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Japan’s exports fell -2.6% yoy in July to JPY 9.36 trillion, the sharpest drop since February 2021, driven by weaker demand from its two largest markets, the U.S. and China. Exports to the U.S. slid -10.1% yoy, with auto shipments plunging -28.4% yoy, a steeper decline than June’s -26.7%. Shipments to China also contracted -3.5% yoy, though exports to Hong Kong surged nearly 18% yoy.

The latest weakness highlights how external headwinds continue to weigh on Japan’s trade sector. While Tokyo reached a deal with Washington on July 22 to reduce reciprocal tariffs to 15% from 25%, the benefits will not be reflected until the August trade data. For now, auto exports remain a key drag on overall performance.

Imports fell -7.5% yoy to JPY 9.48 trillion, leaving Japan with a JPY 118 billion deficit. In seasonally adjusted terms, exports slipped -0.2% mom, while imports rose 0.4% mom, pushing the deficit wider to JPY 303 billion.

The morning NA session follows a quasi-dead European overnight trading.

This tends to happen when a lack of data adds to the Summer trading when volumes are typically subdued.

The Dollar Index had been in the middle of many headwinds, as per usual. After a stellar July followed by and N-shaped (for nope) downward spiral in the beginning of August, it has been difficult to spot where the Greenback is heading.

Forex volatility tends to calm during summers and lack of decisive trends exacerbate this rangebound trading – When the path is unclear, rangebound trading is typical (particularly in currencies.)

With Markets awaiting more developments after the White House gathered heads from Russia, Ukraine and the EU, the Dollar is forming a temporary bottom around the 98.00 Handle.

This region had already formed the post-Liberation day bottom (quickly broken in May).

The White House meetings went well and the US will now attempt to create a Putin-Zelenskyy meeting.

Donald Trump, the author of the Art of the Deal, is an unpredictable leader but one sure thing, he is a monster negotiator, and this is giving back some confidence in the US.

In our most recent DXY analysis, we mentioned an expectation of a more balanced Dollar as a lack of continuation upwards and a not-broken bottom show indecision.

Let's see if this indecision shall continue, at least to the technical side.

Dollar Index (DXY) Technical Analysis

Dollar Index Daily Chart

Dollar Index Daily Chart, August 19, 2025 – Source: TradingView

The US Dollar is holding its low-sloped ascending channel in a 5 day consolidation around the 98.00 handle.

The post-CPI data had created a new offer for the US Dollar as Markets rushed to price the September cut to 97% before the surprising PPI data changed the course of action.

With the future US inflation expectations rising considerably, the fundamental background for the Dollar (like its rate outlook) is more uncertain.

The Daily RSI is way into the Neutral territory and the Daily doji is an indecision one. All of this is also happening right around the 50-Day MA (currently at 98.065).

Let's have a closer look to spot what breakout points could be in play when the action picks up again.

Dollar Index 2H Chart

Such indecisive price action doesn’t warrant analysis across many timeframes – it is better in this environment to look at where we see the most.

Dollar Index 2H Chart, August 19, 2025 – Source: TradingView

The Dollar Index is stuck between the 97.60 Support and the 98.50 Resistance Zones.

With the Price action rebounding from the lows of the Daily upward Channel supplemented by the 2H MA 50 acting as support, it seems that the preferred path would be to the upside.

If things were so sure however, the Dollar would have risen already to test the following resistance zone.

Typically, in this environment, it is good to look at the highs (98.30) and lows of the session (97.94) to see where if the action breaks out from there.

To the upside, look at the 2H MA 200 currently at 98.515.

To the downside, look at the 97.60 Support Zone, then the 97.15 July upward pivot.

Levels to place on your DXY Charts:

Resistance Levels

• 98.50 Pivot Zone now resistance (confluence with 2H MA 200)
• Resistance 99.20 to 99.40
• Main 100.00 to 100.50 Resistance

Support Levels

• 2H MA 50 (97.94)
• 97.60 Support
• July Pivot before run-higher 97.15

Safe Trades!

