Forex News

• US 10-year yield slips but remains sharply higher for the week.
• Thirty-year yield eases after touching its highest level since 2007.
• Fed hike odds hit 91% as inflation expectations climb.

US Treasury yields fall during the North American session following the release of US inflation data, but are poised to finish the week higher. The US 10-year Treasury yield is down 1 basis point to 4.951% but has gained over 16 basis points, or 3.49%, in the week.

US yields cool, but the week’s inflation scare still bites

The US 30-year yield falls two basis points at 5.34% after hitting its highest level since 2007 at 5.38%, due to surging Oil prices, fueled by the escalation of the US-Iran conflict, which has spread to Yemen, Houthis versus Saudi Arabia.

Recent US inflation data were mostly aligned with estimates, except for core CPI, which was in line with forecasts but ticked lower. Despite this, the red-hot PPI report a day ago and the surge in US yields this week ignited a Fed-hawkish repricing.

Money markets had priced in a 91% chance for a 0.25% rate increase by the Federal Reserve at the September 15-16 meeting.

Other data revealed that US consumers are becoming pessimistic about the economy and now expect higher prices due to a resurgence in fuel prices and rising trade tensions, particularly between the US and Canada.

In the meantime, the US Dollar Index (DXY), which tracks the performance of a basket of six currencies against the Greenback, clings to 99.00, up a minimal 0.05%.

In the meantime, the US financial markets' five-year inflation expectations are at 2.46%, up from 2.37% at the beginning of the week, according to the 5-year Breakeven Inflation Rate. For 10 years, the 10-year Breakeven rate fell from 2.35% to 2.4%, suggesting markets expect medium-term inflation to rise.

Traders' focus on the Fed’s meeting, Warsh presser

Next week, traders will focus on the FOMC monetary policy decision. Alongside this, they will monitor jobs and housing data, the NY Fed Empire State Manufacturing Index, Retail Sales and Fed officials' speeches.

US 10-year Treasury note yield

MUFG’s Michael Wan notes that Asia FX and rates have stayed relatively stable despite sharply higher US Treasury yields, but he warns this resilience may not last in the near term. He highlights divergences between Asia FX and US yields, low USD/CNH volatility, and stresses that rising US yields driven by tighter policy and higher risk premia are concerning for Asia.

Asia FX resilience faces growing headwinds

"Linking this to our region, Asia FX and rates markets have been quite benign so far despite the rise in US Treasury yields, but given the drivers of markets more recently we think the probabilities are that this resilience may not continue at least in the near-term."

"We can see this resilience thus far in Asia across multiple measures including the divergence between Asia FX with both yield spreads and absolute yields in the US, a general compression in Asia rates with US Treasury yields, coupled with strength and outperformance in certain currencies such as KRW, TWD, and CNY."

"In addition, implied FX volatility in a pair like USD/CNH has hit multi-decade lows, and while this may certainly be for good reasons, is another indication of how the market is probably positioned right now."

"Ultimately, it’s not just whether US yields are rising, but why they are rising which matters for the spillover impact including to Asia, as our previous analysis and framework shows (see Asia – why US yields rise matter for Asia)."

"As such, the fact market moves have been increasingly driven by tighter policy and importantly higher risk premia with some initial signs of risk-off is concerning."

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

• USD/JPY reversed an early post-CPI jump and is trading lower today.
• US core CPI inflation rose 0.3% in August, a touch hot, yet the Greenback could not sustain its gains.
• The Yen is drawing support from bets on a Bank of Japan rate hike next week.

USD/JPY is trading around 153.70 on Friday, down for the day after briefly spiking above 154.50 following the US inflation release. The pair erased that move within hours as Yen strength overwhelmed the Dollar's knee-jerk bounce, leaving it back toward the lower end of its recent range following this week's sharp slide from the mid-155s.

United States (US) Consumer Price Index (CPI) data held at 3.4% year on year in August, matching both July's reading and market expectations, according to the Bureau of Labor Statistics (BLS). On a monthly basis, prices rose 0.4%, a marked pick-up from the 0.1% gain the month before. The core measure, which strips out food and energy, rose 0.3% on the month, above the 0.2% forecast, although the annual core rate eased to 2.4% from 2.5%.

