Forex News

• WTI struggles for a firm direction as traders await fresh developments around US-Iran tensions.
• Concerns about supply disruptions in the Strait of Hormuz continue to support the black liquid.
• The technical setup favors bulls and backs the case for a further near-term appreciating move.

West Texas Intermediate (WTI) – the benchmark US Crude Oil price – extends its sideways consolidative price moves for the fourth straight day and trades around the $79.00 mark through the first half of the European session on Friday.

Against the backdrop of this week's breakout above the 23.6% Fibonacci retracement level of the April-July fall and the 200-day Simple Moving Average (SMA) on the 4-hour chart, the range-bound price action might be categorized as a bullish consolidation phase. Meanwhile, the Relative Strength Index (RSI) is around 59, and the Moving Average Convergence Divergence (MACD) (12, 26, 9) has stabilized in negative territory.

Momentum indicators together hint at an extension of the consolidative phase rather than aggressive buying. The downside, however, seems cushioned amid a further escalation of tensions between the US and Iran. Furthermore, concerns about supply disruptions in the Strait of Hormuz lend support to crude oil prices. This, in turn, favors bulls and suggests that the path of least resistance for the commodity is to the upside.

Some follow-through buying and acceptance above the $80.00 psychological mark will reaffirm the constructive outlook and lift the black liquid to the 38.2% Fibo. retracement at $82.48. This is followed by a more substantial barrier at the 50.0% level near $87.25. Further up, the 61.8% retracement at $92.01 and the 78.6% level at $98.79 mark progressively stronger supply zones if the buying interest sustains and the rally extends.

On the downside, immediate support is seen at the 200-period SMA at $77.30, followed by the 23.6% retracement at $76.59, where a break would weaken the current bullish structure and open the door to a deeper pullback within the broader range.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

WTI 4-hour chart

Standard Chartered’s Dan Pan assesses new United States (US) Section 301 tariffs on Brazilian exports, noting a 25% levy effective 22 July that could rise to 37.5%. Pan argues the economic impact on Brazil should be limited by wide-ranging exemptions and diversified trade ties, but warns that the political fallout is significant, potentially strengthening President Lula against Flavio Bolsonaro in the October election.

US tariffs seen as politically potent

"The year-long trade and political feud between the US and Brazil is likely to extend following the ongoing Section 301 tariff investigations."

"In addition to the 25% tariff on Brazil’s exports, which will be effective from 22 July, another pending investigation could bring the final tariff to 37.5%. However, any added impact on Brazil’s exports may be limited, as the final new tariff would still be below the 50% tariff imposed by IEEPA last July on concerns over former President Jair Bolsonaro’s trial."

"With over 30% of exports being exempt from the announced 25% Section 301 tariff, we expect the economic pain to be limited."

"Total exports have continued to grow despite hefty US tariffs, benefiting from favourable terms of trade and deepening trade ties with other major trade partners in Asia and the Middle East."

"Wide-ranging exemptions are likely to limit the economic impact on Brazil, but unlikely to reverse the notable decline in bilateral trade since mid-2025 after the announcement of the 50% IEEPA tariff."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann note USD/JPY has edged higher to around 162.35, with intraday bias tilted modestly to the upside but capped between 162.10 and 162.65. Over 1–3 weeks, the pair is expected to be contained in a narrower 161.30–163.00 range, while the medium-term outlook allows for further gains as long as price holds above the 21-day EMA near 161.00.

Japanese Yen stays under gentle pressure

"24-HOUR VIEW: Yesterday, we noted “a slight increase in downward momentum,” and we indicated that this “is likely to lead to USD trading in a lower range of 161.70/162.30 rather than a sustained decline.” However, USD edged up to 162.54 before closing slightly higher by 0.12% at 162.38. This time around, there is a slight increase in upward momentum, and the bias for USD is tilted to the upside. That said, any advance is likely to be contained within a range of 162.10/162.65."

