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United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann flag a sudden AUD/USD selloff to 0.7156, with intraday momentum pointing to further losses toward 0.7140, though 0.7120 is seen as strong support for now. Over the next one to three weeks, the bank now expects the pair could decline toward 0.7120 unless it rebounds above 0.7210.

Selloff shifts focus to lower supports

"24-HOUR VIEW: AUD traded between 0.7210 and 0.7238 two days ago and closed largely unchanged at 0.7217 (+0.01%). When it was at 0.7220 in the early Asian session yesterday, we highlighted that “momentum indicators are mostly flat,” and we expected AUD “to trade in a range between 0.7200 and 0.7235.” The subsequent price action did not unfold as expected. Instead of trading in a range, AUD staged a sudden and sharp selloff that reached a low of 0.7156. The rapid increase in momentum suggests further AUD downside toward 0.7140. Given the oversold conditions, AUD is unlikely to reach the major support at 0.7120. To keep the momentum going, AUD must hold below 0.7190, with minor resistance at 0.7175."

"1-3 WEEKS VIEW: We have held the same view since last Friday (04 Sep, spot at 0.7205), when we indicated that AUD “could edge higher, but any advance is likely to stay within a 0.7160/0.7240 range.” After edging higher for several days and reaching a high of 0.7238 two days ago, AUD plunged and closed 0.83% lower at 0.7157 yesterday. The rapid increase in downward momentum indicates that AUD could decline toward 0.7120. However, if AUD were to break above 0.7210 (‘strong resistance’ level), it would mean that it is likely to continue to trade in a range."

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

• The US Consumer Price Index is expected to rise by 3.4% YoY in August, matching July’s increase.
• Annual core CPI inflation is expected to edge lower to 2.4% from 2.5%.
• Inflation report could significantly influence the market pricing of next week’s Fed decision and the USD performance.

The US Bureau of Labor Statistics (BLS) will publish the August Consumer Price Index (CPI) data on Friday. The report is expected to show a small decline in annual core inflation. Any divergence from analysts’ estimates could influence the Federal Reserve’s (Fed) policy outlook and impact the US Dollar’s valuation.

The monthly CPI is forecast to rise by 0.4%, following the 0.1% increase recorded in July, while the annual reading is seen holding steady at 3.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to post an increase of 0.2% and 2.4%, on a monthly and yearly basis, respectively. 

Following a nearly 22% surge in July, Crude Oil prices held steady in August, ending the month virtually unchanged as the US and Iran keep failing to reach a solution to restore naval activity in the Strait of Hormuz, while avoiding further escalation in military action.

US core CPI data seen contained as goods weakness offsets firm services

According to economists at TD Securities, the upcoming US CPI report should show that “underlying inflation stayed under control in August,” with “the core expected to rise 0.19% m/m.” They expect “the services segment [to] be the main driver of inflation, while core goods prices likely acted as a drag, posting a modest m/m drop.” On an annual basis, TD Securities projects that “core CPI rose 2.3% on a y/y basis, down 10 bps vs July, while headline inflation likely stayed unchanged at 3.4% y/y.” The bank cautions that “risks to our forecasts [are] skewed to the upside” given their assumption of “a number of large price declines in tariff-exposed goods categories.” 

How could the US Consumer Price Index report affect EUR/USD?

While speaking at the Reuters NEXT Newsmaker event in Washington last week, Federal Reserve (Fed) Governor Christopher Waller outlined a conditional reaction function. He explained that a steady policy rate is preferred if August inflation shows continued progress, yet even a modest upside surprise could trigger a “small adjustment” higher. While Waller reiterated that inflation remains “significantly elevated” and that it may not take much acceleration to justify a hike, he acknowledged an “encouraging” disinflation and a solid growth and labor backdrop.

Although the CME Group FedWatch Tool’s probability of a 25 basis points (bps) increase in the interest rate at the upcoming policy meeting declined slightly below 50% following his comments, the upbeat employment data for August, published one day later, reaffirmed healthy labor market conditions and caused markets to reassess the odds of a tightening step. Currently, there is about a 70% chance of a Fed rate hike next week.

A weaker-than-expected increase in the monthly core CPI, below the 0.2% forecast, could cause market participants to scale back bets on a rate increase and trigger an immediate USD selloff, opening the door for a leg higher in EUR/USD heading into the weekend. Conversely, a reading of 0.3% or higher could boost the USD and put EUR/USD under bearish pressure. 

