Forex News
- The EUR/JPY cross may rise toward the all-time high of 187.95.
- The 14-day Relative Strength Index at 55.9 signals positive momentum.
- The immediate support lies at the nine-day EMA of 185.40.
EUR/JPY inches lower after registering gains in the previous day, trading around 185.50 during Asian hours on Tuesday. The technical analysis of a daily chart indicates that the currency cross is remaining close to the lower boundary of the ascending channel pattern, signalling a critical juncture. It offers a high-reward, low-risk entry point for traders; however, if the price presses continuously against the bottom line without bouncing back quickly, it demonstrates underlying market weakness.
The EUR/JPY cross is keeping a constructive bullish tone as it holds above both the nine- and 50-period Exponential Moving Averages (EMAs). The short-term EMA remains above the longer one, hinting at a sustained uptrend, while the 14-day Relative Strength Index (RSI) around 55.9 stays in positive territory without reaching overbought conditions, suggesting room for further gains as long as the cross defends the nearby moving average supports.
The EUR/JPY cross could advance toward the all-time high of 187.95 set on April 17, followed by the upper boundary of the ascending channel around 189.30.
On the downside, the EUR/JPY cross tests the immediate support at the nine-day EMA of 185.40, followed by the lower boundary of the ascending channel at 185.30. Further support lies at the 50-day EMA at 184.86.
A break below the medium-term price average would cause a bearish reversal and put downward pressure on the EUR/JPY cross to navigate the region around the nine-month low of 179.37, recorded on August 3.
Yen focus intensifies ahead of BoJ as policy expectations stay in the spotlight
Strategists at Scotiabank note that the “outlook for relative central bank policy remains front and center into the BoJ’s September 18 decision,” with attention increasingly drawn to signals from both domestic policymakers and international counterparts. They highlight media reports that US Secretary Bessent expects Gov. Ueda “to do the right thing,” underscoring market expectations for a measured policy response. Scotiabank also points out that Board member Takata is scheduled to speak later this week, an event that could further shape perceptions around the BoJ’s near-term policy trajectory.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
A senior official from Japan’s Ministry of Finance on Tuesday declined to comment on recent foreign exchange shifts, adding that expected the Bank of Japan (BoJ) to steer monetary policy aligned with the economy, not influenced by the United States.
Key quotes
Declines to comment on recent forex shifts.
Expects BoJ to steer monetary policy aligned with economy, not influenced by U.S.
Katayama, Bessent talked fx intervention in bilateral meeting, among other issues.
Japan's fiscal policy, latest joint FX intervention among key topics in Katayama, Bessent meeting.
Finmin Katayama detailed conditions for U.S.-Japan joint intervention, factors behind decision to G7 counterparts.
No talks on U.S. bond repurchase at bilateral meeting.
Market reaction
At the time of writing, the USD/JPY pair is up 0.03% on the day at 159.80.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- Silver price flattens around $66.67 in the countdown to US Manufacturing PMI and Job Openings data.
- Fed Chair Warsh signaled at the Jackson Hole Symposium that the central bank needs to act if inflation remains higher.
- Renewed Middle East tensions lift energy prices.
Silver price (XAG/USD) trades in a tight range at around $66.67 during the Asian trading session on Tuesday. The white metal consolidates as investors await the United States (US) ISM Manufacturing PMI data for August and the JOLTS Job Openings data for July, which will be published at 14:00 GMT.
The Manufacturing PMI is expected to arrive at 55.2, lower than 55.6 in July. Meanwhile, fresh jobs posted by US employers are seen marginally lower at 7.3 million from 7.359 million in June. The Job Openings data is expected to have a meaningful influence on Federal Reserve (Fed) interest rate expectations.
Financial market experts see the August batch of Nonfarm Payrolls (NFP) and the Consumer Price Index (CPI) to drive Fed’s interest rate prospects significantly.