The US Dollar (USD) climbed at first, helped by the firmer monthly core figure, but the move lost momentum quickly against the Japanese Yen (JPY), which has been among the strongest currencies this week. The initial rebound lacked the fuel to hold.

Markets see the central bank raising interest rates next week, with a 25-basis-point (bps) hike to 1.25% on the table, a move that would lift Japanese borrowing costs to their highest level in more than three decades.

That combination of a BoJ edging tighter just as the Dollar's inflation-day support drains away is tilting the balance toward the Yen and keeping USD/JPY under pressure around the low-153s. Strength is visible across the board, with the Yen crosses also easing today.

Short-term technical analysis:

In the daily chart, USD/JPY trades at 153.69, extending a corrective bearish phase with price lodged well below the 20-day Simple Moving Average (SMA) at 157.65 and the 100-day SMA at 159.68, which now frame a broad cap on any recovery attempts. The Relative Strength Index (RSI) at 29.35 sits just inside oversold territory, hinting that downside momentum is stretched but not yet reversed, so bounces are likely to be treated as corrective while the pair remains under these key moving-average barriers.

On the topside, initial resistance is aligned at 154.40, ahead of a more notable hurdle at 155.99; a daily close above these levels would be needed to ease immediate selling pressure before the focus could shift toward the 20-day SMA at 157.65 and the 100-day SMA at 159.68. On the downside, nearby support is seen at 153.55, followed by a lower floor at 153.26, where failure to hold would open the way to an extension of the downtrend despite the already oversold RSI backdrop.

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

• The US Dollar pulls back after briefly rising in reaction to the latest CPI figures.
• US CPI rises 0.4% MoM in August, while core inflation increases 0.3%.
• Traders now await whether the Fed delivers the rate hike priced into markets.

The US Dollar Index (DXY) reverses earlier gains on Friday as a pullback in longer-dated US Treasury yields outweighs support from the latest US Consumer Price Index (CPI) report, which strengthened expectations that the Federal Reserve (Fed) will raise interest rates next week. At the time of writing, the index trades around 99.11 after briefly climbing to 99.36 in the immediate reaction to the data.

The headline Consumer Price Index (CPI) rose 0.4% MoM in August, matching market expectations but accelerating sharply from the 0.1% increase recorded in July. Annual inflation held steady at 3.4%, also in line with forecasts.

Core CPI, which excludes volatile food and energy prices, increased 0.3% MoM, above the 0.2% forecast and the previous reading of 0.2%. Annual core inflation eased to 2.4% from 2.5%, matching expectations. The report also showed that gasoline prices rose 3.9% and accounted for more than one-third of the monthly increase in headline inflation.

Following the release, traders raised their bets on a rate hike at the Fed’s September 15-16 meeting, with the CME FedWatch Tool showing an 88% chance of a 25-basis-point increase, up from 67% earlier in the day.

However, the US Dollar struggles to capitalise on the hawkish repricing as a sharp decline in Oil prices pulls longer-dated Treasury yields back from multi-year highs. The benchmark 10-year US Treasury yield trades near 4.94% after briefly reaching 4.99%, its highest level in around three years. Meanwhile, West Texas Intermediate (WTI) Oil trades near $96.50 after briefly climbing above $100, down about 4% on the day.

However, the policy-sensitive two-year yield holds higher near 4.63%, around levels last seen in July 2024, reflecting increased expectations of an imminent rate hike. The elevated front-end yield helps limit selling pressure on the Greenback.

The Fed meeting next week is now the main focus. Fed officials have repeatedly stressed that inflation has stayed too high for too long and reaffirmed their commitment to bringing it back to the 2% target. Elevated Oil prices complicate that task, leaving markets to assess whether policymakers see the energy shock as persistent enough to deliver the rate hike traders expect or opt for another hold.