"1-3 WEEKS VIEW: We have held the same view since last Tuesday (07 Jul, spot at 162.10), when we indicated that “the outlook for USD is mixed,” and it could “trade between the two major levels of 160.60 and 163.00.” While we are not able to derive much from the price action since then, a narrower 161.30/163.00 range is likely sufficient to contain USD for now."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CAD edges lower to near 1.4033 amid strength in the Canadian Dollar.
• The Red Sea closure could lift oil prices further.
• BoC’s Macklem keeps the door open for further interest rate hikes.

The USD/CAD pair trades marginally lower at around 1.4033 during the European trading session on Friday. The Loonie pair edges down as the Canadian Dollar (CAD) outperforms its major currency peers amid fears that oil prices could accelerate further.

Currencies from economies, such as Canada, that are net energy exporters tend to outperform in a high-oil-price environment.

The oil price outlook has improved amid threats from Iran that it will close the Red Sea if the United States (US) strikes on Iranian infrastructure.

On the monetary policy front, Bank of Canada (BoC) Governor Tiff Macklem said in the press conference, after leaving interest rates unchanged at 2.25%, that the central bank might need to raise interest rates if oil prices remain higher.

Meanwhile, the US Dollar holds Thursday’s recovery move amid fears of a resurgence in US inflation due to rising energy prices.

USD/CAD technical analysis

USD/CAD trades slightly lower at around 1.4033, extending a corrective tone after pulling back from recent highs. The pair now sits beneath the 20-day Exponential Moving Average (EMA) at 1.4107, suggesting a near-term bearish bias as price loses traction relative to the short-term trend benchmark.

The Relative Strength Index (RSI) at 39.6 has retreated from overbought territory and now leans toward the lower half of its range, suggesting that downside momentum is still in play but not yet oversold.

On the topside, immediate resistance is defined by the 20-day EMA at 1.4107, and a sustained recovery above this barrier would be needed to ease the current pressure. On the downside, the pair is expected to extend its decline towards the March 31 high at 1.3967.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• USD/CHF fails to break 0.8100 and resumes its near-term bearish trend, retreating to the 0.8075 area.
• The US Dollar remains on its back foot amid cooling hopes of immediate Fed tightening.
• Technically, the pair is trading lower within the broader horizontal channel.

The US Dollar (USD) has turned lower against the Swiss Franc (CHF) on Friday’s European trading session, after failing to find acceptance above the 0.8100 level, which keeps the immediate bearish structure in place.  The Dollar remains weighed by the soft US inflation figures released earlier this week, which have cooled hopes of immediate Federal Reserve (Fed) rate hikes.

US Consumer Price Index (CPI) and Producer Price Index (PPI) figures confirmed that inflationary pressures moderated in June, favoured by a sharp pullback in Oil prices. These numbers provide the Fed further leeway to assess the economic impact of the volatile energy prices, which practically discards a rate hike in July and cools hopes of one in September.

Geopolitical tensions, on the other hand, remain high, as the US and Iran escalated their reciprocal attacks this week, and Iran threatened to close other energy routes, which might bring the global economy to the edge. This is likely to keep appetite for risk subdued and cushion the US Dollar’s downside attempts.

Technical Analysis: Trading lower within a horizontal channel

USD/CHF trades at 0.8073, with recent price action showing a sequence of lower highs and lower lows, yet within a roughly 120-pip range and with momentum indicators at neutral-to-bearish levels. The four-hour Relative Strength Index (14) is hovering just below the 50 line, while the Moving Average Convergence Divergence (MACD) indicator sits marginally below zero, both hinting at subdued bullish conviction.

On the downside, initial support is seen at the July 10 and 15 lows near 0.8030, with key support in the area between early July lows, at 0.8010, and the 38.2% Fibonacci retracement of June's rally, at 0.8007. On the topside, bulls would need to confirm above session highs at 0.8100 to aim for the top of the channel at the area between 0.8135 and 0.8150, which capped rallies in late June and mid-July.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Wells Fargo Economics, led by Tom Porcelli and colleagues, expects the Federal Reserve to keep the fed funds rate at 3.50%-3.75% through year-end 2027, with 10-year Treasury yields near 4.35% in 2026 and 4.30% in 2027. Despite a more hawkish tone, they still see scope for patience if inflation cools and the labor market stays balanced.