Strategists at Brown Brothers Harriman (BBH) emphasize that Friday’s US August CPI release is “the main market driver that will decide the Fed’s September 16 rate decision.” They argue that “a hot CPI print would all but seal a September hike and underpin a firmer USD,” whereas “a cooler reading would strengthen the case for a hold and leave USD vulnerable to a dovish Fed repricing.” However, BBH cautions that “even if a September Fed hike becomes a done deal, we doubt USD will make new cyclical highs,” noting that tightening by other major central banks is limiting policy divergence. 

At the same time, DBS Group Research notes that, despite recent volatility, “there are no signs that price pressures are broadening out.” The bank argues that the upcoming US CPI release will be pivotal for near-term Fed expectations, suggesting that “CPI and core CPI of 0.4% MoM sa and 0.3% MoM respectively may well be the minimum that would nudge market participants to increase the odds of imminent tightening.” By contrast, DBS believes that “a 0.2% print in both figures would probably see the odds of imminent tightening fall closer to zero.”  

Eren Sengezer, European Session Lead Analyst, shares a brief technical outlook for EUR/USD:

“EUR/USD clings to a bullish stance in the short-term technical outlook, with the Relative Strength Index (RSI) indicator on the daily chart holding above 50 and the pair trading well above the 100-day and 50-day Simple Moving Averages (SMA). The 200-day SMA, currently located at 1.1635, aligns as a pivot level. Once the pair confirms that level as support, technical buyers could remain interested. In this scenario, 1.1700 (upper arm of the Bollinger Band, static level) could be seen as an interim resistance level ahead of 1.1800 (static level).”

“On the downside, a relatively wide support region seems to have formed at 1.1560-1.1520, where the 100-day SMA, lower arm of the Bollinger Band and the 50-day SMA are located. If the pair retreats below this region, 1.1460 (static level) could be seen as the next support level before 1.1350 (static level).”

Francesco Pesole at ING argues that despite stronger United Kingdom (UK) Gross Domestic Product (GDP) data and resilient Sterling, the move in Gilts is largely externally driven and not about domestic fiscal fears. ING maintains its view that the Bank of England will not hike further, warning of a potential dovish repricing and targeting higher EUR/GBP and lower GBP/USD into the fourth quarter.

BoE seen resisting further tightening

"Gilts took another blow yesterday, underperforming European peers. The 10-year is now eyeing 5.5%, and the 30-year is very close to 6.0%. Sterling held up well yesterday, confirming this was a purely externally driven move in gilts (which simply have higher beta to US Treasuries) and not caused by heightened fiscal concerns. "

"Chancellor John Healey’s pledge to budget discipline is working in that sense. But it equally highlights how limited the room for any pro-growth government measure is."

"That, among other things, sits at odds with markets’ mammoth bets on monetary tightening: 48bp by year-end, 110bp by July. Our baseline is still that the Bank of England won’t hike at all, leaving sterling in front of a potential cliff-edge dovish repricing."

"UK GDP surprised to the upside this morning, rising 0.4% MoM after June's strong 0.3% gain. Around half the increase came from IT, continuing a familiar trend."

"GBP is a tad stronger on the back of that, but these monthly growth prints have not had much impact on BoE decisions."

"We continue to see upside room for EUR/GBP and downside for GBP/USD, with 4Q targets of 0.87 and 1.33."

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

• EUR/JPY recovery from 10-month lows below 177.90 has been capped at 179.75.
• The Yen remains supported on hopes of a hawkish hike by the BoJ next week.
• The Euro bounced up on Thursday as the ECB hiked rates and hinted at further tightening.

The Euro (EUR) retreated below 179.00 against the Japanese Yen (JPY) on Friday, as the mild recovery seen after Thursday's European Central Bank (ECB) meeting failed to find follow-through above 179.50. The risk-averse sentiment amid the entangled Middle East crisis and investors’ bets that the Bank of Japan (BoJ) will hike interest rates next week are keeping EUR/JPY rallies limited.

Analysts at DBS Group Research argue that “it is almost a done deal that the Bank of Japan will hike rates at the upcoming meeting on Sep 17-18,” pointing to a clear shift in the policy backdrop. In their view, “the most likely outcome is for the BoJ to deliver a hawkish 25bps hike while signalling a flexible pace of rate hikes at future meetings.”