• Gold reclaims the 100-day SMA after CPI-driven post-release volatility.
• Fed hike odds surge to 91%, but US Dollar reaction fades.
• Weak sentiment and falling yields help bullion regain traction.

Gold (XAU/USD) price bounces off daily lows beneath $4,300 on Friday and reclaims the 100-day Simple Moving Average (SMA) of $4,335 following the release of US inflation data, which fueled speculation that a Federal Reserve (Fed) rate hike next week is almost certain. At the time of writing, XAU/USD trades at $4,3737, up over 1.29%.

XAU/USD rebounds after CPI as Dollar reaction fades and yields slip

August’s US Consumer Price Index (CPI) increased by 0.4% MoM, with an annual rise of 3.4%, both matching expectations. Core CPI went up 0.3%, slightly above the forecast of 0.2%; over the past year, it remained at 2.4%, down from July and in line with estimates.

The data strengthened the Greenback. But the initial reaction waned even though money markets have priced in a 91% chance of a rate hike by the Federal Reserve at next week’s meeting, according to Prime Terminal.

Hence, the US Dollar Index (DXY), which tracks the performance of a basket of six currencies against the Greenback, clings to 99.00, down a minimal 0.05%.

The University of Michigan Consumer Sentiment for September deteriorated as US households are becoming pessimistic. The index fell from 51.7 to 47.8, missing forecasts of 51. Joanne Hsu, the survey’s director, commented that “With ​a resurgence in fuel prices and ​trade tensions, consumers anticipate greater pressures on their pocketbooks ‌to ⁠come.”

The same report noted that Americans expect inflation to rise from 4% to 4.6% in one year, while over five years, they foresee inflation ticking higher from 3.3% to 3.4%.

Meanwhile, bullion prices stand firm, advancing steadily and capitalizing on falling US bond yields during the session. The US 10-year Treasury yield drops 1 basis point to 4.951%, though over the week it surged more than 16.5 basis points, or 3.49%.

All in all, Gold’s faith will fall on next week’s Fed monetary policy decision and on Fed Chair Kevin Warsh's press conference.

Besides the FOMC’s meeting, the US economic docket will feature the ADP Employment Change 4-week average, the NY Fed Empire State Manufacturing Index, Retail Sales, housing and jobless claims data, and speeches by Fed officials.

XAU/USD Price Forecast: Gold rises but struggles as sellers defend $4,400

Price action shows Gold drifting higher but struggling to break above $4,400, suggesting sellers are stepping in around that level, pushing back against buyers and setting their sights on $4,500 or higher.

Despite this, the Relative Strength Index (RSI) is aiming higher, but below its neutral level. Therefore, further selling pressure remains, capping XAU’s advance.

On the upside, the first key resistance is $4,400. Once cleared, this exposes key psychological levels at $4,450 and $4,500, ahead of the 200-day SMA at $4,538.

On the downside, XAU/USD must fall below the 100-day SMA at $4,335 and clear $4,300. Underneath sits September’s 2 low of $4,282, followed by the 50-day SMA at $4,269.

• GBP/USD rebounds from US CPI-driven dip as Dollar strength fades.
• Fed hike odds jump to 88% after in-line inflation.
• UK GDP beat helps Sterling steady before BoE decision.

The Pound Sterling (GBP) climbs slightly against the US Dollar (USD) on Friday, up 0.10%, as the latest US consumer inflation report came in line with forecasts, and although money markets have increased the odds of a Federal Reserve (Fed) rate hike next week, traders faded the initial reaction. At the time of writing, the GBP/USD pair trades back at 1.3524 after dipping to around 1.3470 on the Consumer Price Index (CPI) release.

GBP/USD recovers after US CPI as UK GDP surprises higher

The US CPI in August rose 0.4% MoM and, on an annual basis, expanded by 3.4%, with both figures matching forecasts. Core CPI rose 0.3% above estimates of 0.2% and, in the twelve months to August, it was 2.4%, down from July’s 2.5% print and aligned with forecasts.