Fed hawkish tilt at Jackson Hole sets up data-driven September debate
Rabobank’s Elwin de Groot argues that Fed Chair Kevin Warsh’s Jackson Hole appearance was calibrated to shift expectations ahead of the September meeting. In his view, “Warsh’s prepared remarks seemed designed to lift rate-hike expectations, rebalance the September debate towards the hawks and rebuild his inflation-fighting credibility after July’s ‘all talk, no action’ criticism.” However, Rabobank cautions that this strategy “creates a difficult balancing act, as the White House may oppose a hike so close to November’s midterms.”
Even so, de Groot highlights that “Warsh delivered an important signal: the Fed is not relying on tighter financial conditions alone and remains willing to tighten further if underlying inflation stalls.” Against that backdrop, Rabobank judges that “the next round of data – especially the 4 September employment report and 11 September CPI – could therefore prove crucial for the Committee’s swing voters,” potentially determining whether the hawkish messaging translates into actual policy action.
On the geopolitical front, higher oil prices due to the restart of the Middle East war could act as a major headwind for the Silver price. The WTI Oil price jumped to near $85.85 in the Asian session on Tuesday, the highest level in over a week.
Higher energy prices prompt fears of accelerating global inflation expectations, a scenario that forces investors to ramp up hawkish central banks’ bets. This bodes poorly for non-yielding assets, such as Silver.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $66.59. The pair holds a bullish near-term bias as it advances above the 20-day exponential moving average (EMA), which comes in at $65.71 and now acts as underlying demand.
The Relative Strength Index (RSI) at 55.05 stays in neutral-to-positive territory, suggesting steady, rather than aggressive, buying pressure as price consolidates above its short-term trend marker.
On the downside, immediate support is located at the 20-day EMA at $65.71, with the August 9 low at $62.19 acting as the next major cushion. Looking up, the white metal needs a decisive breakout above the June 17 high at $71.56 to extend the advance.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- NZD remains weak despite China's August RatingDog Manufacturing PMI rising to 51.5, beating market expectations.
- The US Dollar rebounds as hawkish Federal Reserve sentiment fuels expectations of upcoming interest rate hikes.
- CME FedWatch Tool suggests that markets now price in a 66% chance of a September Fed rate hike.
NZD/USD depreciates after posting minor gains in the previous day, trading around 0.5910 during the Asian hours on Tuesday. The pair loses ground as the New Zealand Dollar (NZD) holds losses after China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI) climbed to 51.5 in August from 50.9 in July. The market forecast was 50.9. China and New Zealand are close trading partners, so any change in the Chinese economy could impact the NZD.
NZD outlook steadies as RBNZ seen hiking again on firm inflation
Strategists at Brown Brothers Harriman note that the “RBNZ is widely expected to deliver a back-to-back 25bps Official Cash Rate (OCR) hike to 2.75% (Wednesday),” pointing to a supportive domestic backdrop. They highlight that “New Zealand headline inflation is above target, and the domestic growth outlook has improved,” reinforcing expectations for another move higher in the policy rate even as markets assess how much further the tightening cycle can realistically extend.
The NZD/USD pair falls as the US Dollar (USD) rebounds amid hawkish sentiment surrounding the US Federal Reserve (Fed) policy stance. Traders increased their bets on a September rate hike after Warsh said the Fed will "have work to do" if policymakers are not confident that underlying inflation is returning to its 2% target.
Market expectations for Federal Reserve policy have shifted sharply, with the CME FedWatch Tool now pricing in a greater than 66% probability of an interest rate hike in September. This reflects a significant increase from just a week ago, when the likelihood of a hike stood at approximately 41%.
Investors are simultaneously preparing for a crowded economic slate that could further influence monetary policy expectations. Key updates on US manufacturing and services sector activity are scheduled for release later in the day, serving as a prelude to the crucial August Nonfarm Payrolls (NFP) report due on Friday.
Goolsbee flags persistent inflation, keeps Fed bias broadly hawkish
Fed's Goolsbee delivered a moderately hawkish message, with an FXS Speechtracker score of 6.2/10, only marginally above the 6.1/10 historical average and signaling continuity rather than a tonal shift. Agreement that inflation is the main issue, that demand-driven price pressures are hard to address, and that inflation has lasted longer than expected underscores a firm focus on price stability, even as Goolsbee was comfortable holding rates steady at the July FOMC and avoided strong views on meeting frequency. The remark that the Fed and Treasury are not at cross purposes further supports a steady policy narrative, limiting immediate Dollar volatility but keeping upside risks alive if inflation proves sticky.
