USD Faces Volatility as Nvidia Earnings Test AI Rally and Risk Appetite

The US dollar faces a pivotal week as Nvidia's upcoming earnings report looms as a major catalyst for broader risk sentiment, with significant spillover potential into forex markets. The S&P 500 has rallied sharply on the back of AI-driven optimism, and a strong Nvidia result could extend the risk-on environment, weighing on safe-haven currencies like the dollar, yen, and Swiss franc. Conversely, a disappointing report could trigger a sharp reversal in equity markets, boosting demand for haven assets. US 10-year Treasury yields remain elevated, providing underlying support for the dollar, but equity-driven sentiment shifts could override yield differentials in the near term. Traders should monitor USD/JPY and EUR/USD for directional cues, as both pairs are sensitive to shifts in risk appetite and US equity performance. The correlation between tech earnings surprises and short-term dollar volatility has intensified in recent quarters. Positioning ahead of the report suggests elevated implied volatility across major pairs, with options markets pricing in outsized moves through midweek.