Forex News

• USD/JPY extends its rebound and trades around 155.00 on Tuesday, up 0.41% on the day.
• The US Dollar strengthens as solid employment data reinforce expectations of an interest-rate hike this week.
• The Japanese Yen could retain some support from expectations of further monetary tightening in Japan.

USD/JPY extends its rebound on Tuesday and trades around 155.00 at the time of writing, up 0.41% on the day. The pair continues its recovery from levels below 153.00 reached last week, mainly supported by broad-based strength in the US Dollar (USD).

Investors are now preparing for the monetary policy decisions from the United States (US) Federal Reserve (Fed) and the Bank of Japan (BoJ), due on Wednesday and Friday, respectively. Expectations of monetary tightening on both sides of the Pacific put interest-rate differentials in focus and could fuel volatility in USD/JPY.

In the US, expectations of a Fed rate hike are strengthening following recently released robust economic data. According to the CME FedWatch tool, markets are pricing in a 92% chance of an interest-rate increase on Wednesday. A solid August employment report and the latest inflation figures have reinforced expectations that the US central bank will tighten monetary policy.

The latest private-sector employment figures provide additional support to this view. According to ADP's NER Pulse, US private employers added an average of 16.25K jobs per week over the four weeks ending August 29, up from a revised 12.25K previously. The acceleration suggests that the labor market retains some momentum and helps support the US Dollar.

In Japan, the Bank of Japan is also expected to raise interest rates by 25 basis points on Friday and could signal a faster pace of monetary policy normalization. The Japanese Yen (JPY), however, faces headwinds from rising global Oil prices, which increase import costs for Japan's energy-dependent economy. This factor currently limits the Japanese currency's ability to fully benefit from expectations of further BoJ tightening.

At the same time, several factors could continue to provide underlying support to the Japanese Yen, including expectations of more aggressive BoJ monetary tightening, the unwinding of global carry trades and signs that Japanese investors are repatriating foreign assets. These dynamics could limit further USD/JPY gains as markets await the two central banks' decisions.

Japanese Yen underperforms as markets eye BoJ guidance and key USD/JPY levels

Strategists at Scotiabank note that the Yen is soft into Tuesday’s North American session, with the currency “down 0.3% vs. the USD and underperforming all of the G10 currencies.” They highlight that a BoJ move is largely anticipated, stating that “a hike is widely expected and fully priced, with risk centered around the central bank’s tone and its guidance on the pace of future hikes with one additional hike almost fully priced before year end.”

On the technical side, Scotiabank continues to stress the importance of nearby support, remarking that “for USDJPY, we continue to highlight the importance of recent support around 153, with additional support expected closer to 152,” while “the 155 level remains an important level of anticipated resistance.” The bank adds that the “near-term focus remains centered on broader themes including the market tone and the Fed, as market participants balance their attention with domestic developments including the near-term release of trade data (7:50pm ET) and CPI (Friday) ahead of the BoJ policy decision at the end of the week.”

UOB’s Quek Ser Leang reports USD/JPY reversed earlier downside expectations, dipping to 153.29 before surging to 154.99 and closing at 154.35. The bank now sees scope for a move above 155.00, though 155.50 is likely out of reach near term. Over 1–3 weeks, USD/JPY is expected to edge higher but remain confined within a 153.30–156.30 range as downward momentum has faded.

Dollar Yen shifts from bearish to mildly bullish

"24-HOUR VIEW: While we highlighted yesterday that “the bias for USD is on the downside,” we held the view that “any decline should stay within a 153.05/154.30 range.” The subsequent price movements did not unfold as expected. USD dipped to 153.29 and then rose sharply to 154.99 before closing at 154.35 (+0.53%). Upward momentum has increased, albeit not significantly. Today, USD could rise above 155.00, but the next resistance at 155.50 is likely out of reach. On the downside, a breach of 153.90 (minor support is at 154.15) would indicate that the current upward pressure has eased."

"1-3 WEEKS VIEW: We have been holding a negative USD stance since early this month. Last Tuesday (08 Sep, spot at 153.95), we indicated that “the price action suggests USD is likely to continue to weaken, and the next support level to watch is the year-to-date low of 152.08.” After USD rebounded, in our most recent narrative from Friday (11 Sep, spot at 154.50), we highlighted that “downward momentum is slowing, and the odds of 152.08 coming into view are diminishing.” Yesterday, USD broke above our ‘strong resistance’ at 154.90 with a high of 154.99. Downward momentum has faded, and there has been a tentative buildup in upward momentum. From here, USD could edge higher, but based on the prevailing momentum, any advance is likely to stay within a 153.30/156.30 range."

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

• Gold finds some support after falling to a more-than-one-month low earlier this week.
• Traders avoid large directional bets ahead of Wednesday’s Fed decision and updated economic projections.
• XAU/USD remains technically vulnerable while trading below the 100-day and 200-day SMAs.