The FXS Fed Sentiment Index slipped by 0.41 points to 129.29, indicating a slight softening in perceived hawkishness despite the speech remaining well above the neutral 100 threshold. This combination of a minor index pullback and a still-elevated reading suggests the Fed tone is firmly hawkish in aggregate, with Goolsbee's comments reinforcing inflation vigilance while not escalating the hawkish bias relative to the established baseline.
Technical Analysis:
In the daily chart, NZD/USD trades at 0.5910. The pair holds above the 50-day Exponential Moving Average (EMA) at 0.5866, hinting at a mildly constructive undertone, yet it is capped by the shorter nine-day EMA at 0.5926, which keeps upside momentum in check for now. The 14-day Relative Strength Index (RSI) at 53 is hovering just above the neutral line, suggesting steady but not aggressive buying interest, while the latest reading of the FXS Fed Sentiment Index around 129 points to a calmer Fed-related backdrop that may limit directional conviction.
On the topside, immediate resistance is located at the 9-day EMA at 0.5926, and a sustained break above this barrier would open the way for a more decisive recovery phase. On the downside, initial support is offered by the 50-day EMA at 0.5866; a daily close back below this level would weaken the nascent bullish tone and expose the pair to a deeper pullback within the recent range.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
RatingDog Manufacturing PMI
The RatingDog Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s manufacturing sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for CNY.
Read more.Last release: Tue Sep 01, 2026 01:45
Frequency: Monthly
Actual: 51.5
Consensus: 50.9
Previous: 50.9
Source: IHS Markit
Japanese Finance Minister (FM) Satsuki Katayama said Tuesday that he confirmed with US Treasury Secretary Scott Bessent that continued, coordinated action on FX is needed.
Additional quotes
Shared understanding with Bessent on the significance of joint FX intervention.
Can't comment on FX rates when asked if current Yen rates are in order.
Hard to say how specific factors could affect FX moves, when asked whether recent yen moves were orderly or not.
Confirmed with Bessent that our joint efforts with the US continue to benefit global financial market stability.
Can't comment on current JGB yield levels.
No change; when asked if there is any change to stance, said that Tokyo is ready to take decisive action against disorderly FX movements.
True that speculative forex moves not reflecting fundamentals have been on the rise.
FX moves ought to be reflecting fundamentals, but many times they do not.
Market reaction
These comments have little to no impact on the Japanese Yen (JPY), as USD/JPY remains in its range around 159.80, as of writing.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- China's Manufacturing PMI climbed to 51.5 in August, strengthening the Australian Dollar.
- Australian building permits dipped 3.6% in July, performing better than the anticipated decline.
- Rising rate-hike expectations driven by Federal Reserve comments cap the AUD/USD pair's upside.
AUD/USD gains ground for the second consecutive day, trading around 0.7170 during the Asian hours on Tuesday. The pair appreciates as the Australian Dollar (AUD) remains stronger following the release of China’s RatingDog Manufacturing Purchasing Managers’ Index (PMI), which climbed to 51.5 in August from 50.9 in July. The market forecast was for a 50.9 reading. China and Australia are close trading partners, so any change in Chinese economy could impact the AUD.
Australia’s Building Permits slipped 3.6% month-over-month (MoM) in July, against the expected decline of 4.8% and the previous reading of 7.2% increase. Total dwellings unit approved increase 9% year-over-year (YoY), against the 8.9% increase prior.
The upside of the AUD/USD pair is restrained as the US Dollar (USD) rebounds amid hawkish sentiment surrounding the US Federal Reserve (Fed) policy stance. Traders increased their bets on a September rate hike after Warsh said the Fed will "have work to do" if policymakers are not confident that underlying inflation is returning to its 2% target.