Japanese data released earlier on Friday revealed that factory prices remain at high levels, strengthening the case for immediate BoJ monetary tightening. Producer Price Index (PPI) figures showed a 7.6% year-over-year growth in August, down from the 7.7% reading posted in July but above market expectations of a deeper slowdown, to 7.4%.

In the Eurozone, the ECB raised its benchmark Rate on the Deposit Facility by 25 basis points to 2.5%, as widely expected on Thursday, and President Christine Lagarde left the door open for further rate hikes, as, in her opinion, inflation will remain above the 2% target until "well into 2027." The Euro appreciated against its main peers following Lagarde's press conference.

Technical Analysis: A likely dead cat bounce for the Euro

EUR/JPY trades at 179.05, with the rebound from 177.86 lows looking corrective, as the daily Relative Strength Index (14) picks up from heavily overbought levels, following a nearly 4% drop in the last two weeks. The Moving Average Convergence Divergence (MACD) in the same timeframe is well within negative territory, altogether hinting at persistent downside pressure.

Initial support is at the mentioned September 8 low, at 177.86. Further down, there is no clear support until the 127.2% Fibonacci extension of the September selloff, near 175.60. On the topside, any rebound faces immediate resistance at the July 31 high, at 179.55, which held bulls on Thursday. Above here, the next target is the September 4 high, at 182.00.

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

• Gold attracts some dip-buyers near $4,300, though the upside potential seems limited.
• The US PPI report lifted Fed hike bets and underpins the USD, capping the commodity.
• Geopolitical risks further benefit the safe-haven USD ahead of the crucial US CPI report.

Gold (XAU/USD) clings to modest recovery gains around $4,450 through the first half of the European session, albeit it lacks bullish conviction as traders await the release of US consumer inflation figures. Meanwhile, the US Producer Price Index (PPI) report, released on Thursday, lifted Federal Reserve (Fed) rate-hike bets. This continues to act as a tailwind for the US Dollar (USD) and caps the upside for the non-yielding bullion.

US CPI seen as key swing factor for next week’s Fed decision

Commerzbank’s Michael Pfister stresses that markets “have little time to catch their breath,” with today’s US CPI release “potentially tipping the scale for next week’s Fed meeting.” He argues that the inflation print will be pivotal not only for the immediate policy decision but also for the Dollar, given that investors are already pricing roughly 80 basis points of additional Fed tightening by mid-2027 on the back of higher Oil prices and expectations for a 0.4% monthly rise in headline CPI, even as core inflation remains more moderate and uncertainty around the new Fed Chair’s reaction function lingers.

The US Bureau of Labor Statistics (BLS) reported on Thursday that the headline PPI accelerated to a 5.4% YoY rate in August, compared to the previous month's upwardly revised print of 4.8% and estimates of 5.3%. Stripping out food and energy, the core gauge matched forecasts and rose 4.6% YoY from 4.3% in July. This comes on top of inflation risks stemming from elevated energy prices and reaffirms expectations that the US central bank will raise borrowing costs next week.

In fact, crude oil prices shot to the highest level since May 21 amid further escalation of tensions between the US and Iran. The US Treasury plans to sanction a large, undisclosed bank on Monday as part of its ongoing economic pressure campaign against Iran. Moreover, Iran-backed Houthis in Yemen seized the crucial Red Sea city of Mocha, expanding control over the strategic Bab al-Mandeb Strait and adding to growing market concerns about a prolonged disruption to oil supplies.

Meanwhile, US President Donald Trump said that the Iran war will likely continue until after the November midterm elections. This keeps the geopolitical risk premium in play, which might continue to support crude oil prices and the safe-haven Greenback. Hence, a strong US CPI number would push the USD higher, warranting some caution before placing bullish bets on gold. Nevertheless, the commodity remains on track to register weekly losses and depreciate further.

XAU/USD daily chart

Technical Analysis

The precious metal trades marginally above the 50% retracement at $4,320 and the 200-day Exponential Moving Average (EMA) at $4,313, keeping price supported by key medium-term trend references. However, momentum indicators are softening, with the Moving Average Convergence Divergence (MACD) in negative territory and the Relative Strength Index (RSI) hovering just below the 50 line, hinting at a waning bullish impulse rather than an outright reversal.

