Finovatic’s Forex Insights - July 13, 2025

Welcome to this week’s Finovatic Forex Insights, your go-to source for navigating the dynamic forex market. As we approach the market open on July 14, 2025, we’re diving into the fundamental and sentimental forces likely to drive major currency pairs—EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD, USD/CHF, and NZD/USD. With trade tensions, inflation data, central bank policies, and geopolitical shifts in play, here’s what you need to know to prepare for the week ahead.

Fundamental Drivers Shaping the Market

Trade and Tariff Developments

Recent US policy announcements are sending ripples through the forex market. On July 10, 2025, President Trump proposed a 35% tariff on Canadian imports and a 50% tariff on copper imports, effective August 1, 2025. These measures are bolstering the US dollar (USD) as a safe-haven asset amid fears of escalating trade wars. Canada, heavily reliant on exports, faces significant pressure, weakening the Canadian dollar (CAD). Commodity-linked currencies like the Australian dollar (AUD) and New Zealand dollar (NZD) are also under strain due to global trade uncertainties. Meanwhile, the Euro (EUR) and British pound (GBP) may see some support from ongoing trade negotiations, such as potential EU exemptions for industries like Airbus or German carmakers.

Impact on Currency Pairs:

• USD/CAD: The USD is likely to maintain strength against CAD due to tariff-related pressures on Canadian exports.

• AUD/USD, NZD/USD: Bearish sentiment persists for these commodity-driven currencies as trade tensions dampen global demand.

• EUR/USD, GBP/USD: USD strength poses a headwind, but trade deal developments in Europe and the UK could provide a counterbalance.

Quick Technical View of (EURUSD):

Price created a bearish channel Crossed two major swing low and Reacted at Fibonacci 23.6, Possibility is price will follow the channel and remain bearish.

Inflation Data and Expectations

The US Consumer Price Index (CPI) report, scheduled for July 15, 2025, is a critical event this week. Forecasts suggest headline inflation will rise to 2.6% year-over-year from 2.4%. A higher-than-expected print could reduce expectations for Federal Reserve rate cuts, further strengthening the USD. This release is likely to impact all USD-based pairs, particularly USD/JPY and USD/CAD.

Other inflation data to watch includes:

• UK CPI (July 16, 2025): Recent soft UK economic data has increased speculation of a Bank of England (BoE) rate cut, potentially pressuring GBP.

• Canadian and Japanese CPI: These releases, due later this week, could further influence CAD and JPY sentiment, with Canada’s data particularly relevant amid tariff concerns.

Central Bank Policies

Central bank dynamics are creating divergent pressures across major currencies:

• Federal Reserve: The Fed’s June 2025 meeting maintained the federal funds rate at 4.25%-4.50%, with projections suggesting a possible decline to 3.9% by year-end. Fed Chair Powell’s hawkish tone, despite reported tensions with President Trump over rate cut demands, supports USD strength. The Fed’s stance is driven by concerns over tariff-induced inflation.

• European Central Bank (ECB): A dovish outlook, fueled by soft Eurozone economic data, continues to weigh on the euro.

• Bank of England (BoE): Growing expectations for a rate cut, driven by sluggish UK growth, are pressuring GBP.

• Bank of Japan (BoJ): Persistent low interest rates and declining real wages in Japan maintain bearish pressure on the Japanese yen (JPY).

Impact on Currency Pairs:

• USD/JPY: The Fed’s hawkish stance and BoJ’s ultra-loose policy create a bullish outlook for this pair.

• EUR/USD, GBP/USD: Dovish ECB and BoE policies limit upside potential for EUR and GBP against a strong USD.

Geopolitical Risks

A US-brokered ceasefire between Israel and Iran, announced on June 23, 2025, has reduced risk aversion, providing a lift to risk-sensitive currencies like AUD and NZD. However, stalled Gaza ceasefire talks, reported on July 12, 2025, could rekindle risk-off sentiment, potentially boosting safe-haven currencies like USD and JPY. These developments add a layer of uncertainty to the market.

Impact on Currency Pairs:

• USD/CHF: Safe-haven flows may balance between USD and CHF, with USD likely to dominate due to fiscal and trade developments.

• AUD/USD, NZD/USD: Risk-on sentiment from the ceasefire supports these pairs, but trade tensions and potential geopolitical flare-ups could cap gains.

Fiscal Policy

The passage of Trump’s “One Big Beautiful Bill” on July 10, 2025, which extends tax cuts and increases government spending, is driving up US Treasury yields. This fiscal stimulus reinforces USD strength across multiple pairs, particularly USD/CAD and USD/JPY, where counter party currencies face additional pressures.

Sentiment Analysis

Market sentiment provides clues about potential price movements:

• USD: The CFTC Commitment of Traders (COT) report indicates large speculators are holding net-short positions on the USD Index (DXY), suggesting potential for a short-covering rally if positive data, such as a strong CPI, emerges.

• EUR/USD: Hedge funds have reduced net-short holdings, reflecting cautious positioning amid mixed Eurozone signals.

• GBP/USD: Retail traders are net-long, while institutional flows lean bearish due to BoE rate cut expectations, creating a potential divergence that could lead to volatility.

• USD/JPY: Both institutional and retail sentiment align bullishly, driven by JPY weakness and USD strength.

Bond Spreads

Rising US 10-year Treasury yields are supporting USD strength, while widening US-EU bond yield spreads are exerting downward pressure on EUR/USD. These spreads reflect market expectations of divergent monetary policies.

Options Positioning

• USD/JPY: A bullish bias in call options signals strong market confidence in USD strength against JPY.

• EUR/USD: Options show a slight bias toward puts, aligning with bearish sentiment driven by ECB’s dovish stance.

News Tone and Global Risk Appetite

• Negative Sentiment: CAD is under pressure from tariff concerns, JPY faces headwinds from economic weakness, and GBP is weighed down by rate cut expectations.

• USD Sentiment: Hawkish Fed signals and tariff policies maintain a bullish outlook for the USD.

• Risk Appetite: The VIX is moderately elevated, reflecting trade war uncertainties, but strong US equity performance supports risk-on sentiment for AUD and NZD, though tempered by tariff risks.

Currency Pair Outlook

The following table summarizes the fundamental outlook and key drivers for each major currency pair:

Key Events to Monitor

The following events are likely to influence forex markets this week:

Preparing for the Week Ahead

As the forex market opens on July 14, 2025, traders should prioritize the US CPI release on July 15, which could set the tone for USD-based pairs. Central bank communications, particularly from the Fed, ECB, and BoE, will also be critical, as will developments in Gaza ceasefire talks. The interplay of trade tensions, inflation expectations, and geopolitical shifts suggests a week of potential volatility, particularly for USD/JPY, USD/CAD, and EUR/USD.

Disclaimer: This newsletter is helping to Analysis and prepare for trading and investing and adding confluence to increase success ratio of your trading and investing strategy. Trading and investing in financial markets involve risk of your capital if you are not skilled and enough. Finovatic does not constitute to trading signal or financial advice. Always conduct your own research making trading decisions.

Hope this fundamental analysis will be helpful to prepare for this week.

Thanks,

@anidsiam from Finovatic