Forex News
- Gold price declines below $4,600 in Friday’s Asian session.
- US July PCE data fuels Fed rate hike bets; traders brace for Jackson Hole Symposium on Friday.
- Iran officials said they are preparing list of conditions to open Strait of Hormuz.
Gold price (XAU/USD) attracts some sellers below $4,600 during the Asian trading hours on Friday. The precious metal retreats from a three-month high as in-line US inflation data has reinforced the possibility of further Federal Reserve (Fed) rate hikes. Traders await Fed Chair Kevin Warsh's speech at the Jackson Hole Economic Symposium on Friday for fresh impetus.
The core Personal Consumption Expenditures (PCE) Price Index inflation, the Fed's preferred inflation gauge, held steady at 3.3% YoY in July, the US Bureau of Economic Analysis (BEA) revealed on Wednesday. This figure came in line with market expectations. On a monthly basis, the headline PCE Price Index and the core PCE Price Index both rose by 0.2% in July.
Following the data release, the market significantly increased its bets on a September rate increase. According to the CME FedWatch Tool, the probability of a Fed rate hike in September rose to 40% from 36% before the data release. This, in turn, could weigh on the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
On the other hand, optimism for a reopening of the Strait of Hormuz amid diplomatic efforts involving Iran and Oman might ease oil-driven inflation concerns, capping the downside for gold.
Iran’s Security Chief Mohsen Rezaei said on Friday that Tehran is preparing a list of its conditions to open the Strait of Hormuz in response to a request by mediators, adding that conditions include ending the war in the region, per Reuters.
Gold sentiment seen as resilient even if Fed turns more hawkish
According to TD Securities, a shift in tone from Fed Chair Warsh remains a key risk for bullion, with the bank cautioning that “a more hawkish tone from Fed Chair Warsh would be a catalyst for some reversal in the yellow metal.” However, the strategists argue that “the bar is likely high to reverse the improved sentiment in precious metals,” suggesting that any policy surprise would need to be substantial to materially undermine the current constructive backdrop for gold.
XAU/USD daily chart
Technical Analysis: Gold price maintains a constructive outlook above the 100-day SMA
In the daily chart, XAU/USD holds well above its 100-day simple moving average (SMA) and the 20-day Bollinger middle band, keeping the near-term bias bullish despite the recent pullback from record highs. The Relative Strength Index (14) around 65 shows positive momentum but shy of extreme overbought, suggesting upside pressure persists, although the proximity of overbought territory hints that the advance could become more labored as price stretches further from underlying trend support.
On the topside, immediate resistance is located at the upper boundary of Bollinger band near $4,760, where previous upside extensions could face renewed selling interest. On the downside, initial support is seen around the current area near $4,585, with stronger demand anticipated at the middle Bollinger Band at $4,415 and the 100-day SMA at $4,375; a deeper slide toward the lower limit of Bollinger band at $4,073.52 would only come into view if those trend supports give way, which for now looks less likely while daily momentum remains constructive.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- NZD/USD drifts higher to around 0.5960 in Friday’s Asian session.
- BNZ analysts expect the RBNZ to hike 25 bps to 2.75% in September.
- Fed’s Jackson Hole conference will be the highlight on Friday.
The NZD/USD pair gathers strength to near 0.5960 during the Asian trading hours on Friday, bolstered by a hawkish tone from the Reserve Bank of New Zealand (RBNZ). Markets might turn cautious later in the day ahead of Federal Reserve (Fed) Chair Kevin Warsh's speech at the Jackson Hole Symposium.
Hotter-than-expected New Zealand’s Consumer Price Index (CPI) inflation data for the second quarter (Q2) has reinforced expectations of a 25-basis-point RBNZ hike in September, supporting the Kiwi. BNZ analysts see the New Zealand central bank raising the Official Cash Rate (OCR) by 25 bps to 2.75% at the upcoming meeting in September, calling it a near certainty given 94% market pricing.
The RBNZ is expected to signal further tightening toward a peak of around 3.5%, though BNZ's own house view has the OCR reaching 4.0% by May 2027.