The market’s initial reaction was to Dollar strength, but so far, most G8 FX currencies have recovered. The US Dollar Index (DXY), which measures the buck’s value against a basket of six currencies, clings to 99.00, down a minimal 0.05%.

Money markets are pricing in an 88% chance that the Fed will increase its Fed funds rate by 25 basis points to the 3.75%-4% range, according to Prime Terminal. A day ago, the odds were close to 60%.

In the meantime, US households are growing less optimistic about the economy, as shown by the University of Michigan Consumer Sentiment survey for September, with the index falling from 51.7 to 47.8, missing forecasts of a 51 reading.  Joanne Hsu, the survey’s director, commented that “With ​a resurgence in fuel prices and ​trade tensions, consumers anticipate greater pressures on their pocketbooks ‌to ⁠come.”

Inflation expectations jumped sharply: for one year, to 4.6% from 4%, and for five years, ticked up a tenth, from 3.3% to 3.4%.

In the UK, Gross Domestic Product (GDP) figures showed that the economy grew at its fastest pace in 18 months in July, by 1.6% YoY, above estimates of 1.2%, up from the previous reading of 1.1%. On a monthly basis, GDP grew 0.4%, exceeding projections of 0% and up from June's 0.3%

Given the backdrop, money markets expect the Bank of England (BoE) to leave rates unchanged, despite the UK’s status as a net energy importer. On Tuesday, BoE Governor Andrew Bailey stated that, while markets anticipate further tightening, he aimed to clarify that rate hikes are not imminent.

Next week, traders' eyes are on the Federal Reserve monetary policy decision on Wednesday, followed by the BoE on Thursday.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3525, holding a constructive bullish bias as price stays above a dense band of technical supports. The pair sits over the latest simple moving average cluster around 1.3479 and clings to the rising trend-line support from 1.3140 near 1.3459, while prior descending trend barriers around 1.3466 and the earlier 1.3360 break area now underpin the market. The Relative Strength Index (14) near 50 suggests neutral momentum, hinting that bulls are defending the floor but lack strong directional conviction for now.

On the downside, immediate support is located at the current price area of 1.3525, with secondary demand emerging from the moving average region around 1.3479 and the nearby trend-line supports clustered between 1.3466 and 1.3459, ahead of the former breakout zone at 1.3360. On the topside, the next notable resistance is the rising trend-line barrier coming in around 1.3678; a daily close above this level would strengthen the bullish outlook and open the way toward higher highs, while failure to clear it would keep GBP/USD confined to its current consolidation band. (The technical analysis of this story was written with the help of an AI tool. Know more.)

(This story was corrected on September 11 at 17:08 GMT to say that "in the twelve months to August, it was 2.4%, down from July’s 2.5% print and aligned with forecasts." instead of "stood at 2.4%, unchanged from July’s number and aligned with forecasts.")

• The European Central Bank raises rates by a quarter point, but the move was fully priced in and barely stirred the Euro.
• Lagarde leans hawkish on inflation risks yet sticks to a meeting-by-meeting line.
• Firmer UK data and rising British inflation expectations are keeping the Pound in the fight.

EUR/GBP is easing on Friday and slipping toward the 0.8580 area. The cross had pushed to the top of its recent range in the high 0.8590s before running out of steam.

The European Central Bank (ECB) delivered, as expected, a 25-basis-point (bps) rate hike. As a result, the rate on the main refinancing operations, the marginal lending facility and the deposit facility stood at 2.65%, 2.90% and 2.50%, respectively.

ECB President Christine Lagarde refrained from pre-committing to the next move, repeating that the central bank remains data-dependent and will decide meeting by meeting. She added that inflation expectations over shorter horizons remain elevated, highlighting the risks tied to mounting price pressure amid the conflict in the Middle East.

United Kingdom (UK) activity data came in on the stronger side, with monthly Gross Domestic Product (GDP), Industrial Production and Manufacturing Production all beating expectations. UK consumer inflation expectations have also picked up, and a public that expects higher prices tends to reinforce the case for the Bank of England (BoE) to stay restrictive.

