Forex News

• Gold extends gains above $4,400 after US inflation data meets expectations.
• Elevated Oil prices amid uncertainty over the reopening of the Strait of Hormuz keep inflation risks in focus.
• The technical outlook stays bullish, although the RSI nears overbought territory.

Gold (XAU/USD) extends gains above $4,400 on Wednesday as traders digest US inflation data, which came broadly in line with expectations. At the time of writing, XAU/USD trades around $4,429, up 1.38% on the day.

Headline Consumer Price Index (CPI) rose 0.1% in July after falling 0.4% in June, while the annual rate eased to 3.4% from 3.5%. CPI increased 0.2% MoM after staying flat, with the yearly rate slowing to 2.5% from 2.6%.

Following the data, the US Dollar (USD) and US Treasury yields came under pressure, supporting the precious metal. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 99.70, down 0.10% on the day. Treasury yields fell across the curve, with the 2-year yield down four basis points from the daily open and currently trading around 4.180%.

With inflation still above the Federal Reserve’s (Fed) 2% target and higher Oil prices adding to upside risks, the CPI report did little to change market expectations for a September rate hike. Traders continue to price in a 44% chance of a hike, according to the CME FedWatch Tool.

West Texas Intermediate (WTI) trades around $82, holding near a one-and-a-half-week high. The US Energy Information Administration (EIA) raised its 2026 average WTI price forecast to $80.88 per barrel from $76.26.

Analysts at Rabobank highlight that geopolitical tensions in the Middle East remain acute, noting that “after four crew and two rescuers were killed in a Houthi Red Sea attack on a ship and the US struck another in the Gulf of Oman trying to break its Iran blockade,” Iran has now warned that “Hormuz will stay closed unless the US meets its over-reach conditions.”

However, diplomatic efforts continue, with Pakistan’s Interior Minister Mohsin Naqvi meeting Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araghchi in Tehran as Islamabad seeks to revive stalled peace talks between the US and Iran.

Technical analysis: XAU/USD approaches the 200-day SMA

XAU/USD extends its advance above the 50-day Simple Moving Average (SMA) and trades just above the 100-day SMA, keeping the near-term bias bullish.

The pair is now approaching the 200-day SMA at $4,500, which acts as the next significant overhead barrier, while the Relative Strength Index (RSI) at 68 flirts with overbought territory, hinting that the latest advance is strong but could be prone to consolidation.

The Average Directional Index (ADX) at 30 points to a moderately directional market, reinforcing the idea of a sustained bullish phase as long as price remains above the short- and medium-term averages.

On the downside, immediate support is seen at the 100-day SMA near $4,388, with a deeper cushion at the 50-day SMA around $4,148, where buyers would be expected to re-emerge on corrective pullbacks. Further below, a more structural floor is located at the horizontal support line at $4,000.

On the topside, the 200-day SMA at $4,500 is the key resistance level that bulls need to reclaim to extend the uptrend, and a failure to clear this barrier would likely keep price consolidating above the nearby moving-average support band.

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

Rabobank's Senior FX Strategist Jane Foley reviews recent United Kingdom (UK) data against Eurozone performance. Foley notes Eurozone Q2 Gross Domestic Product (GDP) at 0.4% q/q and a 0.7% UK upturn in the three months to May. However, UK monthly data show sectoral contractions and composite PMIs in May and June indicating weakness, leaving a confusing backdrop and wide GDP forecast dispersion ahead of the release.

Mixed growth signals and confidence concerns

"Despite the headwinds stemming from the (near) closure of the Strait of Hormuz, the first estimate of Eurozone Q2 GDP registered a better than expected 0.4% q/q."

"In the three months to May, the UK economy managed a 0.7% upturn, compared with the three months to February."

"However, while the monthly May data brought a better-than-expected growth rate of 0.1% m/m, they demonstrate that despite a 0.3% m/m rise in the services sector, both production and construction contracted."

"Moreover, UK composite PMI data for both May and June indicate contraction, perhaps highlighting the dent to confidence stemming from the Iran war."

"This confusing backdrop may explain the wide spread in economists’ forecasts ahead of tomorrow’s release."

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

National Bank of Canada's (NBC) Jocelyn Paquet analyzes how China’s sharp reduction in petroleum imports helped offset the Middle East supply shock and limit Oil price gains. The July rebound in Chinese imports is highlighted as historically large in percentage terms. Paquet stresses that future trends in Chinese demand will be as important as Middle East developments for determining global energy prices.

China’s imports and global oil pricing

"For there is no doubt that the reduction of no less than 5 million barrels per day (or 41.4%) in China’s petroleum oil imports between March and June is one of the main reasons that has helped keep prices under control."