Policy rates seen steady into 2027

"Our base case remains for the FOMC to stay on hold this year, but the potential for hikes is high."

"Our fed funds forecast remains unchanged, as we continue to look for the FOMC to keep the fed funds rate steady through year-end 2027 at 3.50%-3.75%. Our forecasts for the 10-year Treasury yield at year-end 2026 and 2027 are also unchanged at 4.35% and 4.30%, respectively."

"If the worst of the energy and tariff supply shocks are truly behind us (a big if, we know), and if the labor market is not overheating (we don't think it is), we think there is a path for the Fed to remain patient, keep the policy rate unchanged, and await softer inflation readings in the months ahead."

"Accordingly, we look for the yield curve to bull steepen modestly as the market's rate hike expectations are slowly dialed back in the month ahead."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold recovers slightly from the vicinity of the monthly low, though the upside seems capped.
• Escalating US-Iran tensions and inflation worries revive Fed hike bets, which favor USD bulls.
• The bearish technical setup backs the case for the emergence of fresh selling at higher levels.

Gold (XAU/USD) struggles to capitalize on its modest intraday recovery beyond the $4,000 psychological mark and remains within striking distance of the monthly trough. Moreover, the bearish fundamental backdrop suggests that the path of least resistance for the precious metal remains to the downside. Crude oil prices have jumped over 10% this week as renewed US-Iran clashes stoked supply concerns, reviving inflation fears and lifting expectations that the US Federal Reserve (Fed) will keep rates higher for longer. This is seen as a key factor supporting the US Dollar (USD) and capping the non-yielding bullion.

The US-Iran conflict is entering a dangerous new phase as both sides exchanged intensifying fire on Thursday, with the latter expanding its military campaign beyond conventional military targets. In fact, officials in southern Iran's Bandar Abbas reported that civilian infrastructure – including power facilities and a train station – has been hit. Iran retaliated with missile and drone attacks targeting US-allied Gulf nations. Tensions have also escalated around the Strait of Hormuz, with the US intercepting commercial vessels attempting to breach its naval blockade around Iran.

Meanwhile, Iran's Islamic Revolutionary Guard Corps had threatened to expand the conflict by targeting additional regional energy supply routes. In fact, Reuters reported that Iran has asked Yemen’s Houthis to stand ready to close the Red Sea oil route. This helps crude oil prices in preserving the recent gains at a one-month high, reviving concerns about energy-driven inflation. Adding to this, the upbeat US macro data and hawkish comments from influential Fed officials reinforced expectations that the US central bank will raise borrowing costs at least once by the end of this year.

The US Labor Department reported on Thursday that the number of Americans filing new applications for unemployment benefits dropped to a seasonally adjusted 208 K for the week ended July 11. The reading was below consensus estimates and underscored the resilience of the US labor market. Separately, the Philadelphia Fed Manufacturing Index surged from 10.3 to 41.4 in July, hitting its highest level since November 2021 and indicating a rapid acceleration in regional factory activity. Further details revealed that both price indicators continued to signal rising prices.

Furthermore, Dallas Fed President Lorie Logan said that the positive news this week on consumer and wholesale prices still wasn’t good enough to signal real help for US households. She called for modestly higher interest rates to win a battle the central bank has been losing for the past five years. Apart from this, Fed Vice Chair Philip Jefferson said that he would be open to raising rates if inflation does not show near-term improvement. According to the CME Group's FedWatch Tool, traders are currently pricing in a nearly 75% chance of a 25-basis-point (bps) Fed rate hike by December.

The aforementioned factors favor the USD bulls, suggesting that any subsequent recovery in the Gold price is more likely to be sold into and fizzle out rather quickly. Traders now look forward to Friday's US economic docket – featuring Building Permits, Housing Starts, Industrial Production data, and the prelim University of Michigan Consumer Sentiment Index and Inflation Expectations. This, along with Fed speak, would drive the USD and provide some impetus to the Gold price, which remains on track to register losses for the second consecutive week.

