Forex News
- WTI kicks off the new week on a positive note as the geopolitical risk remains in play amid the US-Iran standoff.
- Hopes that US-Iran peace talks would resume later this week hold back bulls from placing aggressive bets.
- Fed hike bets and elevated US bond yields support the USD, which contributes to capping the black liquid.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – struggles to capitalize on a modest gap-up open on Monday as traders opt to wait for further developments surrounding the Middle East crisis before placing fresh bets. Nevertheless, the commodity retains its positive bias through the Asian session and currently trades just above the $92.00 mark, up over 0.80% for the day.
US President Donald Trump on Saturday rejected an Iranian proposal to reopen the Strait of Hormuz within a week and resume nuclear talks in return for the lifting of the US naval blockade of Iranian ports. Trump added on Sunday that additional military strikes on Iran were possible before the midterm elections in the US, prompting traders to price in the geopolitical risk premium. Adding to this, the Houthis in Yemen and Iran continued their attacks on Saudi Arabia, leaving regional supply flows vulnerable and lending additional support to crude oil prices.
Meanwhile, peace negotiators are pressing Iran to make concessions on its nuclear program to revive ceasefire talks with the US. Furthermore, Trump said that US negotiators are likely to engage in further talks with Iran this week, fueling hopes for a diplomatic resolution to end the Iran war that started in February. Apart from this, the underlying US Dollar (USD) bullish tone, bolstered by rising bets for a rate hike by the US Federal Reserve (Fed) in October and elevated US bond yields, contributes to keeping a lid on any meaningful upside for the commodity.
Adding to this, preliminary data from Kpler showed that crude oil exports from key Middle East producers rebounded in September to 12.8 million barrels per day, the highest since the Iran war started. This further makes it prudent to wait for strong follow-through buying around crude oil prices in order to confirm that the recent corrective pullback from the highest level since May 20, touched earlier this month, has run its course. Traders might also await the release of China's official PMIs on Wednesday before placing fresh directional bets around the black liquid.
WTI daily chart
Technical Analysis
WTI holds a bullish near-term bias above the 100-day Simple Moving Average (SMA) at $84.96. The advance is also supported by reclaimed Fibonacci levels, with prices trading above the 50.0% retracement at $84.44 and the 38.2% retracement at $88.59, suggesting underlying demand on dips while the market consolidates just below the upper retracement bands.
The next relevant hurdle emerges at the 23.6% retracement at $93.72, with a break above this level exposing the structural high zone at $102.01. On the downside, immediate support is located at the 38.2% Fibo. retracement at $88.59, ahead of the 100-day SMA at $84.96 and the deeper 50.0% retracement at $84.44, which together form a broad demand zone if a pullback develops.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- Gold price falls to near $4,215 in Monday’s early Asian session.
- Fed's Hammack worried inflation expectations could deteriorate.
- Hawkish Fed bets support the US Dollar and weigh on USD-denominated Gold.
Gold price (XAU/USD) drops to around $4,215 during the early Asian trading hours on Monday. The precious metal loses ground as a stronger US Dollar (USD) and hawkish signals from the US Federal Reserve (Fed) policymakers dented bullion's appeal.
Expectations of higher-for-longer US interest rates were firmed after Fed officials said additional rate increases may be needed to curb unacceptably high inflation, following September’s quarter-point hike in the benchmark rate. Cleveland Fed President Beth Hammack said on Friday that inflation risks remain high and that restrictive monetary policy should be maintained.
Additionally, Fed Governor Michael Barr said that “further policy adjustments are likely to be needed” to get inflation under control. Fed President Tom Barkin and Boston Fed President Susan Collins both backed the recent interest rate increase, citing continued inflationary pressures.
It’s worth noting that higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.
“Focus will definitely continue to be on the interest rate situation. When we start to see markets pricing in a much more hawkish Fed, it strengthens the dollar and is negative for gold,” said Kelvin Wong, senior market analyst at OANDA.
Gold under pressure as higher oil and firm US data bolster Fed hike bets
Strategists at OCBC note that gold "slipped further to below 4250 briefly before rebounding slightly overnight," as renewed Middle East tensions pushed oil higher and "firm US data and hawkish Fed comments" kept expectations for further tightening elevated. They highlight that the "implied probability of Oct hike rose to >70% while the USD firmed," reinforcing the headwinds for the metal. Looking ahead, OCBC argues that "oil and the rates response remain the main swing factors," with "some easing in energy prices or the USD" potentially helping gold to stabilise, whereas "a further rise in yields would keep the near-term bias under pressure."