Traders will keep an eye on the Jackson Hole Symposium later on Friday. Fed Chairman Kevin Warsh’s speech could provide more clarity on his outlook for the US economy and interest rates. Any hawkish remarks from Warsh could boost the Greenback and act as a headwind for the pair in the near term.
Leveraged NZD shorts seen as a bet against full RBNZ tightening
Analysts at MUFG suggest that record leveraged fund short positioning in the Kiwi may in part reflect “scepticism over the ability of the RBNZ to deliver 100bps of tightening over the next year.” They point out that the latest labour market report showed the unemployment rate rising “from 5.4% to 5.6% despite a strong increase in employment,” a combination that “highlight[es] increased labour supply and greater economic slack than assumed.” In MUFG’s view, this softer backdrop helps explain why speculative investors remain wary of fully pricing the RBNZ’s projected tightening path.
Technical Analysis: Positive tone of NZD/USD prevails above the 100-day SMA
In the daily chart, NZD/USD holds a bullish near-term bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, keeping the recent recovery well supported. The Relative Strength Index (14) at 63 leans toward overbought territory, suggesting upside momentum persists but may be losing some punch as price approaches the upper end of its recent volatility envelope.
On the topside, immediate resistance is aligned with the Bollinger Bands’ upper band near 0.5990, where a daily close higher would open the way to a more decisive extension of the advance. On the downside, initial support is seen at the Bollinger middle band around 0.5910, followed by the 100-day SMA at 0.5845 and the lower Bollinger band near 0.5830, a cluster that should limit deeper pullbacks while the broader constructive structure remains intact.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD gains as strong July inflation data bolster Reserve Bank of Australia rate hike bets.
- Markets now price in a November rate increase, with major banks forecasting earlier tightening.
- Traders await Federal Reserve Chair Kevin Warsh's Jackson Hole speech for directional hints on US interest rates.
AUD/USD continues its winning streak for the fourth successive day, trading around 0.7200 during the Asian hours on Friday. The currency pair is appreciating as the Australian Dollar (AUD) receives strong support from rising Reserve Bank of Australia (RBA) rate hike bets. This tighter policy outlook follows a hotter-than-expected July inflation report.
Several major banks have revised their cash rate forecasts. National Australia Bank (NAB) now expects the cash rate to reach 4.6% next month, while Commonwealth Bank of Australia (CBA) and ANZ anticipate a move in November, though they acknowledge the possibility of earlier tightening. Financial markets have adjusted accordingly, pricing in roughly a 50% chance of a rate increase at the RBA's September meeting, up sharply from 17% previously, while fully pricing in a November hike.
Societe Generale sees EM FX and Aussie supported by capped US yields
Strategists at Societe Generale argue that the broader FX backdrop continues to favour higher-yielding currencies, so long as US policy keeps bond markets in check. They contend that “as for the bigger picture, as long as the US is trying to keep a lid on Treasury yields, and as long as US growth is holding up, there will be better FX longs in EM than in DM, and continued demand for G10’s highest-yielding currency, the AUD.”
Meanwhile, forex traders are turning their focus to the annual economic symposium in Jackson Hole, Wyoming. Market participants are closely monitoring an upcoming speech by Federal Reserve Chairman Kevin Warsh, searching for potential signals regarding the direction of US monetary policy and interest rates.
Technical Analysis: AUD/USD rises to overbought territory
In the daily chart, AUD/USD trades at 0.7200. The pair retains a bullish near-term bias as price holds comfortably above both the nine- and 50-day Exponential Moving Averages (EMAs), keeping the short- and medium-term trend profiles aligned to the upside. The 14-day Relative Strength Index (RSI) at 70.7 has pushed into overbought territory, suggesting strong but potentially stretched upside momentum after the latest advance.
On the downside, initial support is located at the nine-day EMA around 0.7160, followed by the 50-day EMA near 0.7070, where a deeper pullback would be expected to attract dip-buying interest while the broader uptrend remains intact. Below these dynamic floors, more distant horizontal supports sit at 0.6688, ahead of 0.6434 and 0.6348, levels that define the lower boundary of the broader bullish structure and are unlikely to be challenged unless sentiment deteriorates materially.