Markets

This morning’s mediocre Japanese 20-y government bond auction and yesterday’s meeting in the White House on Ukraine were potential drivers for any directional market action today. Quod non. Japanese yields in the 10-y+ sector closed up to 4 bps higher, but the signal this time wasn’t picked up by markets outside the country. US, EMU and UK yields currently are changing less than 2 bps across the curve in a daily perspective. Match null for now as bond investors are cautious to place strong directional bets in the run-up to Fed Chair Powells’ Jackson Hole address on Friday. Still, especially the German (3.34%) and UK 30-y yields (5.60%) are challenging multi-year peak levels. For now, market moves also in this segment of the curve remain orderly, but fiscal sustainability clearly remains a market concern as governments are preparing 2026 budget plans. In the UK, this budgetary exercise is additionally complicated by a near stagflationary context. In this respect, UK Fin Min Reeves for sure also will keep a close eye at the July UK inflation data scheduled for release tomorrow morning as the rising cost of inflation-linked notes is an important variable in UK budget calculations. Sterling traders at least take a cautious approach going into the release. The UK currency is ceding (modest) ground against the single currency, with EUR/GBP trading further off the 0.86 support area (0.8645). On broader FX markets, the dollar mostly trades marginally softer, but with absolutely no technical implications (DXY, 98.1, EUR/USD 1.168, USD/JPY 147.75). Powell apparently also ‘paralyses’ this market. Hope on potential progress regarding the conflict in Ukraine caused a better bid for most CE currencies with the forint outperforming. At EUR/HUF 393.9, the Hungarian currency is touching its best level against the euro since September last year. Gains in the likes of the zloty (EUR/PLN 4.245) and the Czech koruna (EUR/CZK 24.45) are more modest. On equity markets, the Eurostoxx 50 (+0.9%) trades less than 2% below the early March top. In the US, the S&P 500 opens little changed, but (Friday’s) all-time top is also at less than 1%.

News & Views

The International Exchange Inc (ICE) released its Annual Fixed Income Index Rule Review. It again rejected a proposal to add joint EU debt to sovereign bond indices following consultations with stakeholders. The EU is currently categorized as a supranational, which is seen as a reason why its debt is trading at a discount compared with European government bonds with similar rating. ICE said that there is "no development towards consensus" on the inclusion topic since last year with some arguing that the bloc does not meet the “common understanding of sovereign”. MSCI , S&P Global and Bloomberg Index Services have also turned down similar proposals, though it’s possible they will revisit the question. The EU is working on professionalizing the EU bond market given the issuance boom in the wake of the Covid-pandemic. This includes improving liquidity by creating a repo facility and enticing banks for better pricing and efforts to create a futures market. Inclusion in sovereign bond indices would also help creating the appeal of a European safe haven asset comparable to US Treasuries.

Canadian headline inflation accelerate to 0.3% M/M in July with the headline number slowing from 1.9% Y/Y to 1.7% Y/Y, matching the second lowest pace since February 2021. Prices for gasoline led the headline slowdown, falling by 16.1% Y/Y (-0.7% M/M). Excluding energy, CPI stabilized at 2.5% Y/Y, the same pace as in May and June. Shelter price rose by 3% Y/Y (from 2.9%) in a first acceleration since February 2024. Rent prices also accelerated, from 4.7% Y/Y to 5.1% Y/Y. One of the Bank of Canada’s preferred CPI measures, the trimmed mean of core inflation which excludes the most volatile components, stabilized at 3% Y/Y. The Canadian dollar swap curve shows some modest bull steepening in the wake of the figures with front end yields around 2.5 bps lower. The Loonie trades a tad softer at 1.3840. Gains are technically insignificant with first resistance at USD/CAD 1.3879.

Daily Pivots: (S1) 1.1639; (P) 1.1678; (R1) 1.1699; More...

Intraday bias in EUR/USD remains neutral and more consolidations could be seen below 1.1729. Further rally is expected as long as 1.1589 support holds. Above 1.1729 will bring retest of 1.1829 high. On the downside, however, firm break of 1.1589 will turn bias to the downside, and extend the corrective pattern from 1.1829 with another fall.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.

Daily Pivots: (S1) 1.3478; (P) 1.3527; (R1) 1.3551; More...

Intraday bias in GBP/USD remains neutral and outlook is unchanged. Retreat from 1.3594 might extend lower but downside should be contained well above 1.3398 support. On the upside, break of 1.3594 will resume the rise from 1.3140 to retest 1.3787 high.