Gold (XAU/USD) trims part of its intraday decline on Tuesday. However, a stronger US Dollar (USD), rising US Treasury yields and US Federal Reserve (Fed) interest rate hike expectations create a challenging backdrop for the non-yielding metal, limiting the upside ahead of the Fed’s monetary policy decision on Wednesday.

At the time of writing, XAU/USD trades near $4,295, hovering above the more-than-one-month low of $4,253 touched on Monday.

Long-dated US Treasury yields extend their rise on Tuesday, with the benchmark 10-year yield testing the 5% threshold and the 30-year yield climbing to around 5.40%, their highest levels since 2007. Higher yields support demand for the US Dollar while increasing the opportunity cost of holding Gold, which offers no interest.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 99.60 near two-week highs.

The bond sell-off is not limited to the United States, with borrowing costs across several major economies climbing to multi-year highs. Much of the move stems from the energy shock caused by the war in the Middle East, which is adding to inflation concerns and reinforcing expectations of tighter monetary policy.

Since the outbreak of the war, Gold has reacted more strongly to shifts in interest rate expectations than to geopolitical developments. The Fed has kept interest rates unchanged so far, but high Oil prices are making it harder to bring inflation back to the central bank's 2% target.

Headline Consumer Price Index (CPI) inflation stood at 3.4% YoY in August, while the Producer Price Index (PPI) accelerated to 5.4% from 4.8% in July. Recent Fed communication has also centred on the need to bring inflation back to target. As a result, markets widely expect the central bank to deliver its first interest rate hike since 2023 when it concludes its two-day monetary policy meeting on Wednesday.

Much of the hawkish Fed risk appears to be priced in. However, Gold could remain vulnerable if policymakers signal that September marks the beginning of a broader tightening cycle. Such a message could extend the rise in Treasury yields and provide additional support to the US Dollar. Attention will therefore centre on the updated economic projections and Fed Chairman Kevin Warsh’s comments on the path of interest rates.

At the same time, the rise in global bond yields is not driven by monetary policy expectations alone. Heavy government borrowing and concerns over fiscal sustainability across major economies are also contributing to the sell-off. These factors could eventually revive demand for Gold as an alternative store of value, especially if rising yields begin to signal weakening confidence in government debt. In the meantime, central bank buying, retail investment and demand through Gold-backed exchange-traded funds (ETFs) remain steady sources of underlying support.

Technical analysis: Gold faces further downside risks below key SMAs, building bearish momentum

On the daily chart, XAU/USD maintains a bearish near-term bias as price holds below the 100-day Simple Moving Average (SMA) and the 200-day SMA. The metal is marginally above the 50-day SMA at about $4,275, which offers tentative support, but a soft Relative Strength Index (RSI) around 43 and a negative, declining Moving Average Convergence Divergence (MACD) histogram suggest increasing bearish momentum and leave the broader recovery vulnerable to further downside.

On the topside, initial resistance is aligned with the 100-day SMA at $4,328, ahead of a more substantial cap at the 200-day SMA near $4,539 and the horizontal barrier around $4,700. On the downside, a break below the 50-day SMA at $4,275 would expose the next horizontal floors at $4,150 and $4,000, where buyers are likely to reassess the medium-term trend.

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

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Canadian Dollar (CAD) is effectively unchanged versus the US Dollar (USD) but outperforming peers, supported by firmer Oil and steady US-Canada front-end spreads. They see USD/CAD short-term tone as bullish, yet stress a significant resistance band in the low/mid-1.39s. Persistent core Consumer Price Index (CPI) pressures keep focus on Bank of Canada (BoC) normalization later this year.

Resistance zone caps upside

"The CAD is effectively unchanged against the USD on the session and a relative outperformer amongst its major currency peers as a result."

"Firmer crude oil prices are providing a little cover for the CAD, as are steady front-end US-Canada yield spreads. But the CAD will struggle to resist the broader trend in the USD into and around the FOMC decision regardless."

"Broadly in line with expectations Canadian CPI data yesterday did little for the CAD or for short-term rates but toasty underlying trends in core measures maintain the focus on price risks and the potential for the BoC to start normalizing still accommodative monetary policy later this year."

"Bullish—USD gains through the mid/upper-1.38s point to short-term USD strength extending a little more."

"We continue to note a significant resistance zone between the low/mid 1.39s, however, defined by trend resistance, the 40-and 100-day moving averages, retracement resistance, and the early September high. Initial USD support is 1.3825/30 and 1.3730/60."

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

• EUR/USD stays defensive as markets prepare for the Fed’s first rate hike since 2023.
• The US Dollar holds near a two-week high, supported by elevated Treasury yields.
• The Fed’s economic projections and Kevin Warsh’s remarks could drive the pair’s next move.