(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.
- Decreasing Brent crude prices have softened UK inflation concerns, pushing BoE rate hike expectations into 2027.
- Markets price in minimal tightening for September, keeping economists confident the BoE will hold rates at 3.75%.
- FX traders await Federal Reserve Chair Kevin Warsh's Jackson Hole speech for directional hints on US interest rates.
GBP/USD inches higher after two days of losses, trading around 1.3600 during the Asian hours on Friday. However, the British Pound (GBP) may encounter headwinds as recent declines in Brent crude oil prices ease immediate inflation concerns. This shift has led money markets to push back expectations for the Bank of England's (BoE) next interest rate hike from late 2026 into early 2027.
According to LSEG pricing data, financial markets reflect just 24 basis points of policy tightening by December and 36 basis points by February 2027. Ahead of the BoE's September meeting, less than 4 basis points are priced in, translating to roughly a 15% probability of a rate increase.
Despite earlier market speculation of a rate hike driven by fears over potential US-Iran conflict escalation, most economists maintain that interest rates will hold steady at 3.75% through the end of the year. Underpinning this outlook is a mixed economic backdrop: UK inflation accelerated to 2.9% in July, primarily fueled by rising household energy bills, and is projected to edge higher toward year-end, even as the labor market continues to display underlying weakness.
Pound tone softens as quiet UK calendar tempers BoE tightening bets
Strategists at Scotiabank point out that the UK data backdrop offers little to drive the Pound in the near term, with “the domestic calendar has been limited” and “the absence of any major releases ahead of next week’s final PMI’s” keeping traders on the sidelines. They add that “messaging from the BoE has been equally limited,” while highlighting “the modest softening of tightening expectations observed over the past week or so,” which has further weighed on sentiment toward GBP.
Meanwhile, forex traders are turning their focus to the annual economic symposium in Jackson Hole, Wyoming. Market participants are closely monitoring an upcoming speech by Federal Reserve Chairman Kevin Warsh, searching for potential signals regarding the direction of US monetary policy and interest rates.
Markets seen complacent on Jackson Hole risk despite Dollar bid
Strategists at Scotiabank caution that, while history shows Jackson Hole “can have a significant impact on market pricing,” current option markets are sending a different signal. They note that “1w implied vols are running well below recent averages,” which in their view “suggests markets may be a little complacent about the Warsh’s speech and the potential impact on markets,” even as the USD edges firmer into the event.
Technical Analysis:
In the daily chart, GBP/USD trades at 1.3600. The pair holds a constructive bullish bias as it trades above both the nine- and 50-period Exponential Moving Averages (EMAs), keeping the recent advance technically supported. The 14-period Relative Strength Index (RSI) around 61 sits in positive territory without being overbought, hinting that upside momentum remains in place while leaving room for further gains if buyers stay in control.
On the downside, immediate support is found at the near-price nine-period EMA at 1.3593, with a deeper layer of demand emerging at the 50-period EMA around 1.3478 if a corrective pullback unfolds. As long as GBP/USD holds above these moving-average supports on a closing basis, the broader bullish tone is likely to persist, with any dip toward the EMA cluster viewed as a potential buy-the-dip area rather than a trend reversal signal.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- WTI may rise amid intensifying Russia-Ukraine conflicts.
- Strikes on Russian refineries are threatening global crude and refined product exports.
- An Iran-Oman revenue-sharing deal improves Strait of Hormuz supply prospects, though immediate reopening remains uncertain.
West Texas Intermediate (WTI) oil price declines after two days of gains, trading around $82.70 per barrel during the Asian hours on Friday. Crude oil prices may regain their footing as intensifying conflicts in Eastern Europe pull market attention away from the Middle East.
Recent statements from Russian President Vladimir Putin indicate that negotiations with Ukraine have stalled, prompting Russia to prepare for an escalation of hostilities. Compounding these geopolitical tensions, persistent Ukrainian strikes on Russian refineries and ports continue to damage critical energy infrastructure, threatening to limit Russia's capacity to export both crude oil and refined petroleum products.