Technical Analysis: Gold maintains a negative tone below the 100-day SMA
In the daily chart, XAU/USD keeps a bearish near-term tone as price holds below the 100-day simple moving average (SMA) and the Bollinger middle band. The metal is clinging just above the lower Bollinger band support, while the Relative Strength Index (RSI) at 39.9 leans lower, suggesting fading bullish momentum rather than outright oversold conditions.
On the topside, initial resistance appears at the 100-day SMA near $4,300, followed by the Bollinger middle band around $4,340, with the upper Bollinger band at $4,462 acting as a stronger cap if a rebound extends. On the downside, immediate support is defined by the lower Bollinger band at roughly $4,218; a sustained break beneath this floor would open the way for a deeper pullback, keeping the bearish bias intact while the price remains under the clustered moving-average and volatility-band resistance overhead.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
China’s Commerce Ministry said on Monday that the United States (US) and Chinese officials confirmed that the bilateral trade truce has been extended by two months, moving the expiration date from November 10 January 10, 2027.
Key quotes
Importing US coal complements domestic market, offers stable economic returns and jobs for US industry.
We look forward to expanding China-US collaboration in coal sector.
China and US agree to form agricultural working group.
Both parties agree to hold first agriculture working group meeting before end of 2026.
China will review and approve applications from financial service institutions worldwide, including those with US capital, to operate and open branches.
China expects US to offer fair, transparent, and stable policy environment for Chinese financial institutions.
China, US agree to set up communication channel for AI incidents.
Both parties agreed to maintain dialogue on boosting China-US flights and related issues.
Trade ceasefire with US to be extended to January 2027.
Trade truce offers room for both sides to review and evaluate joint arrangement implementation and explore ways to boost China-US economic and trade relations.
Both sides likely to keep working on positive solution for continued extension via high-level economic and trade talks before year-end.
Both sides agree to keep talks on boosting China-US flights and related issues.
Market reaction
At the time of writing, the AUD/USD pair is down 0.08% on the day at 0.7018.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
- GBP/USD advances on US Dollar weakness despite growing market expectations for an October Federal Reserve rate hike.
- Geopolitical uncertainty lingers following President Trump's rejection of Iran's latest Strait of Hormuz proposal.
- British Pound gains momentum as BoE policymakers signal potential rate increases due to elevated energy prices.
GBP/USD gains ground for the second successive day, trading around 1.3230 during the Asian hours on Monday. The currency pair advances as the US Dollar (USD) weakens, despite hawkish signals from Federal Reserve (Fed) officials. Traders are turning their focus toward key economic indicators due this week, including key US employment data and the Fed’s preferred inflation gauge.
The downside of the Greenback could be restrained as several central bank officials expressed concerns over persistent inflation. Last week, Cleveland Fed President Beth Hammack warned against allowing the public to accept elevated prices as the norm. Echoing this sentiment, Philadelphia Fed President Anna Paulson noted that modest further tightening may be warranted. As a result, money markets are now pricing in a 65.9% chance of a benchmark rate hike at the October Fed meeting, up from 57.6% a week ago and just 9.4% a month ago.
Beyond monetary policy, investors are seeking fresh catalysts while closely tracking geopolitical developments in the Middle East. President Trump recently rejected Iran’s proposal to reopen the Strait of Hormuz, stating that Tehran had overplayed its hand, though he noted negotiations are expected to resume this week. Furthermore, President Trump expressed confidence that the conflict with Iran would conclude soon, while keeping open the possibility of additional military strikes before the midterm elections.
Meanwhile, the British Pound (GBP) is also drawing support from increasingly hawkish rhetoric among Bank of England (BoE) policymakers. BoE Governor Andrew Bailey warned that persistently high energy prices would make it difficult for the central bank to maintain current interest rates. Supporting this hawkish stance, MPC members Sarah Breeden and Clare Lombardelli signaled they are moving closer to backing a rate hike, citing risks that rising energy costs could keep inflation above the BoE's target.
Bailey flags AI upside but warns energy risks could lift GBP
BoE Governor Bailey’s speech scores 8.2/10 on FXS Speechtracker, notably above the historic 6.3/10 baseline, signaling a more impactful and slightly hawkish tone. The warning that prolonged high energy prices make it harder to maintain a no-hike stance, alongside attention to rising mortgage rates, points to a cautious bias toward future tightening that can support GBP.
At the same time, the remark that AI could be a positive shock in an era of negative supply shocks introduces a medium-term constructive narrative for UK productivity and growth. Bailey’s acknowledgment of currently subdued pass-through of energy prices, while stressing it is still early days, reinforces a watchful stance that keeps GBP sensitive to incoming inflation and energy data.
