Forex News

• Gold treads water around $4,700 despite broad-based USD weakness.
• Hopes of a peace deal in the Middle East remain alive, keeping the USD on its back foot.
• Later this week, the Fed's monetary policy decision might determine the USD's near-term direction.

Gold’s (XAU/USD) has opened the week in the same cautious mood that ended the last one. The precious metal keeps hovering within a tight range around $4,700 at the time of writing, with doji candles on the daily chart highlighting an indecisive market.

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of currencies, is looking weak on Monday amid a mild optimism about the end of the US-Iran war. News of further moves to advance toward a deal keeps investors hopeful, but the Strait of Hormuz remains closed, and the second round of peace talks has been cancelled. This maintains investors' appetite for risk subdued, and leaves precious metals practically flat.

The market is also attentive to a slew of central bank monetary policy decisions, with particular interest in the Federal Reserve’s (Fed), due on Wednesday. The Fed is widely expected to leave interest rates on hold and hint at a steady monetary policy for the near-term. Chairman Jerome Powell, however, is also likely to leave his place to former Governor Kevin Warsh, who might pursue a more dovish policy.

Technical Analysis: Key support is at the $4,600 area

The technical picture shows XAU/USD trading within a tight range, inside a wider horizontal channel, with key support at the $4,600 area.

Technical indicators on 4-hour charts highlight a neutral-to-slightly bearish bias, with the Relative Strength Index (RSI) around 45, while the positive Moving Average Convergence Divergence (MACD) reading suggests tentative upside momentum that has yet to overcome dense resistance overhead.

Dips have been contained above Friday's low, around $4,660, although the bottom of the channel, at $4,600, remains on the bears' focus. A confirmation below here would increase pressure towards the March 26 low, at the $4,350 area. On the topside, resistance in the area between $4,745 and $4,740, which held upside attempts several times last week, is capping bulls for now and closing the path to the channel top, around $4,885.

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

ING analysts Warren Patterson and Ewa Manthey note that Oil has rallied strongly as US-Iran peace talks stall and energy flows through the Strait of Hormuz remain constrained. They highlight tightening market fundamentals, a roughly 13m b/d shortfall, and the need for higher prices to trigger demand destruction, while also flagging fresh US sanctions on Iranian Oil and related shipping.

Tightening balances drive Oil higher

"Oil is trading stronger this morning after attempts to get US-Iran peace talks back on track broke down, erasing hopes for a resumption of energy flows through the Strait of Hormuz anytime soon. ICE Brent is up around 2% in early-morning trading today, after rallying almost 17% over the course of last week."

"The lack of progress means the market is tightening every day, requiring oil prices to reprice at higher levels. There’s little alternative to fill a roughly 13m b/d shortfall."

"Clearly, the longer this persists, the more demand destruction we will need to see. To see further demand destruction, prices will need to move higher."

"US efforts to cut off Iranian oil would add to the upside. Last week, the US seized a sanctioned tanker carrying Iranian oil in the Indian Ocean."

"The US blockade appears aimed at forcing a resolution and increasing pressure on Iran to return to negotiations. The latest positioning data does not entirely capture the move seen in the market over the last week."

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

• EUR/GBP bounced up from lows near 0.8650 but remains capped below 0.8670 so far.
• Weak German consumer confidence data has weighed on the Euro across the board.
• Technical indicators show a waning bearish pressure.

The Euro (EUR) is trimming some losses against the British Pound (GBP) on Monday after finding support at the 0.8655 area late last week. Upside attempts, however, remain capped below a previous support area at 0.8670 so far, which leaves the broader bearish trend in play for now.

Data from Germany released earlier on Monday revealed that consumer confidence for May, as measured by the GfK Consumer Confidence Survey, deteriorated to its weakest level since February 2023, amid the consequences of the war in Iran. The impact of these figures on the Euro, however, has been cushioned by a mild risk appetite, fuelled by news of ongoing negotiations between the US and Iran to end the Middle East conflict. This is keeping the Euro and the Pound moderately positive against the safe-haven US Dollar (USD).