EUR/USD remains on the back foot on Tuesday as rising US Treasury yields support the US Dollar. However, the pair lacks strong follow-through selling as traders avoid placing large bets ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

At the time of writing, the pair trades around 1.1543 after touching an intraday low near 1.1527, holding close to its lowest levels in almost a month.

On the data front, second-tier US releases offered mixed signals and had little impact on the pair. The ADP Employment Change four-week average increased to 16.25K from 12.25K. Meanwhile, the New York Empire State Manufacturing Index fell to 7.6 in September from 20.6, missing the market forecast of 14.75.

US Treasury yields climbed to fresh multi-year highs across the curve on Tuesday. The benchmark 10-year yield reached 5.04%, its highest level since 2007, before easing back toward 5%.

The bond sell-off has been largely driven by the energy shock stemming from the war in the Middle East, with the Eurozone 10-year government bond yield also hitting a post-2009 high of 3.51%. Rising Oil prices are adding to inflationary pressures and strengthening the case for tighter monetary policy.

Against this backdrop, the European Central Bank (ECB) has already raised interest rates twice this year, taking the deposit facility rate to 2.50%, and has signalled openness to additional tightening.

Attention now turns to the Fed, with markets widely expecting the central bank to deliver its first rate hike since 2023 as the energy shock has stalled the disinflation trend, keeping inflation above the central bank's 2% target. According to the CME FedWatch Tool, traders price in around a 92% chance of a 25-basis-point (bps) increase on Wednesday.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.60, up 0.11% on the day and close to a two-week high.

With a quarter-point increase largely priced in, a surprise hold could trigger a sharp pullback in the US Dollar and Treasury yields, allowing EUR/USD to extend its rebound. Conversely, a rate hike accompanied by hawkish economic projections and comments from Fed Chairman Kevin Warsh could trigger fresh selling in EUR/USD.

TD Securities’ macro team, including Oscar Munoz and colleagues, expects the FOMC to deliver a 25bps hike, with the dot plot signaling fewer hikes than markets imply. They see the Dollar showing knee-jerk weakness under this base case, but note that a dovish hold could push USD back to pre-August CPI levels, while a more hawkish dot plot could extend the recent USD rally.

Dollar paths under FOMC outcomes

"We expect the FOMC to begin a hiking cycle at its September meeting with a 25bps rate increase. August inflation data showed a lack of progress, and Chair Warsh will likely explain as much while stopping short of any forward guidance. However, changes to the SEP by the rest of the Committee will likely be hawkish — showing dots signaling hikes along with upgraded inflation and labor market projections."

"With a 25bp rate hike almost fully priced-in, the USD could see knee-jerk weakness under our base case. A rate hold would be a big dovish surprise and could push the USD back to pre-August CPI release level. The USD rally could have room to extend if the dot plot puts an October rate hike on the table."

"We expect a 25bps hike, but the dot plot may show a lower number of hikes than markets anticipate. The curve could bull steepen modestly on our base case given recent hike repricing, and USD could see some knee-jerk weakness."

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

Deutsche Bank’s Chief UK Economist Sanjay Raja assesses latest United Kingdom (UK) labour market data as signalling a still weak backdrop, with employment struggling and vacancies falling. Pay indicators show some correction, while productivity is rising as growth outpaces expectations with fewer employees. Raja argues this sluggish labour market will influence the Bank of England’s (BoE) Monetary Policy Committee by reinforcing that Bank Rate remains restrictive.

Weak jobs and moderating pay trends

"Today’s labour market data throws a small (and maybe temporary) wrench in our view that the labour market is bottoming out. Indeed, today’s data painted a picture of a rather sluggish labour market – despite some signs of optimism building in the survey data."

"First, the labour market is still struggling to grow. While the jobless rate stayed steady at 4.9% (as we expected), payroll data from HMRC showed a sizeable 26k fall in August (though we expect this to be eventually revised higher). The more reliable quarterly Workforce Jobs data also showed a fall in spring too – though at only -48k (with the number of employee jobs down “only” 10k in Q2)."

"Second, pay data looks like it may be correcting a little. We knew this would happen. AWE Private Regular Pay – the key indicator watched by the MPC – ticked up to 2.9% (3m/YoY) in July."

"While economic growth continues to outpace expectations, the staggering fact is that it’s happening with fewer employees. Productivity growth, by definition, is pushing higher. That said, there’s no evidence yet that the UK labour market is out of the woods just yet."

"For the MPC, this will matter. A still sluggish labour market will give the Bank some confidence that Bank Rate remains restrictive."

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

Societe Generale economist Kunal Kundu notes that India’s headline Consumer Price Index (CPI) inflation rose to 4.8% year-on-year in August 2026, staying above the Reserve Bank of India ’s (RBI) 4.0% median target for a third month. Kundu highlights that food remains the main driver, but core goods and services inflation are also firming, suggesting broader underlying pressures and a less comfortable inflation mix for RBI policy.

