The US dollar index has risen again this week, climbing for five consecutive days, with the euro, yen, and Australian dollar all falling. It seems the market has started to speculate again on the Federal Reserve raising interest rates.

First, let's talk about the euro. Last week, the euro/USD fell 1.35%, mainly due to a sudden rebound in US inflation data. April's CPI increased by 3.8% year-over-year, hitting a nearly three-year high, and PPI surged to 6%, the highest since 2022. Once this data was released, the market immediately began betting that the Fed might raise rates before the end of 2026, with a probability exceeding 50%. The dollar index has been rising steadily this week, up for five days in a row, while the euro/USD has fallen for five consecutive days, hitting a more than one-month low. Analysts at US banks say that the downside potential for the dollar is now limited, and the risks are more skewed to the upside. Dutch International Group has a more aggressive view, believing that the dollar index has already broken through the high point at the end of April. With no progress in Middle East tensions, it's still too early to say the dollar has peaked, and it could even surge to 100.

The situation with the yen is even worse. USD/JPY rose 1.32% last week, also up for five days in a row, approaching 159. The problem in Japan is that the government wants to use fiscal expansion to combat rising prices, but as a result, the 10-year government bond yield soared to 2.75%, a 30-year high. Strategists at Daiwa Securities say that this policy stance puts pressure on the bond market, causing the yen to depreciate. If the Bank of Japan delays raising interest rates further, real interest rates will be pushed even lower, weakening the yen further. However, traders now believe there is an 80% chance that the Bank of Japan will raise rates next month.

From a technical perspective, EUR/USD has broken below the 200-day moving average, and the MACD indicates a sell signal, with support levels at 1.16 and 1.15. USD/JPY has broken above the 21-day moving average, with a clear buy signal on the MACD, and resistance at 160. This week, attention should be paid to the US-Iran situation, the Fed meeting minutes, and whether the Japanese government will intervene in the currency market. If tensions escalate or rate hike expectations increase further, the dollar index could still have room to rise.