Fed clarity on inflation target keeps Dollar bulls engaged
Strategists at Scotiabank note that recent Fed commentary has sharpened the policy outlook, with officials “effectively removed ambiguity around the Fed’s inflation target” and issuing “a clear warning that unless inflation makes progress towards the 2% target ‘with speed’, the Fed could be pushed to tighten policy.” This firmer guidance on the inflation objective is seen as reinforcing higher rate expectations into the September FOMC and helping to underpin the Dollar, even as it gives back part of its latest gains.
Goolsbee flags persistent inflation but backs steady rates, keeping Dollar focus on Fed’s main issue
Fed’s Goolsbee delivered a moderately hawkish-leaning message, with a 6.2/10 FXS Speechtracker score just above the 6.1/10 historical average, underscoring inflation as the central policy challenge. Agreement with Warsh on the economic backdrop and the emphasis that inflation from overheated demand is “hard to address” and has lasted longer than expected highlight concern about price pressures, even as Goolsbee signaled comfort with holding rates steady at the July FOMC and downplayed procedural issues like the number of meetings. The tone suggests a Fed still firmly focused on inflation, but not in a rush to tighten further absent clearer evidence of renewed demand-driven price acceleration.
The FXS Fed Sentiment Index slipped by 0.41 points to 129.29, indicating a modest pullback in perceived hawkishness following the speech. Despite the decline, the index remains well above the neutral 100 threshold, signaling that Fed communication is still firmly in hawkish territory, with Goolsbee’s remarks reinforcing inflation as the main issue even as the FXS Speechtracker score only marginally exceeds the established baseline.
Technical Analysis:
In the daily chart, AUD/USD trades at 0.7170, maintaining a bullish near-term bias as price holds above both the nine- and 50-day Exponential Moving Averages (EMAs). The alignment of the shorter EMA above the longer one reinforces an upward trend structure, while the 14-day Relative Strength Index (RSI) at 64.24 stays in positive territory without yet reaching extreme overbought conditions.
On the downside, immediate support is seen at the nine-day EMA near 0.7156, followed by the 50-day EMA at 0.7071, which together define a nearby demand zone. Below these, deeper structural support levels are located at 0.6688, 0.6434 and 0.6348, where buyers would be expected to re-emerge if a broader corrective phase unfolds.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- GBP/USD weakens to near 1.3550 in Tuesday’s early Asian session.
- Trump said Washington would respond to Iranian attacks on US forces.
- The US ISM Manufacturing PMI report is due on Tuesday ahead of US jobs data.
The GBP/USD pair trades with mild losses around 1.3550 during the early Asian trading hours on Tuesday. The US Dollar (USD) edges higher against the British Pound (GBP) amid ongoing Middle East tensions and Federal Reserve (Fed) Chair Kevin Warsh's hawkish remarks at the Jackson Hole symposium.
US President Donald Trump on Monday threatened to forcefully strike Iran after the US and Iran exchanged fire for the first time in a month. Meanwhile, Iran's Revolutionary Guard Corps (IRGC) said it targeted US military bases in the two Middle Eastern countries in response to the first US strikes on Iran in weeks.
Late Monday, the United Kingdom Maritime Trade Operations (UKMTO) said that a tanker has reported being struck by three projectiles while sailing out of the Strait of Hormuz, per Reuters. Rising tensions in the Middle East could boost safe-haven flows, supporting the Greenback and acting as a headwind for the major pair.
Fed Chairman warned on Friday that inflation is not slowing significantly, and that unless policymakers become confident it is, the central bank has “work to do.” Traders raise their bets on a September rate hike following Warsh’s speech.
Traders brace for the US ISM Manufacturing Purchasing Managers Index (PMI) report, which will be released later on Tuesday. On Friday, the attention will shift to the employment data for August. In case of a weaker-than-expected outcome, this could drag the USD lower in the near term.
BoE expectations firm as markets eye UK budget for next policy cues
Strategists at Scotiabank highlight that market pricing remains firmly tilted toward further BoE tightening, with investors assigning “a ~60% chance of a 25bpt at the next BoE meeting on September 16” and “a cumulative 36bpts of tightening by year-end.” They add that, in terms of sentiment, “the October 28 budget… will remain a key focus for markets over the next coupld of months,” underscoring the extent to which fiscal signals are now seen as integral to the UK policy outlook.