In the bigger picture, up trend from 1.3051 (2022 low) is in progress. Next medium term target is 61.8% projection of 1.0351 to 1.3433 from 1.2099 at 1.4004. Outlook will now stay bullish as long as 55 W EMA (now at 1.3090) holds, even in case of deep pullback.

Daily Pivots: (S1) 0.8058; (P) 0.8069; (R1) 0.8087; More….

Intraday bias in USD/CHF remains neutral and outlook is unchanged. On the downside, break of 0.8020 will revive that case that the corrective pattern from 0.7871 has completed, and target a retest on 0.7871 low. On the upside, firm break of 0.8710 will resume the corrective from 0.7871. Intraday bias will be back on the upside for 38.2% retracement of 0.9200 to 0.7871 at 0.8379.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8475 resistance holds.

Daily Pivots: (S1) 147.29; (P) 147.64; (R1) 148.20; More...

Intraday bias in USD/JPY stays neutral and outlook is unchanged. On the upside, break of 148.51 will indicate that the pullback from 150.90 has completed, and bring retest of this high. This will also keep the whole rise from 139.87 alive. However, firm break of 145.84 support will argue that the rebound from 139.87 has completed, and turn near term outlook bearish.

In the bigger picture, price actions from 161.94 (2024 high) are seen as a corrective pattern to rise from 102.58 (2021 low). Decisive break of 61.8% retracement of 158.86 to 139.87 at 151.22 will argue that it has already completed with three waves at 139.87. Larger up trend might then be ready to resume through 161.94 high. In case the corrective pattern extends with another fall, strong support is expected from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound.

Headline CPI inflation for July came in at 1.7% year-on-year (y/y), cooling from the 1.9% in June and below expectations for a 1.8% y/y print.

Gasoline prices falling 0.7% on the month on lower geopolitical tensions and increased OPEC+ output were a drag on the index.

Shelter price inflation rose for the first time since February 2024, rising 3.0% y/y from 2.9% in June. This was mostly attributed to a greater influence from the natural gas and rent indexes. The contraction in natural gas prices slowed in July, propping up shelter costs while tent inflation increased to 5.1% y/y, from 4.7% in June.

The Bank of Canada's (BoC) CPI-trim measure was unchanged for the third month in a row at 3.0% y/y, while the CPI-median index ticked higher to 3.1% y/y. The CPI excluding food and energy ticked down to 2.5% y/y from 2.6% the month prior and the CPI excluding the eight most volatile components and indirect taxes (CPIX) also took a step back to 2.6% y/y (from 2.7% in June). All four of the core measures decelerated on a seasonally adjusted monthly basis in July, with the trim and median registering 0.18% m/m and 0.19% m/m, respectively, while the CPI excluding food and energy and CPIX were effectively flat at 0.06% m/m.

Key Implications

Energy prices continue to do the heavy lifting on the top-line measure, but the softer trend in core inflation is what really jumps out from this report. The monthly pattern is suggestive of an economy where prices pressures are increasingly offset by growing economic slack.

On a go-forward basis this report builds on what we saw last month, slowing momentum in core prices as slack in the economy builds. Between February (when trade tensions really flared) and July the economy has added a total of 27k jobs, and now core inflation appears to be losing steam. All together this looks like the scenario the BoC highlighted as giving rise to the "need for a further reduction in the policy interest rate". From our lens, we think the BoC will have room to deliver more easing later this year as the economic slack continues to build and offset inflation pressure.

Daily Pivots: (S1) 1.3780; (P) 1.3806; (R1) 1.3828; More...

USD/CAD rebounds further today but stays below 1.3878 resistance. Intraday bias remains neutral first. On the upside, firm break of 1.3878 will resume the corrective rebound from 1.3538 with another rising leg. Intraday bias will be back to the upside for 1.4014 cluster resistance (38.2% retracement of 1.4791 to 1.3538 at 1.4017). On the downside, though, below 1.3781 will turn bias to the downside to extend the fall from 1.3878 through 1.3720 support.

In the bigger picture, price actions from 1.4791 medium term top could either be a correction to rise from 1.2005 (2021 low), or trend reversal. In either case, further decline is expected as long as 1.4014 resistance holds. Next target is 61.8% retracement of 1.2005 (2021 low) to 1.4791 at 1.3069.