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.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Thursday at 6.7399 compared to last Thursday's fix of 6.7489 and 6.7085 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- USD/JP kicks off the new week on a positive note, reversing a part of Friday’s retracement slide.
- The divergent Fed-BoJ policy stance continues to act as a tailwind for spot prices and favors bulls.
- Fed hike bets and oil-driven inflation fears support elevated US bond yields, supporting the USD.
The USD/JPY pair attracts some dip-buyers at the start of a new week and climbs to the 157.75 area during the Asian session, reversing a part of Friday's retracement slide from the vicinity of a multi-week top. Spot prices stick to gains following the release of Bank of Japan (BoJ) Minutes and remain at the mercy of US Dollar (USD) price dynamics.
Against the backdrop of the US Federal Reserve's (Fed) hawkish outlook, energy-driven inflation fears underpin prospects for further policy tightening and keep US bond yields elevated near multi-year highs. Apart from this, geopolitical risks stemming from the US-Iran standoff help the safe-haven USD regain positive traction and remain close to its highest level since July 29, touched last Thursday. This, in turn, is seen as a key factor acting as a tailwind for the USD/JPY pair.
Meanwhile, the Japanese Yen (JPY) reacted little to the July BoJ meeting Minutes, which showed that members agreed financial conditions are accommodative and that firms are steadily passing on rising raw material costs, keeping inflation elevated. Even speculations that authorities will step in again to prop up the domestic currency fail to impress JPY bulls, suggesting that the path of least resistance for the USD/JPY pair is to the upside amid the BoJ's dovish-leaning tone.
Traders, however, might refrain from placing aggressive directional bets and opt to wait for further developments surrounding the Middle East crisis. Nevertheless, the fundamental backdrop seems tilted in favor of USD bulls and backs the case for an extension of the USD/JPY pair's recent well-established multi-week uptrend. Traders now look to speeches from influential FOMC members for short-term opportunities later during the North American session.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair reclaims the 23.6% Fibonacci retracement level after showing resilience below the 50-period Simple Moving Average (SMA) on the 4-hour chart. This points to the underlying demand and reinforces a constructive tone above the 50-SMA. The next notable resistance aligns with the cycle high anchor near 159.08, where a sustained break would open further upside.
On the downside, initial support is seen at the 23.6% Fibo. retracement at 157.62, followed by the 50-period SMA at 157.17, with deeper structural cushions at the 38.2% retracement at 156.71 and the 50.0% retracement at 155.98.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- EUR/USD declines to near 1.1380 in Monday’s early Asian session.
- Hawkish Fed remarks strengthened expectations for further tightening.
- Markets are currently pricing nearly a 45% odds of another ECB 25 bps rate hike in October.
The EUR/USD pair edges lower to around 1.1380 during the early Asian session on Monday, pressured by hawkish signals from the Federal Reserve (Fed) and escalating Middle East tensions. Traders brace for the Retail Sales and Consumer Price Index (CPI) inflation reports from Germany later on Wednesday for fresh impetus.
Many Fed officials delivered hawkish remarks last week, with Cleveland Fed President Beth Hammack saying on Friday that she is worried that persistently high inflation risks conditioning the American public to accept elevated prices as the norm, adding the central bank cannot let that happen. Philadelphia Fed President Anna Paulson said, "Some modest further tightening may be warranted.”
Markets are now pricing in nearly a 65.9% odds of the Fed October benchmark rate hike, up from 57.6% a week earlier and 9.4% a month earlier, according to the CME FedWatch tool.
Furthermore, rising tensions in the Middle East could boost safe-haven flows, supporting the Greenback. US President Donald Trump said on Sunday that he believes the war with Iran will be won “very soon,” adding that additional military strikes before the midterm elections are possible.
Meanwhile, Iran sticks to its position that it would only reopen the crucial waterway if its conditions are met, while a senior Iranian military leader stressed his country’s readiness to continue fighting.
The European Central Bank (ECB) raised its key deposit rate by 25 basis points (bps) to 2.50% at its September policy meeting. Markets are currently pricing roughly a 45% chance of another 25 bps rate hike in October, with a further rate hike fully priced only by December at the earliest, according to Reuters. That leaves plenty of room for incoming data to move expectations.
Euro slide seen as stretched with downside limited unless supports give way
Strategists at UOB Group note that the Euro’s latest leg lower has exceeded their earlier expectations. In their 1–3 weeks view, they recall that in their last update on Wednesday, 23 September, when EUR/USD was trading around 1.1450, they had highlighted that “there is a chance for EUR to test 1.1400, but the odds for a sustained decline below this level are not high.” However, they point out that the subsequent “breach of 1.1400 triggered a sharp decline that reached a low of 1.1358 yesterday.”
