Dollar Uptrend Remains Intact Despite Recent Weakness

TD Securities' macro team, led by Jayati Bharadwaj and colleagues, believes that recent weakness in the US Dollar after the July FOMC meeting was a short-lived retracement within a broader Q3 2026 uptrend. They argue that hawkish Fed dissenter speeches and centrist members leaning hawkish will support the Dollar. According to their MRSI model, which is gradually turning more bearish, this does not signal a structural USD downtrend.

The team views the latest USD move as a temporary retracement rather than the formation of a new USD downtrend. They point out that three hawkish dissents in favor of a rate hike were seen at the July FOMC meeting. This, combined with hawkish speeches from Fed dissenters, should offset some of the post-FOMC USD weakness.

Hawkish pushback from other Fed members in the coming weeks is expected to curb the USD weakness. The team recommends shorting out-of-money EUR/USD calls for the summer to position for near-term USD consolidation or uptrend resumption. They see the broad USD Q3 2026 uptrends remaining intact, absent material US data weakness that would remove the near-term Fed rate hike pricing.