On the topside, initial resistance is aligned at the 38.2% Fibonacci retracement at $4,409, followed by a stronger barrier at the 23.6% retracement of $4,519. On the downside, immediate support is seen at the 50% retracement at $4,320, reinforced by the 200-day EMA at $4,313. A break below this area would expose the 61.8% retracement at $4,231 and then the 78.6% level at $4,104, with the prior cycle low around $3,943 acting as a more distant floor.

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

• DXY holds steady within the previous day’s range as trades keenly await the US CPI report.
• Rising September rate hike bets and geopolitical risks act as a tailwind for the Greenback.
• The mixed technical setup warrants some caution before placing aggressive directional bets.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, sticks to a mildly positive bias through the early European session, though it remains confined within the previous day's broader range. The index currently trades just above the 99.00 mark as investors keenly await the release of the latest US consumer inflation figures for more cues about the Federal Reserve's (Fed) policy path and to determine the near-term trajectory.

In the meantime, the US Producer Price Index (PPI) report, released on Thursday, pointed to still sticky inflationary pressures, prompting traders to lift their bets for a September rate hike. Furthermore, energy-driven inflation fears, along with persistent geopolitical risks stemming from further escalation of tensions between the US and Iran, continue to act as a tailwind for the safe-haven US Dollar (USD). This favors bulls and backs the case for further gains.

The DXY is capped beneath the 200-period simple moving average (SMA) at 99.12 and a series of higher Fibonacci retracements, which keeps the near-term tone cautious despite a moderately bullish Relative Strength Index (RSI) around 59. That said, a slightly negative and flattening Moving Average Convergence Divergence (MACD) (12, 26, 9) hints that upside momentum is losing traction while the index holds under its 200-period SMA on the 4-hour chart.

Meanwhile, the 38.2% Fibonacci retracement level of the slide from the monthly swing high, at 99.08, is being actively tested as a pivot. This is followed by the next relevant support at the 23.6% Fibo. retracement at 98.89, with a deeper bearish extension exposing the lower structural floor around 98.59. On the topside, initial resistance is located at the 200-period SMA at 99.12, followed by the 50.0% retracement at 99.23 and the 61.8% level at 99.38. Further gains would then face additional barriers at 99.59 and the recent cycle high area near 99.86.

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

DXY 4-hour chart

Commerzbank’s Antje Praefcke reports that the Polish central bank kept its key rate at 3.75%, while Governor Glapiński signalled no cuts until year-end after previously sounding dovish. With rate cuts now seen as unrealistic given higher inflation and geopolitical risks, the completed policy U-turn should underpin the Zloty, though future moves will depend on whether the council follows through with hikes if inflation rises further.

No cuts and conditional hike bias

"It was widely expected that the Polish Central Bank (NBP) would leave its key rate unchanged at 3.75% this week. More interesting was what Central Bank Governor Adam Glapiński would say about the future path of interest rates, given that he had sounded dovish in July, signaling rate cuts, but started to change his wording on the sidelines of the G2 summit in light of rising inflation rates."

"At yesterday’s press conference, it became clear that there will be no interest rate cuts until the end of the year, even though decisions will be made on a meeting-by-meeting basis. Glapiński noted that inflation could exceed the target and that geopolitical uncertainty remains high. He acknowledged that he had been dovish as recently as this summer but that, given the escalation in the Middle East, rate cuts are now unrealistic."

"This marks the completion of the U-turn, and interest rate cuts are off the table for now - a development that should provide underlying support for the zloty. Nevertheless, the question remains as to how the NBP will proceed in the coming months."

"While Glapiński made it clear that the Monetary Policy Council would consider interest rate hikes if inflation and inflation forecasts rise, the same applies in reverse for rate cuts. In the coming months, it will therefore be important to see whether, should inflation continue to trend upward, Glapiński - or rather, the Monetary Policy Council - will actually stand by its word and be prepared to raise the key interest rate. This will be key for the zloty going forward."

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

• EUR/USD struggles for direction as investors await the US CPI data for August.
• Hot US PPI report has resulted in a fresh escalation in hawkish Fed prospects.
• The ECB is expected to raise interest rates again this year.

The Euro (EUR) trades subduedly at around 1.1608 against the US Dollar (USD) during the European trading session on Friday. The major currency pair has remained in a tight range between 1.1566 and 1.1641 for over 10 days, but is likely to find direction after the release of the United States (US) Consumer Price Index (CPI) data for August at 12:30 GMT.

The US CPI report is expected to show that headline inflation remained steady at 3.4% Year-on-Year (YoY), with core figures dropping to 2.4% from the previous reading of 2.5%.