Short-term technical analysis:

On the 4-hour chart, EUR/GBP trades at 0.8582, holding just above the 100-period Simple Moving Average (SMA) at 0.8576 but capped by a nearby resistance cluster. The 20-period SMA at 0.8587, together with horizontal barriers at 0.8584 and 0.8585, forms a tight ceiling that keeps the near-term bias mildly bearish while price remains trapped beneath it. The Relative Strength Index (RSI) around 43 tilts lower, hinting that upside attempts could continue to fade under this overhead supply.

On the topside, initial resistance is aligned at 0.8584 and 0.8585, with the 20-period SMA and an additional horizontal level reinforcing a stronger cap near 0.8587. On the downside, immediate support is located at the recent floor around 0.8578, ahead of the 100-period SMA backing the structure near 0.8576; a clear break below this band would expose a deeper corrective phase, whereas a sustained move above 0.8587 would be needed to relieve the current pressure.

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

• Silver rebounds sharply from a three-week low and gains 1.13% on Friday.
• US headline inflation remains stable at 3.4% in August, in line with market expectations.
• A stronger monthly core inflation reading initially pressured the precious metal, but the US Dollar quickly gave back its post-data gains.

Silver (XAG/USD) rebounds sharply on Friday, trading around $64.30 at the time of writing, up 1.13% on the day. The white metal recovers after briefly falling to a three-week low of $62.94 in the immediate reaction to the latest United States (US) inflation figures.

The US Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose 3.4% YoY in August, unchanged from the previous month and in line with market expectations. On a monthly basis, headline inflation increased 0.4%, accelerating from the 0.1% rise recorded in July.

Underlying inflation delivered a slightly firmer signal. The core CPI, which excludes volatile food and energy prices, rose 0.3% MoM, above the 0.2% increase expected by economists. However, annual core inflation eased to 2.4% from 2.5% in July.

Silver initially came under selling pressure as the stronger-than-expected monthly core reading triggered a rebound in the US Dollar (USD). Higher inflation can strengthen the scope for monetary tightening by the Federal Reserve (Fed), generally creating a headwind for non-yielding precious metals.

However, the initial reaction quickly reversed. The US Dollar struggled to retain its post-CPI gains as annual headline inflation showed no renewed acceleration and core inflation continued to moderate on a yearly basis. The fading USD rebound allowed Silver to recover rapidly from its three-week low and return above $64.50.

Attention also turns to preliminary consumer sentiment data from the University of Michigan (UoM). The Consumer Sentiment Index came in at 47.8 in September, down from 51.7 previously. The Current Conditions Index declined to 50.9 from 51.9, while the Consumer Expectations Index fell to 45.8 from 51.5.

Inflation expectations could prove particularly important for the interest-rate outlook. One-year inflation expectations rose to 4.6% from 4%, while the five-year measure edged higher to 3.4% from 3.3%. Persistently elevated inflation expectations could reinforce the Fed's path toward tightening and remain a source of volatility for Silver and the US Dollar.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $64.53. The metal remains under pressure while it holds below the 100-hour simple moving average (SMA) at $65.82 and the 200-hour SMA at $65.74, keeping the near-term bias bearish despite the latest bounce. The Relative Strength Index (14) has recovered toward the 50 area, hinting that downside momentum has faded, but price action is still capped by a dense resistance band just above the market.

On the topside, initial resistance is seen at the horizontal barrier around $65.28, followed by the 200-hour SMA at $65.74 and then the 100-hour SMA at $65.82. On the downside, the next notable support sits at the prior horizontal floor near $62.94, where buyers would be expected to show interest if selling resumes.

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

• DJIA rallied on Friday as long yields back off, roughly 500 points to near 52,600.
• The 10-year Treasury yield ran at 5.00% on the inflation print and then turned.
• Core CPI 0.3% on the month, a tenth above consensus, core goods at 0.1%.