XAU/USD daily chart

Gold is likely to attract fresh sellers at higher levels amid bearish setup

From a technical perspective, the XAU/USD pair has been trending lower along a downward-sloping channel and remains below the very important 200-day Simple Moving Average (SMA). This reaffirms the near-term bearish outlook for Gold and suggests that rallies are likely to remain capped within the broader corrective phase. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator has turned modestly positive, while the Relative Strength Index (RSI) near 40 hints at only a tentative stabilization rather than a sustained recovery.

Hence, any further move up could face an initial hurdle at the channel top near $4,082.74, with stronger structural resistance at the 200-day SMA clustered around $4,495.44. On the downside, the lower boundary of the descending channel at $3,661.05 acts as key support, and a decisive break below this zone would reinforce the prevailing bearish structure and expose further downside within the current trend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Deutsche Bank’s Early Morning Reid notes Brent Oil trading around $85 per barrel, with prices slightly higher at $85.12/bbl and on course for a first close above $85 in over a month. The report links this strength to ongoing Middle East tensions, including US–Iran strikes and potential Red Sea disruptions, reinforcing market worries about persistent inflation.

Brent holds above key $85 level

"In terms of the latest in the Middle East, oil prices oscillated back and forth through the day, as strikes between the US and Iran continued."

"Otherwise, there was also a Reuters report yesterday that Iran had asked its Houthi allies in Yemen to be ready to close the Red Sea oil route if the US struck Iran’s power network, which raised fears about further supply-chain disruption."

"And in the background, fears about rate hikes and more persistent inflation are still there, with Brent crude oil up another +1.06% this morning to $85.12/bbl."

"That would be its first close above $85/bbl in over a month, and that combination of concerns around tech and inflation has really put a dent in the more buoyant narrative after the soft US CPI report earlier this week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• GBP/JPY attracts sellers for the second straight day as intervention fears boost the JPY.
• A modest USD strength weighs on the GBP, contributing to the pair’s intraday downfall.
• The wide UK-Japan rate gap and optimism over the UK’s fiscal outlook should limit losses.

The GBP/JPY cross turns lower for the second straight day following an intraday uptick to the 219.00 neighborhood on Friday and retreats further from its highest level since January 2008, touched earlier this week. Spot prices weaken below mid-218.00s during the early part of the European session, though the downside potential seems limited.

Traders remain on high alert amid speculations that Japanese authorities will step in to prop up the domestic currency, which, in turn, offers some support to the Japanese Yen (JPY). The British Pound (GBP), on the other hand, is weighed down by a modest US Dollar (USD) strength and turns out to be another factor exerting some pressure on the GBP/JPY cross. However, a broadly supportive fundamental backdrop could limit deeper losses, warranting caution for aggressive bearish traders.

Borrowing costs in Japan remain significantly lower than in other major economies, including the UK. In fact, the Bank of Japan (BoJ) raised its short-term policy rate to a 31-year high level of 1.0% in June, while the Bank of England's (BoE) base rate is 3.75%. This leaves a gap of around 275 basis points (bps), which is wide enough to sustain the so-called JPY carry trades. Furthermore, economic risks stemming from the Middle East conflict might cap the JPY recovery and support the GBP/JPY cross.

Meanwhile, diminishing domestic political risks, along with the growing optimism over the UK’s fiscal outlook and economic resilience, should help limit losses for the GBP and the GBP/JPY cross. Reports that the  incoming UK Prime Minister, Andy Burnham, may appoint Shabana Mahmood as Chancellor eased concerns over aggressive government borrowing and heavy fiscal expansion. Moreover, data released on Thursday showed that the UK economy returned to growth in May.

Hence, it will be prudent to wait for strong follow-through selling before confirming that the GBP/JPY cross has topped out in the near-term and positioning for a meaningful corrective decline. Nevertheless, spot prices remain on track to register strong weekly gains, and any subsequent fall might still be seen as a buying opportunity.