While acknowledging that “EUR could weaken further,” UOB argues that “the deeply oversold conditions suggest that the scope for additional downside may be relatively limited.” They emphasise that “the decline in EUR that started two weeks ago … has been substantial,” and draw attention to “two strong support levels, at 1.1355 and 1.1325.” On the topside, UOB flags that “a breach of 1.1430 (‘strong resistance’ level previously at 1.1490) would indicate that the weakness in EUR is stabilising,” marking that zone as a key threshold for any near-term recovery in the Euro.
Hammack flags inflation mindset risk as Fed keeps policy stance restrictive
Fed’s Hammack delivers a moderately hawkish message, with a FXS Speechtracker score of 7.2/10, slightly below the 7.5/10 historical average, as the focus shifts to the danger of an entrenched “inflationary mindset” after a prolonged period of above-target price pressures. The emphasis on solid growth, a stable job market, and demand- and capex-driven inflation risks, alongside the warning that expectations could shift if progress stalls, underscores a clear preference for maintaining a restrictive policy stance to re-anchor inflation expectations. Overall, the tone leans hawkish, but the slight dip versus the established baseline suggests marginally less urgency than in past communications.
The FXS Fed Sentiment Index slipped by 0.34 points to 147.72, indicating a modest pullback in perceived hawkishness following the speech. Despite this decline, the index remains firmly in hawkish territory well above the neutral 100 mark, signaling that, in aggregate, Fed communication still points to restrictive policy bias even as the latest Hammack remarks register a small sentiment moderation in the FXS Fed Sentiment Index and FXS Speechtracker.
Technical Analysis: EUR/USD retains a negative outlook below the 100-day SMA
In the daily chart, EUR/USD remains under clear bearish pressure, holding well below the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, which cap the topside and reinforce a negative near-term bias. The Relative Strength Index (14) sits in oversold territory near 27, hinting that while downside momentum is strong, the sell-off is becoming stretched.
On the downside, immediate support emerges at the lower Bollinger Band around 1.1340, where sellers may hesitate to push prices further without a corrective bounce. On the topside, initial resistance is clustered in the 1.1525–1.1530 area, defined by the Bollinger middle band and the 100-day SMA, with a subsequent barrier at the upper Bollinger Band near 1.1708; only a recovery above these levels would ease the current bearish tone.
(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.
US President Donald Trump said on Sunday that he believes the war with Iran will be won “very soon,” adding that additional military strikes before the midterm elections are possible, Fox News reported.
“I think what's going to happen is we're going to win this war very soon, and as soon as we win it, the oil will go down, way down to what it was before the war,” said Trump. “And the key is, Iran will not have a nuclear weapon,” he added, saying nuclear deterrence was “key to the whole thing.”
Meanwhile, Iran’s Persian Gulf Strait Authority (PGSA) warned shipowners Sunday against using “unauthorized” routes through the Persian Gulf and Strait of Hormuz, threatening consequences for noncompliant shipping companies.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.72% on the day at $92.00.
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 Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Monday, per the BoJ Minutes of the July meeting.
Key quotes
Members agreed financial conditions remain accommodative.
Some members note consumer prices rising, reflecting increased import costs.
Several members noted companies steadily pass rising raw material costs, sustaining high wholesale inflation.
Many members say medium-, long-term inflation expectations rising for households, companies.
Several members expect consumer goods price increases to expand from summer onward.
Many members noted underlying inflation nearing 2%, demanding focus on stability.
Many members said underlying inflation nearing 2%, requiring focus on stabilising price growth around that level.
Members concur fx volatility impacts economy, prices more than before as firms increase pass-through of rising import costs.
One member notes rising upside price risks as recent weak yen, Middle East events could boost inflation expectations.
One member noted it takes 1-1.5 years for rate hike effect to ease inflation, economy.
One member said Bank of Japan must taper monetary support gradually to prevent delay in interest-rate increases.
One member said central bank must ensure nimble policy decisions by raising policy rate, which stayed below estimated neutral rate range.
Many members said central bank gradually moving to phase focusing on stabilising underlying inflation around 2%, not pushing up inflation.
One member said markets appear to expect BOJ to raise rates about once every six months, but hikes could come more quickly.
One member said bank must adjust policy rate nimbly with focus on upside inflation risks.
One member says bank must speed up rate hikes as inflation risks could cause significant harm to economy.
Some members said central bank must signal focus on upside inflation risks more clearly.
Several members said it was difficult to anticipate pace and timing of future rate increases.
Board discussed long-term interest rate changes with some members saying term premia could increase if markets doubt BOJ will raise rates adequately.