Technical Analysis: Bears are losing momentum

From a technical perspective, the 4-hour chart shows the EUR/GBP trading within a bearish channel, although Friday's upper low and a bullish divergence in the Relative Strength Index (RSI) suggest that sellers might be losing momentum.

The RSI has been trending higher, although it is still below the 50 midline, highlighting a mild bearish pressure. The Moving Average Convergence Divergence (MACD) histogram is flat near the zero line, pointing to a lack of strong directional momentum, altogether showing an indecisive market.

Bulls would need to confirm above the area around 0.8685 (April 8, 14 lows, and April 24 high) to clear the path towards trendline resistance, now at 0.8705. Key support is at the confluence of Thursday and Friday's lows, between 0.8655 and 0.8660, and the channel bottom, at 0.8650. Further down, the next target is the March 24 and 26 lows near 0.8635.

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

UOB strategists Suan Teck Kin and Alvin Liew assess how a potential Kevin Warsh Fed chairmanship could shape United States (US) monetary policy and the Fed funds rate. They expect a pause through early 2026, then two cuts in June and 3Q, taking the Fed Funds Target Rate (FFTR) to 3.25% by end-2026, with risks from higher energy prices and labour softness.

UOB outlines cautious easing trajectory

"Expect gradual change, not shock therapy: FOMC consensus and the May leadership transition constrain abrupt policy shifts in the near term. Futures market is pricing in about 10bps cut to the Fed funds rate by Dec 2026. On our part, we still expect a Fed pause in early 2026 (including Apr FOMC), then two rate cuts in Jun and 3Q, taking FFTR to 3.25%."

"Where does this leave the Fed funds rate in the over 6 to 12 months? For the next FOMC meeting (30 Apr), financial markets and we do not expect any change to the current Fed funds rate of 3.5-3.75%, which is likely to be the final meeting for current Chair Jerome Powell."

"Over the next 6-9 months’ horizon, futures markets are pricing in an implied Fed funds rate of 3.54% at end-Dec 2026, meaning a cumulative rate reduction of approximately 10bps, i.e. a modest, gradual easing path rather than an aggressive one."

"As such, we continue to expect a period of pause (including the Apr FOMC) followed by two rate reductions in Jun and 3Q26, with the expectations for more visible weakness in the labour market and consumer spending to emerge in the months ahead."

"This would bring the terminal FFTR to 3.25% by year-end 2026, consistent with our view of a gradual normalization path."

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

• The Indian Rupee underperforms against the US Dollar amid elevated oil prices.
• US-Iran diplomacy stalemate keeps oil prices higher.
• FIIs continue to exert selling pressure in the Indian stock market.

The Indian Rupee (INR) holds onto weekly losses against the US Dollar (USD) at open on Monday. The USD/INR pair trades firmly near 94.30 as elevated oil prices, strong demand for US Dollars by importers, and escalating sell-off by overseas investors in the Indian stock market are acting as major headwinds for the Indian Rupee.

Iran delivers new proposal on Hormuz reopening

The WTI Oil price is marginally positive around $93.60 in the Asian trade on Monday as the United States (US)-Iran diplomacy remains at a stalemate, following Washington’s refusal to visit Islamabad for another round of peace talks.

Following the cancellation of US envoys Steve Witkoff and Jared Kushner's visit to Islamabad, President Donald Trump clarified that Washington is available on the phone and doesn’t want to waste time taking an 18-hour flight for unproductive talks, Axios reported.

US President Trump added that the counteroffer by Iran's foreign minister Seyed Abbas Araghchi, received through Pakistan, was not good enough, and Washington has all the cards. Trump confirmed that the diplomatic stalemate doesn’t mean the war will resume.

