Marc Chandler - Slumping Dollar, Global Rate Divergence, Yen Volatility Persists, Tariff Impacts
The KE Report Aug 14, 2026
Summary
Weaker US data and softer inflation have pushed Fed hike odds down to 8 basis points, dragging the dollar to its softest weekly close.
Marc Chandler sees a bear flag forming on the dollar index, with the 200-day moving average near 99.20 as the next downside target.
Japanese investors bought the most foreign bonds and stocks in two years the week after intervention, weakening the yen carry-unwind narrative.
A record July US budget deficit and roughly $100B in tariff refunds keep fiscal pressure on the dollar, while August 19 Canada tariffs loom.
Marc Chandler's takeaways
- Top takeaway Argues the US dollar has rolled over on soft US data — jobs lost in July, weaker retail sales, softer CPI/PPI — and scaled-back Fed hike odds, framing further downside as the "end of the boxer's punch" rather than a breakout given stretched, oversold momentum indicators
- Sets next technical support on the dollar index around $99.20 (200-day MA) and then $98.75–$99.00 (late May/early June lows), but warns lack of follow-through selling could leave the dollar rangebound below 100
- Flags the steepest 2s/10s US yield curve since mid-May, attributing part of the move to a record July US budget deficit and uncertainty around the new Fed chair who has yet to vote for a hike
- Notes BOJ September hike odds have swung from roughly 20% to over 80% while Fed September hike odds fell from about 72% to 32%, yet the yen has not benefited — dollar/yen around 159.55, the highest since the intervention
- Says the yen carry trade has not unwound: Japanese investors used the post-intervention bounce to buy the most foreign bonds and stocks in two years, and argues Swiss franc (Euro-Swiss at new year highs) and US dollar have absorbed the carry funding role