Cabinet office official says suitable monetary policy crucial for stable inflation, hopes BOJ collaborates with government.
Market reaction to the BoJ Minutes
At the time of writing, USD/JPY is up 0.11% on the day at 157.48.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- AUD/USD weakens to around 0.7010 in Monday’s early Asian session.
- Fed’s Hammack wanted restrictive monetary policy to bring inflation to target.
- The RBA is poised to resume raising interest rates at its September meeting on Tuesday.
The AUD/USD pair loses momentum to near 0.7010 during the early Asian session on Monday. The US Dollar (USD) strengthens against the Australian Dollar (AUD) on rising US Treasury yields and growing bets on further Federal Reserve (Fed) interest rate hikes. The Reserve Bank of Australia (RBA) will be in the spotlight later on Tuesday.
Hawkish remarks from Fed officials have fueled speculation about additional interest rate increases following a recent rate hike to the 3.75%-4.00% range. Cleveland Fed President Beth Hammack said on Friday that she is worried that persistently high inflation risks conditioning the American public to accept elevated prices as the norm, adding the central bank cannot let that happen.
Meanwhile, Philadelphia Fed President Anna Paulson said, "Some modest further tightening may be warranted.” Markets are now pricing in nearly a 65.9% chance of a Fed October benchmark rate hike, up from 57.6% a week earlier and 9.4% a month earlier, according to the CME FedWatch tool.
The RBA is likely to deliver a 25 basis points (bps) rate hike to combat sticky inflation. That would bring the Official Cash Rate (OCR) to 4.60%, the highest level since November 2011. Traders will take more cues from Governor Michele Bullock’s press conference after the rate decision whether the Australian central bank is prepared to deliver back-to-back hikes in November or prefers to watch and wait through the rest of the year.
“The risk sits with the need to tighten monetary policy further beyond September given the inflation backdrop,” said Belinda Allen, head of Australia Economics at Commonwealth Bank of Australia. “But it is not an easy decision to push monetary policy further into restrictive territory,” Allen added.
AUD resilience underpinned as RBA tightening odds rise despite softer jobs headline
Brown Brothers Harriman’s Elias Haddad notes that Australia’s latest labour force data delivered a mixed signal, with the “unemployment rate unexpectedly rose 0.1ppt to 4.6%, which was above consensus and RBA year-end projection of 4.5%.” However, BBH stresses that “the increase in the jobless rate largely reflects a higher participation rate suggesting some tightness in the labor market persists,” reinforcing the view that underlying conditions remain firm.
Against this backdrop, Haddad argues that the “bottom line: rising odds of additional RBA hikes limits policy divergence with the Fed and supports AUD/USD.” He also highlights that “Australia’s strategic exposure to commodities linked to energy, AI, and defense remains an important long-term tailwind for AUD,” providing an additional structural underpinning for the currency beyond the near-term policy outlook.
Hammack flags inflation mindset risk, keeps Fed tone firmly hawkish
Fed’s Hammack delivered a moderately hawkish message, with a 7.2/10 FXS Speechtracker score that is slightly softer relative to the historical average of 7.5/10 but still clearly above neutral. The emphasis on the “biggest risk” being the formation of an inflationary mindset, alongside comments that growth is holding up and the job market is stable, underscores concern that persistent above-target inflation and ongoing capital expenditure could entrench price pressures. The warning that policy must remain at a restrictive stance if progress on inflation stalls reinforces a bias toward keeping rates elevated for longer, supporting the Dollar on balance.
The FXS Fed Sentiment Index slipped by 0.34 points to 147.72, indicating a modest pullback in perceived hawkishness even as the index remains deep in hawkish territory above the 100 neutral line. This configuration—high level but negative change—suggests the Fed is still firmly skewed toward restrictive policy, yet markets may interpret Hammack’s tone as marginally less aggressive compared to the established baseline.
Technical Analysis: AUD/USD keeps a bearish vibe in the near term
In the daily chart, AUD/USD holds below the 100-day simple moving average (SMA) and the Bollinger middle band, keeping the near-term bias bearish despite a modest intraday bounce off recent lows. Price is only marginally above the Bollinger lower band support, while the Relative Strength Index (RSI) at 33 is hovering near oversold territory, suggesting selling pressure is stretched but not yet reversed.
On the topside, initial resistance is seen at the 100-day SMA around 0.7070, with the next cap at the Bollinger middle band close to 0.7130, ahead of the upper band near 0.7265. On the downside, a clear break below the Bollinger lower band at 0.7000 would open the door to further downside extension, while recovery attempts are likely to remain fragile as long as price trades under the 100-day SMA.
(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.
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