However, crude is still set to close the week lower as investors digest encouraging diplomatic signals from the Middle East. Market anxiety has been somewhat tempered by reports of improved supply prospects through the Strait of Hormuz, driven by a new revenue-sharing agreement between Iran's military and Oman regarding the strategic passage. However, Tehran has emphasized that this compromise does not translate to an immediate or full reopening of the strait, leaving global energy flows in a precarious balance.
Oil traders weigh Hormuz traffic as prices hint at renewed energy bounce
Analysts at MUFG suggest that the recent firming in crude may mark “the start of a renewed bounce in energy prices,” but stress that the outlook hinges on how much shipping is actually getting through the Strait of Hormuz. They acknowledge that “it’s difficult to know for sure,” yet point out that “the oil price level suggests the traffic is higher than previously,” implying that current market pricing is already reflecting a greater degree of flow resilience through the key chokepoint.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- USD/JPY softens to near 159.30 in Friday’s early Asian session.
- Japan’s Tokyo core CPI inflation accelerates in August.
- The Jackson Hole symposium event will be in the spotlight later on Friday.
The USD/JPY pair declines to around 159.30 during the early Asian session on Friday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) as Japan’s Tokyo Consumer Price Index (CPI) inflation data strengthens the case for a September Bank of Japan (BoJ) rate hike. All eyes will be on a speech by Federal Reserve (Fed) Chair Kevin Warsh at the Jackson Hole symposium later on Friday.
Data released by the Statistics Bureau of Japan on Friday showed that the headline Tokyo CPI rose 1.9% YoY in August, compared to 1.8% in July. Meanwhile, the core CPI inflation climbed to 1.8% YoY in August from 1.7% in July (revised from 1.9%). This figure came in above the market consensus of 1.7%.
Finally, CPI excluding food and energy, which is closely watched by the BoJ as a better gauge of trend inflation, jumped 2.0% YoY in August, versus 1.8% prior (revised from 2.0%).
This report has reinforced expectations that the Japanese central bank may raise the interest rate as early as its September 17–18 policy meeting. This, in turn, provides some support to the JPY and acts as a headwind for the pair.
Later on Friday, traders brace for the speech from Fed Chairman Kevin Warsh in Jackson Hole, Wyoming, which could offer some hints about the outlook for US interest rates. Any hawkish remarks from Fed officials could help limit the Greenback’s losses in the near term.
Yen softens as BoJ’s Himino strikes hawkish tone without explicit hike signal
Analysts at MUFG observe that the Yen “weakened back in response” to Deputy Governor Himino’s latest remarks, reflecting “some disappointment that Himino was not more explicit” on the near-term policy path. They note that while he stopped short of “explicitly” signalling a rate hike next month, “his general tone was certainly on the hawkish side.” In both his speech and subsequent press conference, Himino stressed that the BoJ needed to “pay more attention to upside inflation risks than before,” which MUFG describes as “the closest you will get to guidance that the pace of rate hikes could be increased.”
Technical Analysis: USD/JPY remains capped under the 100-day SMA
In the daily chart, USD/JPY retains a capped tone as it sits beneath the 100-day Simple Moving Average (SMA) while holding just above the Bollinger middle band. The pair has slipped back from recent highs and the Relative Strength Index (RSI) at 47.09 leans slightly to the downside, suggesting fading upside momentum as prices oscillate between the mid-line and the upper end of the recent volatility envelope.
On the topside, immediate resistance is reinforced by the 100-day SMA at 160.00, with the Bollinger upper band near 160.30 acting as the next barrier that bulls would need to reclaim to re-establish a sustained advance. On the downside, initial support is located around the Bollinger middle band at 158.85, ahead of a deeper cushion at the lower band near 157.45, where a break would likely open the door to a broader corrective phase.
(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.
Iran’s Security Chief Mohsen Rezaei said on Friday that Tehran is preparing a list of its conditions to open the Strait of Hormuz in response to a request by mediators, adding that conditions include ending the war in the region, Reuters reported, citing an interview on Lebanese Hezbollah-affiliated Al Manar TV.
Rezaei stated that the “US must first take practical steps to fulfil Iran’s conditions, and then Iran will proceed to open the Strait of Hormuz”, the Iranian state-run IRNA news agency reported.