Technical Analysis: GBP/USD
In the daily chart, GBP/USD trades at 1.3546. The pair holds a mild bullish bias, with price above the 100-day simple moving average (SMA) at 1.3444 and the lower Bollinger Band at 1.3433, suggesting underlying demand on dips. However, spot is pressing against the Bollinger middle band at 1.3550, which acts as a nearby cap, while the Relative Strength Index (RSI) at 53.3 points to steady but not overstretched upside momentum.
On the topside, initial resistance is aligned at the Bollinger 20-period SMA near 1.3550, followed by the upper Bollinger Band around 1.3668. On the downside, support emerges first at the 100-day SMA at 1.3444, before the lower Bollinger Band at 1.3433, where buyers would be expected to reappear if a corrective pullback unfolds.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- USD/JPY stabilizes during the Asian session following the previous day’s modest losses.
- Japan’s fiscal concerns and the wide US-Japan rate gap keep JPY bulls on the defensive.
- Rising September Fed rate hike bets and geopolitical risks support the USD and the pair.
The USD/JPY pair holds steady below the 160.00 psychological mark during the Asian session on Tuesday and remains close to a one-month peak, which was retested the previous day.
Anxiety over Japan's massive national debt burden, surging long-term borrowing costs, and expansionary fiscal policies continue to undermine confidence in the Japanese Yen (JPY). Furthermore, the persistently wide interest rate gap between Japan and other major economies, including the US, keeps JPY bulls on the back foot, which, in turn, acts as a tailwind for the USD/JPY currency pair.
The US Dollar (USD), on the other hand, attracts fresh buyers following the previous day's pullback from an over two-week top amid hawkish US Federal Reserve (Fed) expectations and escalating US-Iran tensions. Traders ramped up bets for a rate hike by the US central bank in September following Fed Chair Kevin Warsh's comments at the Jackson Hole Symposium on Friday.
In fact, Warsh acknowledged that inflation is running hot and hinted on Friday that interest rates could need to move higher if more progress isn’t made on easing price pressures. Adding to this, inflation fears stemming from higher energy prices back the Fed's tightening bias, which, along with geopolitical uncertainties, continue to lend some support to the safe-haven Greenback.
In the latest developments surrounding the Middle East crisis, US forces struck two rocket launchers on Iran’s Larak Island in the Strait of Hormuz on Sunday, prompting an Iranian counterattack on American air bases in Jordan. US President Donald Trump threatened more strikes on Iran after the first exchange of direct attacks in a month, supporting crude oil prices and the USD.
The aforementioned fundamental backdrop seems tilted in favor of bulls, though fears of another joint intervention by Tokyo and Washington cap the upside for the USD/JPY pair. Traders now look to this week's important US macro releases, starting with the ISM Manufacturing PMI later today. The focus, however, will be on the US Nonfarm Payrolls (NFP) report on Friday.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair holds in a neutral near-term stance as it consolidates above the 100-period Simple Moving Average (SMA) at 159.19 on the 4-hour chart, which hints at an underlying bid. Spot prices, however, remain capped by the 200-period SMA at 160.26, keeping upside attempts in check while the pair fluctuates around the 50.0% Fibonacci retracement at 159.59.
Immediate resistance above the 200-period SMA is located at the 61.8% Fibo. at 160.62, while higher barriers emerge at 162.09 and 163.96. On the downside, initial support aligns with the 50.0% retracement at 159.59 and the 100-period SMA at 159.19, ahead of deeper Fibonacci supports at 158.56 and 157.28, with the broader structural floor seen near 155.21.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
China's RatingDog Manufacturing Purchasing Managers' Index (PMI) climbed to 51.5 in August from 50.9 in July the latest data published by RatingDog showed on Tuesday. The market forecast was for a 50.9 reading.
Market reaction to China’s RatingDog Manufacturing PMI
The China-proxy Australian Dollar (AUD) has little to no impact following China’s PMI data. At the press time, the AUD/USD pair is up 0.10% on the day to trade at 0.7173.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Tuesday at 6.7809 compared to the previous day's fix of 6.7828 and 6.7170 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
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