"Combined with the release of strategic reserves, this reduction has made up for the global shortfall and kept shortages in other countries to a minimum."

"But just as the decline in Chinese demand has helped cap prices, a potential recovery could have the opposite effect in the future if the Strait were to remain closed for an extended period."

"Imports of petroleum products indeed rose by 1.2 million barrels per day during the month (or 22.1%)."

"Granted, it is difficult to know whether this rebound will continue in the coming months—China could theoretically continue to draw on its reserves and keep its import levels low for several more months—the fact remains that trends in Chinese demand will play a role just as important as developments in the Middle East in determining future energy prices."

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

• EUR/USD trades little changed around 1.1550 after a brief spike in volatility triggered by the US inflation data.
• US inflation eases to 3.4% in July, while core inflation comes in at 2.5%, in line with expectations.
• Tensions surrounding the Strait of Hormuz limit risk appetite, while accelerating German inflation provides only limited support to the Euro.

EUR/USD trades around 1.1550 on Wednesday at the time of writing, up a modest 0.08% on the day. The pair experienced a brief spike in volatility following the release of United States (US) inflation data but quickly returned to levels seen before the publication, as the figures broadly match market expectations.

Inflation in the US, as measured by the Consumer Price Index (CPI), slowed to 3.4% YoY in July from 3.5% in June, according to the Bureau of Labor Statistics (BLS). On a monthly basis, prices rose by 0.1%, following a 0.4% decline in June. The core CPI, which excludes volatile food and energy components, increased by 0.2% MoM and 2.5% YoY. All the figures align with market forecasts.

The reaction of the US Dollar (USD) remains subdued, as the data provide no significant surprise likely to materially alter expectations regarding the Federal Reserve's (Fed) monetary policy outlook. The US Dollar Index (DXY), which measures the value of the Greenback against a basket of six major currencies, edges slightly lower following the release.

On the European side, the Euro (EUR) receives little support from accelerating German inflation. Germany's Harmonized Index of Consumer Prices (HICP) confirmed a 2.8% YoY increase in July, up from 2.4% in June. The acceleration is mainly driven by energy prices, which rose 7.3% from a year earlier, compared with 2.7% in the previous month. Excluding food and energy, inflation also accelerated to 2.6% from 2.5% in the previous month.

These figures reinforce expectations of a potential monetary policy tightening by the European Central Bank (ECB) in September. However, their positive impact on the Euro remains limited as investors also focus on the deteriorating geopolitical backdrop in the Middle East.

Concerns surrounding the peace process between the US and Iran return to the forefront following reports of attacks on vessels attempting to cross the Straits of Hormuz and Bab el-Mandeb. According to Reuters, a senior Iranian source says that no discussions are currently underway regarding an extension of the ceasefire between Washington and Tehran.

Caution also intensifies after US President Donald Trump called on Tehran to pay reparations to victims of attacks linked to the Islamic Republic. These developments reduce hopes for a swift reopening of the Strait of Hormuz and maintain a risk-averse environment that, for now, prevents EUR/USD from benefiting more significantly from the modest weakness of the US Dollar.

EUR/USD technical analysis

In the one-hour chart, EUR/USD trades at 1.1546, holding a mildly bullish intraday bias as it remains above both the 100-period simple moving average (SMA) at 1.1541 and the 200-period SMA at 1.1533. The pair is grinding higher from the day’s open at 1.1541, while the Relative Strength Index (RSI) around 60.75 suggests firm but not extreme upside momentum, hinting that buyers retain near-term control as long as price stays over these moving averages.

On the topside, initial resistance appears at the horizontal barrier near 1.1560, ahead of a higher cap at 1.1581, where fresh selling interest could emerge. On the downside, immediate support is provided by the clustered 100- and 200-period SMAs at 1.1541 and 1.1533, followed by the intraday floor at 1.1515 and deeper structural supports at 1.1500 and 1.1480, levels that would need to give way to undermine the current constructive tone.

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

Annual inflation in the United States (US), as measured by the change in the Consumer Price Index (CPI), declined to 3.4% in July from 3.5% in June, the US Bureau of Labor Statistics (BLS) reported on Wednesday. This print came in line with the market expectation.

On a monthly basis, the CPI rose by 0.1% following the 0.4% decline recorded in the previous month. The core CPI, which excludes volatile food and energy prices, increased by 0.2% and 2.5% on a monthly and yearly basis, respectively. All these figures matched analysts' forecasts.

Market reaction to US July inflation data

The US Dollar (USD) Index edges slightly lower with the immediate reaction to inflation data and was last seen losing 0.1% on the day at 99.70.

This section below was published as a preview of the US July inflation data at 08:30 GMT.

