her desire to stay ahead of the curve.

New Zealand BNZ manufacturing rises to 48.8, conditions still very tough

New Zealand’s manufacturing sector showed modest signs of stabilization in June, with the BusinessNZ Performance of Manufacturing Index rising from 47.4 to 48.8. While still signaling contraction, the gain was underpinned by an encouraging rebound in new orders, which jumped from 45.4 to 51.2—breaking back into expansion. Employment (47.9) and production (48.6) also improved slightly, though both remained under the 50 threshold. The headline PMI remains well below the historical average of 52.5.

The proportion of negative comments from respondents held steady at 65.5% (May 64.5), with widespread concerns over weak consumer demand, high living costs, and a murky economic outlook. Input cost pressures and a drop in construction activity also continue to weigh on manufacturing sentiment.

BNZ Senior Economist Doug Steel said that despite hopes of recovery, “conditions are still very tough.” All key sub-indices remain below their long-run averages, highlighting that while some green shoots are emerging, the overall manufacturing environment is still struggling to gain traction.

Bitcoin blasts to record ahead of House Crypto Week, 135k next

Bitcoin has broken decisively to a new all-time high with upside acceleration, confirming a bullish breakout from its recent consolidation range and setting sights on 135k level. The rally gained additional momentum as bullish sentiment grows ahead of “Crypto Week” in the US Congress, where the House Committee on Financial Services, led by the Republicans, plans to advance crypto-friendly legislation. The committee said the measures are designed to help position the US as the “crypto capital of the world.”

Behind the scenes, the rally continues to be supported by a trifecta of macro forces: rising institutional interest, increasing fiscal strain in the US, and a broadly dovish Fed outlook that is keeping real yields contained. Combined, these drivers are encouraging investors to seek alternatives and store-of-value assets like Bitcoin, with the added appeal of regulatory clarity possibly on the horizon.

Technically, near term outlook will now stay bullish as long as 11060 resistance turned support holds. Two major projection levels mark the next target zone at 135k, 100% projection of 49008 to 109571 from 74373 at 134946 and 100% projection of 74373 to 112013 from 98148 at 135788.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6548; (P) 0.6570; (R1) 0.6611; More...

AUD/USD’s rally resumed by breaching 0.6589 and intraday bias is back on the upside. Rise from 0.5913 should target 0.6713 fibonacci level next. ON the downside, however, firm break of 0.6484 support will now indicate short term topping, and turn bias back to the downside for 0.6372 support.

In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).