Quarter-End Wrap: Dollar Wins Q3 as Euro Sinks Below 1.13
The third quarter of 2026 is in the books, and the scoreboard is unambiguous: the US dollar beat everything.
Look at the numbers. The Federal Reserve’s own H.10 data shows the euro buying just 1.1259 dollars as of October 2 — down from 1.1367 a week earlier and miles below the 1.17 handle where it started the quarter. The yen fared even worse on the quarter despite its September spike: 157.8 per dollar at last check. The pound, the darling of August, is back down near 1.3260.
Three months, one theme
If I had to summarize Q3 in a single sentence: the market stopped believing the soft-dollar story. Coming into July, the consensus trade was dollar weakness on the back of expected Fed easing. Instead, US data stayed firm, rate-cut expectations got pushed out, and the dollar index never looked back.
The euro’s quarter was particularly rough. From 1.1524 at the end of June to 1.1327 at the September low — a decline of nearly 2% — with almost the entire move happening in the last three weeks of the quarter. Momentum funds, systematic strategies, and macro accounts all ended up on the same side of that trade, which is why it moved so fast once it started.
The yen’s strange quarter
USD/JPY’s quarterly path deserves its own footnote: up to 163.98 by late July, crashing to 152.90 in early September, closing the quarter near 157.6. A 1100-pip round trip. If you held a long-dollar-yen position all quarter, you ended roughly where you started — after one of the wildest rides in years. Volatility like that destroys more accounts than trending markets ever do.
Q4 setup
Heading into the fourth quarter, the dollar has momentum, positioning is on its side, and the growth differential still favors the US. The risks to that view: an abrupt US data downturn, or a global risk-off episode that sends everyone scrambling into — ironically — the yen.
Key levels into year-end: EUR/USD 1.1250 support, 1.1500 resistance. USD/JPY 155.50 support, 160.20 resistance. GBP/USD 1.3200 support, 1.3510 resistance.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
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