• The US Consumer Price Index is expected to rise by 3.4% YoY in July, down slightly from the 3.5% advance seen in June.
• Annual core CPI inflation is expected to edge lower to 2.5% from 2.6% previously.
• EUR/USD technical outlook highlights bulls’ hesitancy in the near term.

The US Bureau of Labor Statistics (BLS) will publish the July Consumer Price Index (CPI) data on Wednesday. The report is expected to show a small decline in consumer inflation and core inflation. 

The monthly CPI is forecast to rise by 0.1%, following the 0.4% decrease recorded in June, while the annual reading is seen retreating to 3.4% from 3.5% reported in the previous month. Core CPI figures, which exclude volatile food and energy prices, are expected to post an increase of 0.2% and 2.5%, on a monthly and yearly basis, respectively. 

Following a nearly 16% drop in May, Crude Oil prices declined roughly 20% in June and came back to pre-war levels, as investors cheered news of the US and Iran reaching a ceasefire on June 17 to start negotiations to bring an end to the conflict. As a result, CPI inflation softened at a much faster pace than expected in June.

US inflation seen rebounding as services and core goods firm

According to TD Securities, July inflation data are likely to show a modest increase after June’s temporary softness. The bank expects that “July core CPI likely rebounded after June’s one-off weakness, rising 0.20% m/m as services inflation reaccelerated, led by rents/OER, airfares, medical, and recreation.” TD also highlights that “core goods likely posted their first increase in three months,” while “headline CPI likely rose 0.15% m/m, with lower gasoline offset by faster grocery prices.” Overall, TD cautions that “upside risks remain” around the upcoming release.

What to expect in the next CPI data report?

As the US and Iran failed to find an agreement to reopen the Strait of Hormuz and started exchanging military attacks, crude Oil prices recovered in July, with the barrel of West Texas Intermediate (WTI) rising nearly 22% in the month. Nevertheless, news of Iran and Oman working on a deal to manage the waterway helped Oil prices ease in the first week of August. Combined with the disappointing July labor market data from the US, which showed that Nonfarm Payrolls (NFP) unexpectedly declined by 23K, investors scaled back bets for a Federal Reserve (Fed) rate hike in September. 

According to the CME Group FedWatch Tool, markets are currently pricing in about a 52% chance of a 25 basis points (bps) increase in interest rates at the next policy meeting.

Still, markets remain sceptical about a policy hold after Oil prices started to push higher this week, with Iran saying that an agreement with Oman would not be enough to resume activity in the Strait of Hormuz unless the US agreed to a list of conditions. 

Analysts at OCBC argue that the bar for a meaningful shift in Fed expectations remains elevated, noting that “core CPI would need to print at 0.3% MoM or higher in July, above the 0.2% consensus forecast, to materially lift expectations of a September rate hike.” In their view, a “rangebound USD, combined with a constructive risk backdrop, should continue to support carry trades despite ongoing volatility in oil markets.” They add that recent “oil prices eased on hopes that the Strait of Hormuz could reopen, but Iran's firm conditions for Washington suggest any near-term boost to energy supply is likely to be limited,” keeping the outlook for energy markets finely balanced. 

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

Markets will pay close attention to the monthly core CPI print to see how volatile energy costs are spreading into the wider economy. A monthly core CPI increase of 0.3% or higher, in addition to the elevated uncertainty surrounding the Oil price outlook, could revive expectations for a Fed policy tightening step in September and boost the US Dollar (USD) with the immediate reaction. In this scenario, EUR/USD could come under renewed bearish pressure.

Conversely, a core CPI reading below the market expectation of 0.2% could cause the USD to weaken and pave the way for a leg higher in EUR/USD. 

Since CPI is a lagging indicator, the market reaction could remain short-lived. Instead, investors are likely to continue to assess changes in Oil prices. Even if the monthly core CPI surprises to the upside, a decline in Oil prices could allow market participants to lean toward a Fed policy hold and hurt the USD. On the other hand, investors could ignore soft inflation data for July in case tensions escalate further in the Middle East, pushing energy costs higher. 

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

“EUR/USD climbed slightly above a descending trend line drawn from late-January but lost its traction after testing the 100-day Simple Moving Average (SMA), currently located near 1.1570. Additionally, the Relative Strength Index (RSI) indicator on the daily chart retreated below 60, reflecting a loss of bullish momentum.”

“On the upside, 1.1570 (100-day SMA) aligns as an interim resistance level before 1.1630 (200-day SMA). A daily close above this latter resistance could be seen as a significant bullish sign and open the door for an extended rally toward 1.1800 (static level). Looking south, the first support level could be spotted at 1.1470 (20-day SMA, 50-day SMA) ahead of 1.1350-1.1330 (static level, lower boundary of the Bollinger Bands).”