Earlier in the day, a report by Axios showed that Iran has given a new proposal to the US ​on ​reopening of the Strait ⁠of ​Hormuz, a vital passage to almost 20% of global energy supply, and the ​ending of the war, with ​nuclear negotiations ​postponed for a ‌later ⁠stage.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

Meanwhile, stubbornly high oil prices have increased demand for US Dollars by Indian importers, which is also weighing heavily on the Indian Rupee.

FIIs remain dumping their stake in Indian stock market

There seems to be a significant increase in the selling pressure by Foreign Institutional Investors (FIIs) in the Indian stock market amid stalled US-Iran peace talks. On Friday, FIIs offloaded their stake worth Rs. 8,827.87 crore, which was higher than the combined selling amount of Rs. 8,311.99 crore being recorded in the first four trading days of the previous week.

Foreign investors remain cautious over the India Inc. earnings outlook, amid fears that higher oil prices would hit the operating margins of various companies badly.

Investors await the Fed's policy

This week, investors will pay close attention to the Federal Reserve's (Fed) monetary policy announcement on Wednesday, in which it is expected to leave interest rates unchanged in the range of 3.50%-3.75% for the third time in a row. The Fed is expected to warn of upside inflation risks and downside economic risks amidst elevated energy prices.

Technical Analysis: USD/INR trades firmly above 20-day EMA

USD/INR trades firmly at around 94.30 as of writing, keeping a bullish near-term bias as spot holds above the 20-day exponential moving average (EMA) at 93.42. The pair is pressing near recent highs, and the Relative Strength Index (RSI) around 59 suggests positive but not extreme momentum, hinting that buyers still have the upper hand while conditions remain short of overbought territory.

On the downside, initial support is located at the 20-day EMA near 93.42, which acts as the primary dynamic floor and would need to give way to signal a deeper correction. As long as USD/INR holds above this level, pullbacks are likely to be viewed as corrective within the broader uptrend, with bulls looking to defend that moving average on dips and extend the advance towards the all-time high around 95.20.

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

Philip Wee of DBS Group Research observes that the US Dollar (USD), as measured by the US Dollar Index (DXY), has lost upside momentum after an earlier rebound. The index has stalled around 99 following a decline from 100.6 to just under 98 earlier in April. This comes as markets weigh Fed leadership uncertainty, G7 policy expectations and volatile Oil prices.

DXY pauses after earlier slide

"The DXY Index’s rebound has stalled around 99, following its decline from 100.6 to slightly below 98 in the first half of this month."

"This week, currency markets face multiple cross-currents: volatile oil prices, Powell's stance on whether he will remain as Fed Governor until Jan 2028, potential rate-hike pivots at G7 central bank meetings, and the War Powers Resolution vote and deadline."

"The Bank of Japan, European Central Bank, and Bank of England are expected to remain on hold this week, but the market is pricing a hawkish pivot for rate hikes at their following meetings, diverging from expectations that Warsh’s confirmation would dampen the Fed’s high-for-longer USD premium."

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

Silver prices (XAG/USD) fell on Monday, according to FXStreet data. Silver trades at $75.59 per troy ounce, down 0.15% from the $75.70 it cost on Friday.

Silver prices have increased by 6.34% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 62.25 on Monday, broadly unchanged from 62.21 on Friday.

(An automation tool was used in creating this post.)

• EUR/JPY posts modest gains as markets remain cautious ahead of central bank meetings.
• Monetary policy is widely expected to remain unchanged in both the Eurozone and Japan.
• Middle East tensions and elevated Oil prices continue to fuel global uncertainty.

EUR/JPY trades around 186.95 on Monday at the time of writing, up modestly by 0.07%, as markets adopt a wait-and-see stance ahead of this week’s monetary policy decisions from the Bank of Japan (BoJ) and the European Central Bank (ECB).

Investors broadly expect the Bank of Japan (BoJ) to leave interest rates unchanged at 0.75% on Tuesday. However, attention will focus on the central bank’s communication and any signals pointing to a potential rate hike in June. According to Commerzbank, the absence of clear forward guidance in this direction could weigh on the Japanese Yen (JPY), despite ongoing geopolitical tensions and concerns about intervention from Japanese authorities.