Iranian official warned on Thursday that the country will target US economic interests if the maritime blockade against the country continues.
Rezaei said that Iran had “broken the maritime blockade” during the ceasefire and exported between 70 million and 80 million barrels of oil. He added that Iranian oil sales had returned to their pre-sanctions level.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 1.77% on the day at $82.90.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The headline Tokyo Consumer Price Index (CPI) for August rose 1.9% YoY as compared to 1.8% in the previous month, the Statistics Bureau of Japan showed on Friday.
Additionally, Tokyo CPI ex Fresh Food climbed 1.8% YoY in August against 1.7% expected and 1.7% in the prior month (revised from 1.9%). The Tokyo CPI ex Fresh Food, Energy jumped 2.0% YoY in August, compared to the previous reading of 1.8% (revised from 2.0%).
USD/JPY reaction to the Tokyo Consumer Price Index data
The Tokyo CPI inflation report has little to no impact to the Japanese Yen (JPY). As of writing, the USD/JPY pair is up 0.01% on the day at 159.35.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- EUR/USD trades with mild gains around 1.1655 in Friday’s early Asian session.
- Traders brace for Fed Chair Warsh’s speech on Friday at the Jackson Hole, Wyoming, symposium.
- The ECB is expected to raise the key interest rates in September.
The EUR/USD pair posts modest gains near 1.1655 during the early Asian session on Friday. Markets might turn cautious later in the day as Federal Reserve (Fed) Chairman Kevin Warsh is set to deliver his much-awaited keynote address in Jackson Hole.
Hawkish stance of the European Central Bank (ECB) and firm economic data from the Eurozone provide some support to the Euro (EUR) against the US Dollar (USD). ECB Executive Board member Isabel Schnabel said on Wednesday that borrowing costs will need to rise further as the lengthy conflict in the Middle East and a surprisingly strong Eurozone economy pose upside risks to inflation.
The Eurozone economy has also proved resilient, with data on Friday showing business activity growing at its fastest pace this year. Markets are now pricing in nearly 96% odds that the ECB will increase the deposit rate to 2.50% at its September policy meeting, according to the ECB Watch tool.
Traders will closely watch Fed Chair Kevin Warsh’s speech Friday at the Economic Policy Symposium in Jackson Hole, Wyoming. This event could offer some clues about the US economy and monetary policy.
“In short, we expect Warsh to signal that he is prepared to raise rates again if inflation does not continue to moderate,” said Mark Cabana, head of U.S. rates strategy at Bank of America. “By contrast, if he uses the speech to focus solely on broader structural themes such as productivity or demographics, we worry markets could interpret the message as dovish,” Cabana added.
Euro support softens but ECB policy still seen favoring EUR strength
Strategists at Scotiabank note that the Euro has lost some traction as yield dynamics shift, observing that “fundamentally, the EUR has seen a minor loss of support from the latest turn in GermanUS yield spreads.” Nonetheless, they stress that policy divergence remains a constructive medium-term driver, adding that “we continue to feel that the outlook for relative central bank policy favors EUR strength as the ECB moves to tighten in September while markets continue to fade their pricing of Fed hikes.”
Technical Analysis: EUR/USD keeps a bullish vibe above the key SMA
In the daily chart, EUR/USD retains a bullish near-term bias as spot holds above both the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. Price action is edging toward the upper Bollinger band resistance, while the Relative Strength Index (14) around 65 suggests firm but not yet extreme upside momentum, hinting that buyers still control the short-term tone.
On the downside, initial support is aligned in the 1.1585–1.1575 area, where the Bollinger middle band and the 100-day SMA cluster to underpin the advance, ahead of stronger structural demand near the lower Bollinger band at 1.1465. On the topside, a clear break above the upper Bollinger band resistance at 1.1710 would open the door for further gains, whereas failure to overcome this barrier could trigger a corrective pullback toward the cited support zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/JPY trades close to 114.75, 19 pips under a seventeen-year ceiling.
- Australian capex fell 3.6% in Q2 against a flat consensus and 6.9% prior.