The Dow Jones Industrial Average trades just beneath 52,600, roughly 510 points higher, after four sessions of losses. The inflation print was worth about 100 points at 12:30 GMT, and the rest of the advance arrived in the afternoon once the long end of the Treasury curve turned. Crude Oil is lower on the day, and American diesel set a record at the pump this morning. The barrel is not what changed.

The long end looked at 5% and backed away

The 10-year Treasury yield rose toward 5.00% on the data and then reversed, and it trades near 4.90%. The 30-year is lower on the day after Thursday took it to 5.37%, the highest since 2007. The 2-year is higher on the day and has given back most of an 11 basis point jump. That is the part of the curve that prices next Wednesday, and it is the part that did not back off.

Four sessions of selling ran the same mechanism in reverse. The 10-year set its highest level since October 2023 this week, the 30-year its highest since 2007, and chip names led Thursday's decline on their exposure to long-dated credit costs. The front end has bought the hike. The long end has bought what the hike is supposed to do to growth.

The headline was gasoline and the core was jet fuel

The Consumer Price Index (CPI) rose 0.4% in August and 3.4% YoY, both in line with consensus. The core measure rose 0.3% on the month against 0.2% expected. The annual core rate eased to 2.4% from 2.5%. Gasoline rose 3.9% and did more than a third of the monthly increase on its own, and the energy index is up 16.3% over the year.

The beat did not come from tariffs. Core goods rose 0.1% on the month and 0.7% on the year. What moved were the services that burn fuel: airline fares up 2.7% in the month and 23.4% over the year, transportation services up 0.5%, and shelter reaccelerating to 0.3% from 0.1%. Monthly core has run 0.0% in June, 0.2% in July and 0.3% in August. The core rate is being lifted by the price of the thing it excludes.

Crude Oil eased and diesel set a record

Crude Oil is lower on the day and both benchmarks hold gains near 20% over the past month. American diesel passed $6.00 a gallon for the first time on Friday, at $6.05 against $5.32 a month ago. That is a price 29 of these 30 members pay rather than charge, and it went up today. Chevron (CVX) is the one member on the other side of it, and energy is the smallest sector weight in the average at 2.4%.

The consumer that pays for it disagreed

The University of Michigan's preliminary September survey put sentiment at 47.8, down from 51.7 and beneath a consensus of 51. The expectations component fell to 45.8 from 51.5. The survey has run since 1952 and its record low is four months old. Year-ahead inflation expectations jumped to 4.6% from 4.0%, and the five-year measure rose to 3.4% from 3.3%. Those last two figures are the reason a quarter point is on the table at all.

The curve is not pricing one hike

Futures put a move to 3.75-4.00% next Wednesday at 86.71%. By the December 9 meeting, 4.00-4.25% carries 93.96%. By March 17 the market puts 89.29% on 4.25-4.50%, and a fourth increase leads the pricing by the July 2027 meeting. The question on the screen is not whether the Federal Reserve hikes but how many times it has to.

The committee's own June projections put the funds rate at 3.8% for the end of this year, 3.6% for next year and 3.1% in the longer run. The market sits close to a point above that for 2027. A fresh set of projections arrives with the decision on Wednesday, so the dots and the curve get reconciled in public, and only one of them has to move.

The week hands the decision one number

August retail sales land Wednesday at 12:30 GMT after a 0.6% fall, with the control group last at -0.4%. The decision follows at 18:00 GMT alongside the projections, and the press conference at 18:30 GMT. The print reaches the committee five and a half hours before the vote it is meant to inform. Thursday carries housing starts, building permits, jobless claims last at 206K and the Philadelphia Fed survey last at 47.4, with industrial production on Friday.

Levels and bias

Resistance: The 50-day Exponential Moving Average (EMA) near 52,750 is the first hurdle, and the session high stopped short of it. Above that sit 53,000 and the 53,250 area, then the 53,500 shelf and the 53,800 band that capped the August rallies. The early-August peak just short of 54,750 is roughly 4% overhead.

Support: The session low in the 52,100 area is the first floor, and Thursday's close sits just beneath it. Under that lie the 52,000 handle, then 51,500 and the June low near 51,300. The 200-day EMA near 50,250 is not in play.