Investors will pay close attention to the US consumer inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

Ahead of the US CPI data, a fresh escalation is seen in hawkish Fed interest rate expectations following the release of the hotter-than-projected Producer Price Index (PPI) report for August.

Meanwhile, the Euro struggles to attract bids even as market experts see the possibility of one more interest rate hike by the European Central Bank (ECB) this year despite the central bank raising policy rates by 25 basis points (bps) and President Christine Lagarde warning of price pressures remaining elevated in the policy announcement on Thursday

Economists at Commerzbank have shifted to a more hawkish view on the ECB’s policy path following President Lagarde’s latest remarks. Citing the “higher inflation rate expected for next year” and the ECB President’s statement that inflation will remain above the 2% target for an “extended period,” they write that “we have revised our ECB interest rate forecast.” The bank now projects “another 25-basis-point increase in the deposit rate to 2.75% in December” and, in a notable change, adds that “we no longer anticipate a reversal of the ECB’s rate hikes in the second half of next year.”

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1603. The pair trades close to the 20-period exponential moving average (EMA) at 1.1606, hinting at a sideways trend. The Relative Strength Index (RSI) hovers inside the 40.00-60.00 zone, which also signifies a volatility contraction.

On the topside, the immediate hurdle for the major currency pair is the high of the previous 10-day range at around 1.1641, followed by the August high at 1.1711. Looking down, the low of the previous 10-day range at around 1.1566 is the closest cushion; below that, the psychological level of 1.1500 is the key support zone.

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

• EUR/CAD may advance as the Euro could gain support from an ongoing hawkish ECB tone.
• The Canadian Dollar faces pressure from declining oil prices despite escalating Middle East supply risks.
• Yemeni Houthi forces captured the strategic port of Mokha, threatening vital global trade routes.

EUR/CAD experienced volatility but remained flat for the second successive day, hovering around 1.6060 during European hours on Friday. The currency cross may rise as the Euro (EUR) could receive support due to ongoing hawkish sentiment surrounding the European Central Bank (ECB) policy outlook.

The ECB raised the interest rate on the deposit facility to 2.50% at its September policy meeting on Thursday, as widely expected. It was the ECB’s second hike this year, after policymakers raised borrowing costs in June for the first time since 2023. ECB President Christine Lagarde warned that the conflict in the Middle East and recent developments in Russia’s war on Ukraine will keep headline inflation “well above” the bank's 2% target for an extended period.

Meanwhile, the commodity-linked Canadian Dollar (CAD) struggles due to a decline in oil prices. However, crude oil prices may rebound as the escalating conflict between the US and Iran has fueled concerns over prolonged disruptions to global energy supplies. Top US officials reportedly warned President Donald Trump that the war could continue through the remainder of his term, which ends in January 2029.

Adding to regional tensions, the BBC cited military sources and witnesses, saying that Yemen's Houthis have seized the strategic Red Sea port city of Mokha from Saudi-backed pro-government forces. Mokha's capture leaves the Iran-backed group only 75km (46 miles) away from the Bab al-Mandab Strait, the southern gateway to a vital trade route linking Asia and Europe.

ING’s Commodities Strategist Ewa Manthey notes that Copper has dropped sharply after a Reuters report suggested a US decision on refined Copper tariffs is still pending, highlighting how a tariff premium has driven prices beyond fundamentals. She explains how US-focused arbitrage, shifting inventories and a still‑surplus refined market contrast with tight nearby supply, leaving Copper’s longer-term outlook positive but near-term prices sensitive to tariff headlines.

Tariff premium, stocks and surplus balance

"Copper fell more than 3% on Thursday after hitting a record $14,875/t on the London Metal Exchange earlier in the session."

"Until now, the market had largely assumed that tariffs would go ahead. The latest news has challenged that view and taken some of the tariff premium out of copper prices."

"If the tariff premium between New York and London narrows, shipping more metal to the US will become less attractive. Some stocks could eventually return to international markets."

"However, the refined market is not yet facing an outright shortage. Refined production rose 2.4% in the first half, leaving a preliminary surplus of around 131,000 tonnes, according to ICSG."

"Either way, the arbitrage will eventually close. If tariffs are ruled out, the US premium should narrow and some metal could return to international markets. If they go ahead, imports could rise again before the duties take effect, but should slow afterwards."

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