- Tokyo core is seen easing to 1.7% at 23:30 GMT from 1.9% in July.
AUD/JPY traded close to 114.75 on Thursday, ahead 0.36% on the session, with a high that stops nineteen pips beneath a ceiling the pair has not traded above since September 7, 1990. The August bar is running 3.80% higher and trading at its own high with two sessions left in it, and price sits well clear of a 50-day Exponential Moving Average (EMA) at the 113.00 handle, with the daily Stochastic Relative Strength Index (Stoch RSI) near 84.
The defence lasted three weeks
Late July broke this cross roughly 450 pips in two sessions, from just under 114.50 into the 110.00 area, on the largest currency defence ever mounted in a single session. Four weeks on the pair trades above where it stood before any of it happened. The whole break has been recovered and then some, which is a different outcome from the Dollar leg, where USD/JPY has taken back only about half of its equivalent move.
The asymmetry is the point. Where the Yen was defended directly it half held, and on the crosses it did not hold at all, because an intervention moves a level while leaving the reason for the level untouched. Australia's cash rate is 4.35% against a Japanese policy rate of 1.00%, a gap of 335 basis points, and the September increase the market has at just under four-in-five odds still leaves 310 of them. Selling reserves against that is renting a price rather than buying one.
Australia does contribute one thing to this cross, and it is the rate rather than the economy, three increases this year having widened the gap the whole trade is built on. The same monthly frame also carries the cost of being wrong about it. This pair lost better than twenty percent from a 2024 peak near 109.50 into the mid-80s the last time the funding trade came apart, and it did that in weeks rather than quarters. Carry positions pay slowly and unwind instantly.
Australia is not in this trade
Business investment contracted 3.6% in the June quarter against a consensus for no change and a 6.9% prior, a swing of more than ten points in a single quarter, and it printed at 01:30 GMT Thursday. The pair went up anyway. Iron Ore has spent the summer beneath $100 a tonne, so the commodity leg is not carrying the currency either.
The demand side is worse. China's official manufacturing gauge sits at 49.2 and its non-manufacturing gauge at 49, both beneath the line dividing expansion from contraction, and China is where Australian exports go. A currency whose largest customer is shrinking on both surveys and whose own capital spending just went backwards does not trade at a seventeen-year high on merit. It trades there because it is the receiving end of a funding trade, and the ticker on the front of the pair is close to incidental.
Both legs report inside a week
Tokyo inflation lands at 23:30 GMT Thursday, headline and the ex food and energy measure both from a 2% prior, core seen easing to 1.7% from 1.9%, with July unemployment alongside at 2.5% unchanged. That print will not decide the September meeting, which has moved on political and currency grounds rather than price ones, but a soft number removes the last cover for anyone arguing the increase is about inflation. Japanese retail trade follows at 23:50 GMT Sunday from 0.5% on the year and minus 4.1% MoM.
The Australian leg then reports almost daily. China's official surveys arrive Monday at 01:30 GMT with manufacturing seen at 49.7 from 49.2, second-quarter Gross Domestic Product (GDP) lands Wednesday at 01:30 GMT from 0.3% on the quarter and 2.5% on the year, and the July trade balance follows Thursday against a prior surplus close to 1.9 billion. Building permits and an industry survey running at minus 29.9 round it out. If the cross clears its ceiling before Wednesday, it will have done so with Australian growth still unreported.
Levels
Resistance: Just short of 115.00 is the ceiling and Thursday's high stops nineteen pips beneath it. Above there the chart runs out of modern history, leaving round numbers as the only marks, 115.50 first and then 116.50.
Support: 114.00 is the near shelf, then the 50-day EMA at the 113.00 handle, with the 200-day EMA and the intervention low sitting together in the 110.00 area beneath that.
Bias: Bullish. A funding gap of 335 basis points that a quarter point does not close, against a ceiling nineteen pips overhead and a monthly bar trading at its own high with two sessions to run, is a setup that resolves upward. A daily Stoch RSI at 84 under a monthly reading at 90 argues the break arrives fast rather than durably. Invalidation on a daily close beneath 113.00.
AUD/JPY daily chart
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.
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