In the Eurozone, the European Central Bank (ECB) is also expected to keep rates on hold on Thursday, maintaining its benchmark deposit rate at 2%. Policymakers are adopting a wait-and-see approach amid elevated economic uncertainty, particularly linked to the conflict in the Middle East. Governing Council member Martins Kazaks recently noted that the ECB still has the “luxury” of gathering data before adjusting its policy stance.

Recent data from Germany highlight this fragile backdrop. The GfK Consumer Confidence index dropped to -33.3 for May, its lowest level in more than three years, pointing to deteriorating household sentiment. However, the impact on the Euro (EUR) has remained limited.

Geopolitical developments in the Middle East remain the key market driver. Hopes for de-escalation briefly emerged following reports that Iran had submitted a new peace proposal to the United States (US), including reopening the Strait of Hormuz. However, negotiations remain stalled, with Oil tankers blocked for two months and Crude prices hovering near $100 per barrel, raising concerns about a potential global recession.

In this environment, safe-haven flows and energy-driven inflation expectations continue to influence the Japanese Yen, while the Euro remains constrained by weak growth and limited policy visibility. The near-term direction of EUR/JPY will largely depend on signals from central banks this week and any progress on the geopolitical front.

• The Japanese Yen gains against the US Dollar, but is down against its other peers.
• Investors expect both the BoJ and the Fed to hold interest rates steady.
• Iran’s readiness to reach a permanent ceasefire with the US has diminished the US Dollar’s appeal.

The Japanese Yen (JPY) trades higher against the US Dollar (USD), with the USD/JPY pair dropping to near 159.15, during the European trading session on Monday. The pair comes under pressure as the US Dollar (USD) turns upside down amid signs of readiness from Iran regarding a permanent ceasefire with the United States (US).

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.25% lower to near 98.25 after erasing strong opening gains.

Earlier in the day, a report from Axios showed that Iran has delivered another proposal regarding negotiations on Tehran’s nuclear ambitions with a precondition to lift the US blockade for the reopening of the Strait of Hormuz.

Over the weekend, US President Donald Trump announced that he had canceled the US envoys’ visit to Islamabad, calling it a waste of time, as the counteroffer by Iran, as received from Pakistan, is not good enough.

The US-Iran permanent truce, along with the Hormuz reopening, would be an unfavorable situation for the US Dollar, as it would anchor inflation expectations and diminish the hopes of interest rate hikes by the Federal Reserve (Fed) in the near term.

For more cues on the US interest rate outlook, investors await the Fed’s monetary policy announcement on Wednesday, in which it is expected to leave borrowing rates unchanged in the range of 3.50%-3.75%.

Though the JPY trades higher against the US Dollar, it is down against its other peers, ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Tuesday. Investors expect the BoJ to hold interest rates steady at 0.75%, as energy price shocks have raised economic concerns.

MUFG’s Lee Hardman highlights that the Pound (GBP) has outperformed, pushing EUR/GBP to new lows as markets price a more hawkish Bank of England (BoE) stance on the back of stronger United Kingdom (UK) growth and sticky inflation. However, he warns that rising domestic political risks around Prime Minister Starmer’s leadership could trigger at least a temporary Pound sell-off in coming weeks.

BoE support versus UK political risks

"The pound outperformed last week resulting in EUR/GBP falling to a fresh low overnight of 0.8649."

"The pound has been supported by the hawkish repricing of BoE rate hike expectations encouraged by further evidence of stronger UK growth momentum at the start of this year while underlying inflation pressures remained uncomfortably high at the start of the energy price shock."

"We expect a hawkish hold this week with two MPC members Chief Economist Pill and MPC member Mann voting for a hike."

"Support for the pound from higher UK rates is currently offsetting headwinds from higher energy prices while the UK economy is holding up, and domestic political risks ahead of the local elections."

"Domestic political developments have the potential to trigger at least a temporary sell-off for the pound in the coming weeks."

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