The revival of US dollar strength, driven by a more hawkish Federal Reserve, may tighten global financial conditions and weigh on risk-sensitive assets in July.
Key takeaways
- A hawkish Fed under Kevin Warsh has revived US dollar strength, increasing pressure on global risk assets.
- AUD/USD is testing major support, while the Nasdaq 100 shows topping signals as dollar strength gains momentum.
- Hong Kong 33 has broken key technical support, increasing the risk of a deeper multi-week corrective decline.
The macroeconomic landscape for the greenback has shifted gears under new Federal Reserve Chair Kevin Warsh, who officially assumed office on 22 May 2026 and helmed his first FOMC meeting in June 2026.
The reality of a “Warsh Fed” repricing
Fig. 1: CME FedWatch tool aggregated FOMC meeting probabilities as of 26 Jun 2026 (Source: CME website). The information presented is historical information, and past performance is not indicative of future performance.
At his inaugural June press conference, Warsh stressed that “inflation is a choice,” delivering a notably concise policy statement that cut the traditional word count by more than half, signalling a deliberate effort to minimise explicit forward guidance.
The Federal Reserve's Summary of Economic Projections (SEP) reinforced a distinctly hawkish outlook. The median year-end 2026 Fed funds rate projection was revised up to 3.8%, from 3.4% in the March SEP, while half of the FOMC participants now expect at least one rate hike later this year. At the same time, the median core PCE inflation forecast for 2026 was raised to 3.6% from 2.7%, underscoring the Committee's growing concern over persistent inflationary pressures.1
As a result, Fed funds futures traders have fully unwound expectations for a 25-basis-point rate cut in late 2026. Instead, according to the CME FedWatch Tool as of 26 June 2026, markets are pricing in a 74% probability of a 25-basis-point rate hike at the 16 September 2026 FOMC meeting, rising to 94% for the 28 October 2026 meeting (see Fig. 1).
The US Dollar Index rose to a 13-month high
Fig. 2: US Dollar Index major trend as of 26 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
Since the conclusion of the 17 June 2026 FOMC meeting, the global macro landscape has undergone a significant shift. In sharp contrast to the tentative consolidation seen in the US dollar between April and May 2026, the US Dollar Index has staged a decisive bullish breakout above its long-standing range resistance at 100.54, which had capped gains since May 2025. The greenback has since advanced to a 13-month high of 101.37 at the close of Friday’s US session on 26 June 2026.
This renewed strength in the US Dollar Index has been accompanied by a widening of the yield premium between US 2-year and 10-year Treasury notes and an equal-weighted basket of sovereign bonds from Germany, the UK, Japan, Canada, Switzerland, Australia, and China (see Fig. 2). Notably, both the 2-year and 10-year US-over-global yield spreads have broken above their respective 200-day moving averages, reinforcing the dollar’s improving relative yield advantage.
The arrival of new Fed Chair Kevin Warsh has catalysed a structural repricing of the US interest rate outlook. The Fed’s increasingly hawkish policy stance has strengthened the US dollar’s yield premium, triggering potential broad-based demand for the greenback while intensifying depreciation pressures across major global currencies.
Considering the potential revival of medium-term US dollar strength, let’s now focus on three related instruments.
AUD/USD is now retesting a key major support of 0.6850
Fig. 3: AUD/USD medium-term trend as of 29 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
The risk-sensitive Australian dollar has been in the doldrums since early May 2026, with AUD/USD staging a 7-week decline of 5.5% from the 6 May 2026 high of 0.7278 to an intraday low of 0.6875 on 26 June 2026.
In addition, it has broken down below its 20- and 50-day moving averages, and the current price action is hovering just above the major support at 0.6850 (the 200-day moving average and the lower boundary of a major ascending channel from the 9 April 2025 low) (see Fig. 3).
This set of technical developments suggests that the AUD/USD may be undergoing a medium-term trend change from bullish to bearish.
Watch the 0.7085 key medium-term pivotal resistance (also close to the 50-day moving average), and a break below 0.6850 may expose the next medium-term supports at 0.6765 and 0.6675.
However, a breakout and a daily close above 0.7085 would bring the next medium-term resistance levels to 0.7180/7210 and 0.7265.
Nasdaq 100’s potential toppish configuration in play
Fig. 4: US Nasdaq 100 CFD medium-term trend as of 29 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
Fig. 5: Weekly MACD trend indicator of the US Dollar Index with US Nasdaq 100 CFD as of 29 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
The price action of the US Nasdaq 100 CFD (a proxy for the Nasdaq 100 E-mini futures) has turned lethargic since its intraday all-time high of 30,773 was printed on 3 June 2026.
It has traced out a potential multi-week “Toppish” configuration, with an accompanying bearish divergence condition flashing on its daily RSI momentum indicator (see Fig. 4).
In terms of intermarket analysis, the weekly MACD trend indicator of the US Dollar Index staged a significant bullish breakout the week of 1 June 2026, moving above the zero line. Two similar bullish breakouts were seen in the week of 4 November 2024 and 20 September 2021, which led to significant prior corrective declines of 22% and 35%, respectively, on the US Nasdaq 100 CFD (see Fig. 5).
Watch the 30,715 key medium-term pivotal resistance, and a break below 29,040 intermediate support (also the 50-day moving) may expose the key neckline support of the “Toppish” configuration at 27,850.
A daily close below 27,850 may trigger a medium-term (multi-week) corrective decline, exposing the next medium-term supports at 26,990 and 26,288 (also the 200-day moving average).
On the other hand, a daily close above 30,715 invalidates the bearish scenario and supports a potential continuation of the bullish impulsive move, with the next medium-term resistance levels at 31,240 and 32,766/33,122.
Hong Kong 33’s major bearish breakdown below 24,765
Fig. 6: Hong Kong 33 CFD medium-term trend as of 29 Jun 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.
Since its current 52-week high of 28,065 printed on 29 January 2026, the price action of the Hong Kong 33 CFD (a proxy for the Hang Seng Index futures) has failed to stage a proper bullish breakout above its long-term secular descending trendline dating back to the January 2018 high (see Fig. 6).
In addition, recent price action has broken below a former major ascending channel support level from the 22 January 2024 low on 25 June 2026, which increases the odds of a potential medium-term (multi-week) corrective decline sequence.
Watch the 24,765 key medium-term pivotal resistance, and a break below the 22,670 intermediate support exposes the next medium-term supports at 21,040 and 19,730/030.
On the other hand, a daily close above 24,765 invalidates the bearish tone, opening the door to a potential squeeze up to retest the next medium-term resistance at 25,955 (also the 200-day moving average); above it, the major resistance comes in at 26,915/27,500.
This article and its contents are intended for educational purposes only and should not be considered trading advice.
