TD Securities Holds Bearish Dollar View for 2026
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
us-dollarforex-strategy
Fazen Markets Editorial Desk
Collective editorial team · methodology
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TD Securities forex strategists announced on 26 May 2026 that they are maintaining a bearish outlook for the US dollar through 2026. The view remains intact despite stronger-than-expected US economic data and geopolitical tension stemming from the Iran conflict. The firm cites only middling US economic outperformance versus global peers and an expectation that the Federal Reserve will hold rates steady. The Dollar Index (DXY) was trading lower, while the US Package Service Index surged 3.79% to $101.97 as of 22:01 UTC today.
Global markets are assessing the durability of US economic strength against a backdrop of heightened Middle East tensions. The strategists' report pushes against a growing narrative that recent US data resilience warrants a sustained dollar bull run. This contrarian stance comes as the market prices in a less aggressive Fed easing path than anticipated at the start of the year.
The last significant dollar peak occurred in late 2022, when the DXY surged above 114.00 amid the Fed's rapid interest rate hiking cycle. Since then, the index has retreated as global central banks have caught up with their own tightening measures. The current level represents a significant depreciation from those multi-decade highs.
The immediate catalyst for revisiting the dollar thesis is the market's reaction to the US-Iran conflict and recent US GDP and inflation prints. TD Securities argues that these factors are transitory and do not alter the fundamental path toward rate convergence between the Fed and other major central banks.
TD Securities' analysis hinges on specific macroeconomic comparisons. They describe current US economic momentum as "middle-of-the-pack" when measured against other developed and emerging markets. This contrasts with the clear outperformance that characterized the US economy in 2022 and 2023.
The Dollar Index's recent gains have been contained. It remains substantially below its peak of 114.78 set in September 2022. Core inflation rates across major economies, including the Eurozone and Canada, have not shown the broad-based acceleration that would justify a new, synchronized global tightening cycle.
Market pricing currently reflects skepticism about imminent Fed rate cuts, but also judges full rate hikes as premature. This leaves the dollar in a holding pattern, susceptible to shifts in relative growth forecasts. The US Package Service Index, trading at $101.97 with a daily range of $101.44 to $102.67, exemplifies the strong single-stock moves that can occur even as the broader dollar narrative remains contested.
| Metric | TD Securities Assessment |
|---|---|
| US Economic Outperformance | Middling vs. Peers |
| Fed Policy Bias | Expected to Drop Easing, Stay on Hold |
| Global Core Inflation | Lacks Broad-Based Upside |
| DXY vs. 2022 Peak | Well Below Highs |
A persistently strong or weakening dollar has profound second-order effects across asset classes. A bearish dollar outlook, as held by TD Securities, typically benefits US multinational corporations with large overseas revenue streams. Sectors like technology and materials often see expanded profit margins when the dollar weakens, as their foreign earnings translate into more dollars.
Emerging market assets also tend to perform well in a softer dollar environment, as dollar-denominated debt becomes easier to service and capital flows into higher-yielding markets. Conversely, a bearish dollar view implies headwinds for US exporters who become less competitive and for investors in dollar-heavy safe-haven assets.
A key risk to this outlook is a scenario where US inflation proves stickier than anticipated, forcing the Fed to resume hiking rates while other central banks pivot toward easing. This would likely trigger a sharp dollar rally. Current flow data suggests institutional investors are cautiously positioned for dollar weakness later in the year, but remain underweight compared to historical averages for a bearish bet.
The trajectory of the dollar will be determined by a sequence of upcoming economic releases and central bank meetings. The next US Non-Farm Payrolls report and Consumer Price Index (CPI) data for May will be critical in validating or challenging the Fed's patient stance. Any significant deviation from expectations could force a repricing of rate expectations.
Key levels to watch for the DXY include the 2024 low of 99.50 as a major support zone and the 106.00 level as resistance. A sustained break above 106.00 would signal a breakdown of the bearish technical structure and potentially invalidate TD's thesis.
The European Central Bank and Bank of England policy meetings in June will provide crucial insight into the pace of expected rate convergence. If these banks signal a slower path to easing than markets anticipate, it could bolster their currencies against the dollar, supporting TD's view.
A bearish dollar outlook typically translates into a bullish forecast for the EUR/USD exchange rate. If TD Securities' thesis proves correct, the euro could appreciate against the dollar as interest rate differentials between the ECB and Fed narrow. The pair would likely test resistance levels above 1.1200, a zone not traded in since early 2023, driven by capital flows into European assets.
Historically, geopolitical crises in the Middle East have caused a flight to safety, initially boosting the US dollar's value as investors seek refuge in US Treasury bonds. However, these spikes are often short-lived unless the conflict significantly disrupts global oil supplies or draws in major powers directly. The strategists argue the current situation lacks the scale to create a lasting dollar bullish catalyst.
Following the initial pause in a Fed hiking cycle, the dollar's performance has been mixed and largely dependent on the subsequent actions of other central banks. In the 2006-2008 pause, the dollar weakened as global growth remained strong. The current cycle is unique due to the high starting level of inflation and synchronized global monetary tightening, making historical comparisons less reliable.
TD Securities expects dollar weakness in late 2026 driven by global rate convergence, not current geopolitics.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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