Broader price pressures challenge RBI

"India’s headline CPI inflation rose sharply to 4.8% yoy in August 2026, in line with our forecast, from 4.5% in July. This marked the third consecutive month in which inflation remained above the RBI’s median inflation target."

"Although food prices continued to account for much of the increase, the August print points to a more consequential shift in the inflation landscape: price pressures are gradually becoming broader based, with both core goods and services inflation gaining momentum."

"Given the large weight of food in the CPI basket, its renewed acceleration is likely to keep headline inflation elevated in the near term, even if price pressures across individual categories do not intensify further."

"Unless sequential momentum softens meaningfully, the balance of inflation risks is likely to remain tilted to the upside."

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

ING’s Francesco Pesole notes the Pound has been resilient against the Dollar and EUR/GBP has fallen about 0.5% since Friday, partly on positioning ahead of the Bank of England meeting. However, he sees risks skewed dovishly for the BoE, doubts EUR/GBP can fall much further, highlights multiple upside risks in coming weeks, and maintains a 0.87 target for EUR/GBP.

BoE risks seen skewed dovish

"The pound has shown good resilience to the dollar’s advance. EUR/GBP is down by around 0.5% since Friday, perhaps on some precautionary positioning ahead of the Bank of England meeting on Thursday."

"But as discussed in our preview, we think the risks are actually on the dovish side this week. Unlike the ECB, we suspect BoE doves will hold their ground and stress that there is no evidence price pressures are extending beyond energy prices."

"We also see some risk that Governor Andrew Bailey himself pushes back against aggressive market pricing (45bp by December, 100bp by June)."

"We struggle to see EUR/GBP falling much further from here. Most risks appear on the upside in the coming weeks, from the monetary policy story mentioned above to potential fiscal headlines ahead of the late October budget to growing pressure on Downing Street to allow independence referendums in Scotland, Wales and Northern Ireland."

"Our target remains 0.87 for EUR/GBP."

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

• GBP/JPY edges higher as traders gear up for the BoE and BoJ policy decisions later this week.
• The cross retains a bearish bias below key moving averages, while momentum indicators remain weak.
• Immediate support sits near 207, while the 209.32-211.79 region caps the upside.

GBP/JPY trades on the front foot on Tuesday but remains confined to a narrow range following the Japanese Yen’s (JPY) sharp rally earlier this month. Price action stays subdued as traders brace for major central bank events, with the Bank of England (BoE) announcing its policy decision on Thursday and the Bank of Japan (BoJ) following on Friday. At the time of writing, the cross trades near 209, up 0.32% on the day.

The BoE is widely expected to leave interest rates unchanged at 3.75% for a sixth consecutive meeting. Attention will therefore turn to the vote split after policymakers voted 6-3 at the previous meeting, with three members favouring a 25-basis-point (bps) hike to counter inflation risks from elevated Oil prices.

Even with rates unchanged, a more hawkish vote split could lift the British Pound (GBP). High energy prices linked to the war in the Middle East continue to cloud the inflation outlook, leaving markets positioned for a rate increase in the coming months.

On the other hand, traders are fully convinced that the BoJ will raise interest rates for the second time this year, taking the policy rate to 1.25%. Expectations that the central bank could accelerate the pace of tightening, rather than waiting around six months between moves, drove sharp gains in the Japanese Yen at the start of September.

GBP/JPY remains down roughly 3.50% so far this month. The cross could face fresh selling pressure if the BoJ signals that additional hikes may come at a faster pace, while a cautious policy outlook could allow GBP/JPY to recover some of its recent losses.

Technical analysis

On the daily chart, GBP/JPY retains a bearish near-term bias as it holds beneath a dense band of moving average and Fibonacci resistances. Momentum stays weak, with the Relative Strength Index (RSI) recovering only modestly from oversold territory near 33 and the Moving Average Convergence Divergence (MACD) still negative, while the Average Directional Index (ADX) around 38 signals a strong downtrend.

On the topside, initial resistance is seen at the 23.6% Fibonacci retracement at 209.32, followed by a tight Fibonacci cluster between 210.69 (38.2%) and 211.79 (50.0%), which could check any rebound.

A stronger recovery would bring the 61.8% retracement at 212.90 and the 200-day Simple Moving Average (SMA) at 213.11 into focus. The 214.47-214.92 area, containing the 78.6% retracement and the 100-day and 50-day SMAs, forms a firm resistance zone. Only a sustained break above this band would ease the current bearish tone.

On the downside, the recent swing low around 207 acts as immediate support. A decisive break below this level would reinforce the bearish bias and expose the 204.50 area, followed by the psychological 200 mark.

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