📉 [FX Market Report | May 26, 2025]
Dollar Weakness Persists – A Tug-of-War Between U.S. Divestment and Risk Appetite
🔍 Market Overview
The week opened with the FX market gradually resuming its dollar weakening trend, following the unwind of last week’s risk-off sentiment.
What’s unfolding now appears to be more than just a short-term “sell America” trade — we’re witnessing a growing structural shift toward long-term capital diversification away from the U.S.
One key development was the report that former President Trump postponed the EU tariff activation date to July 9.
This delay helped ease market tension, and a slight risk-on mood returned to markets today.
💱 Key Currency Movements
USD/JPY
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Despite the broad dollar weakness, yen selling lingers in correlation with rising equities.
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The yen’s safe-haven appeal has eased, and cross-yen pairs remain broadly firm.
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That said, upside is capped around the low 144s.
EUR/USD
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The euro remains firm in the 1.13 range, supported by ongoing dollar pressure.
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While upside momentum is cautious, the euro is increasingly seen as a beneficiary of capital reallocating away from the U.S.
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Inflation data due later this week may lead to position adjustments.
EUR/JPY
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Euro strength driven by dollar weakness is also lifting EUR/JPY, which is trading steadily.
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As long as risk sentiment holds, the pair is likely to stay stable in the 162–163 range.
🌐 Fundamentals & Today’s Market Context
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Persistent headwinds for the dollar include U.S. fiscal concerns, tariff risk, and rate cut expectations.
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While global markets remain wary of Trump-era diplomatic tactics, there’s a sense of “familiarity,” shifting reactions from panic to structural adjustments.
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However, with London and New York markets closed today, liquidity is extremely thin:
→ This means lack of direction and a higher risk of sudden price swings.
📝 Strategy Summary for May 26
| Currency Pair | Strategy | Commentary |
|---|---|---|
| USD/JPY | Mildly bearish | Even if risk-on triggers yen selling, dollar rebounds will likely be capped |
| EUR/USD | Buy on dips | Capital is still rotating out of the U.S. into the euro |
| EUR/JPY | Stay long | Stock gains + euro strength make dips in cross-yen pairs attractive |
| GBP/USD | Wait-and-see | Range-bound ahead of data; suitable for short-term countertrend trades |
✅ Summary
U.S. policy-related risks are increasingly entrenching the dollar’s downtrend.
At the same time, rising equities and risk appetite may offset yen strength, leading to a market driven more by cross-yen movements than USD/JPY itself.
With overseas markets closed today, thin trading and low liquidity warrant caution.
⚠️ Avoid chasing one-directional moves — patience and risk control are key today.