Bias: Bearish while the 50-day EMA near 52,750 caps, with the 52,100 area the first objective and the 52,000 handle behind it. The daily Stochastic Relative Strength Index (Stoch RSI) near 39 has not been oversold since July, so four sessions of selling exhausted nothing, and the five-minute reading near 75 says this bounce is late rather than early. A daily close above 53,000 voids the case and puts 53,250 back in range.

Dow Jones daily chart

• Gold attracts fresh buying as the US Dollar reverses its post-CPI gains.
• US CPI data reinforces expectations of a Fed rate hike next week.
• XAU/USD retains a modest bullish bias while holding above its 50-day and 100-day moving averages.

Gold (XAU/USD) rebounds on Friday, reversing most of the previous day’s losses as a pullback in the US Dollar, US Treasury yields and Oil prices supports the precious metal. However, the upside appears limited after the latest US CPI data strengthened expectations that the Federal Reserve (Fed) could raise interest rates next week. At the time of writing, XAU/USD trades around $4,370, up 1.20% on the day after briefly retesting $4,400.

The precious metal fell nearly 2% on Thursday as surging Oil prices stoked inflation concerns and drove US Treasury yields to multi-year highs. The benchmark 10-year US Treasury yield trades around 4.91% after touching 4.97% earlier in the day, its highest level since October 2023. However, Yields at the front end of the curve remain high as traders price in a greater chance of a Fed rate hike.

Meanwhile, West Texas Intermediate (WTI) Oil trades near $96.50 after briefly climbing above $100, down about 4% on the day. Despite the sharp pullback, WTI remains on track for a second consecutive weekly gain.

US CPI report came broadly in line with expectations, limiting the immediate market reaction. Headline inflation rose 0.4% MoM in August, matching forecasts but accelerating from the 0.1% increase recorded in July. The annual rate held steady at 3.4%, also in line with market expectations.

Core CPI, which excludes volatile food and energy prices, increased 0.3% MoM, above the 0.2% forecast and the previous reading of 0.2%. Annual core inflation eased to 2.4% from 2.5%, matching expectations. Gasoline prices rose 3.9% in August and accounted for more than one-third of the monthly increase in headline inflation.

The US Dollar strengthened following the release but struggled to hold its gains. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99 after climbing to 99.36 in the immediate reaction to the data.

The CPI figures follow Thursday’s Producer Price Index (PPI) report, which showed that annual producer inflation accelerated to 5.4% in August from 4.8% in July. According to the CME FedWatch Tool, markets now price in an 85% probability of a 25-basis-point interest-rate hike at the September 15-16 meeting, up from 67% earlier in the day.

According to TD Securities, “the yellow metal has been able to hold support in the higher range, even as the market grapples with renewed energy upside and the near-term increase in Fed hike probabilities.” The bank argues that “strong data and a hawkish Fed may only catalyze relatively modest near-term selling, postponing the timing of the next leg higher, rather than leading to material downside.”

On a more strategic horizon, TD Securities highlights that “the renewed dollar-debasement theme, elevated central bank buying and renewed ETF accumulation offer a strong support base,” reinforcing the view that any short-term weakness is likely to be contained within a broader constructive backdrop for gold.

Technical analysis: XAU/USD recovery faces key hurdle at 200-day SMA

XAU/USD holds a mild constructive bias as it remains above both the 50-day and 100-day Simple Moving Averages (SMAs), suggesting underlying demand after the recent pullback. However, the advance is still capped beneath the 200-day SMA at $4,538, keeping the broader uptrend in check. The Relative Strength Index (RSI) on the daily chart sits at 49, while the Average Directional Index (ADX) has eased to 20, hinting at a consolidative phase rather than a strong directional move.

On the downside, a decisive break below the 100-day SMA could expose the 50-day SMA at $4,269, followed by $4,150 and $4,000.

On the topside, the 200-day SMA at $4,538 acts as the main resistance. A sustained break above this level would weaken the bearish structure and open the door to a retest of the August 25 high near $4,697.

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