Analysts at UOB Group note that “there has been no significant increase in upward momentum, and the hurdle for further gains has risen, with EUR needing to close above 1.1580 before a move to 1.1600 and beyond can be expected.” In addition, the bank now places the “‘strong support’ level” higher, at “1.1515 instead of 1.1495,” underscoring a tighter trading band as the Euro consolidates.

The International Energy Agency (IEA) cut its global Oil supply and demand forecasts for 2026 amid shipping disruptions in the Middle East.

In its August Oil Market Report, the agency said, “With an agreement enabling the reopening of Hormuz and unhindered transit through the Bab el-Mandeb Strait still elusive, we have again lowered supply estimates for the rest of the year.”

Global Oil supply is now expected to fall by an average of 4.3 million barrels per day (bpd) in 2026 to around 102 million bpd. The agency, however, expects supply to rebound by 8.3 million bpd next year to 110.3 million bpd.

World Oil demand is forecast to decline by 1.6 million bpd in 2026, a 510,000 bpd larger drop than estimated in last month’s report. The agency noted that “elevated fuel prices are putting further downward pressure on oil use.”

However, the annual decline in demand is expected to ease from 4.9 million bpd in the second quarter to 2.8 million bpd in the third before returning to growth in the final quarter. Global Oil demand is then forecast to rise by 2.4 million bpd in 2027.

“Although the market is projected to return to surplus towards the end of this year, risks remain substantial and the urgency of reopening the Strait has increased, as previously available inventory buffers are rapidly depleting,” the IEA said.

MUFG’s Michael Wan reports the Reserve Bank of Australia kept its policy rate at 4.35% in a unanimous decision. AUD/USD initially dipped on the statement but later rebounded as Governor Bullock reiterated hawkish inflation concerns. MUFG’s global team expects AUD/USD to move gradually above 0.70, driven mainly by risk sentiment, Fed rate cuts and a weaker Dollar.

RBA steady, currency outlook firmer

"The Reserve Bank of Australia (RBA) kept its policy rate at 4.35% yesterday in a unanimous decision."

"The AUD/USD initially dipped after the policy statement release; however it later rebounded when RBA Governor Michele Bullock reiterated hawkish statements, by warning of persistent inflation risks and stated during her press conference that future rate hikes remain on the table if inflation stays sticky."

"The RBA nonetheless remained cautious about other key external risks, such as larger or more persistent negative effects of the Middle East conflict."

"The RBA also highlighted a softer property market including through weaker wealth effects, rising interest rates, and tighter investment property tax rules as an important transmission mechanism to aid its mandate of bringing down inflation, with the RBA’s consumption forecast also seeing a downward revision by year end from 1.9% to 1.6%."

"Overall, our global team thinks that AUD/USD is likely to move gradually higher above the 0.70 levels but less so because of further rate hikes by RBA, but driven more by risk sentiment, Fed rate cuts, and a weaker Dollar moving forward."

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

ING’s Chris Turner expects US July CPI to be the key driver for the Federal Reserve’s next move, with consensus looking for subdued headline and core readings that edge closer to the 2% target. A soft print could reduce September hike odds, steepen the US yield curve and weaken the Dollar, especially versus procyclical currencies, while DXY’s 99.40–100.00 range is in focus.

Fed expectations hinge on CPI data

"Friday's soft US jobs data did not weigh heavily on the dollar. The prevailing view here is that inflation trends will primarily drive the next Fed move. These are on show today in the form of the US July CPI release."

"Here, consensus is looking for a reasonably subdued set of numbers: 0.1% month-on-month for headline and 0.2% for core. These would see the year-on-year rates drop to 3.4% and 2.5% respectively – inching closer to the Fed's 2% inflation target. Driving the softer numbers are expected to be lower gasoline prices, broadening signs of rental deflation and soft wages."

"Given the market looks to be expecting a softer price story today, we would probably need to see a 0.1% month-on-month read on core inflation – which some think is possible. A soft number should drag market pricing of a September Fed rate hike away from a 50% probability in favour of no change. And a bullish steepening of the yield curve should see the dollar soften – particularly against the procyclical currencies."

"Additionally, talk is emerging that President Trump could be trying to launch a cut in the Capital Gains Tax ahead of the midterms in early November. That would prove a mild dollar negative from a pro-risk perspective, but again we should monitor how the long-end of the Treasury curve would take more unfunded tax cuts and also whether this could tip the Fed over the edge into tightening."

"For today, let's see whether a soft CPI print can break DXY to the downside from its 99.40-100.00 trading range."

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

BNY’s Wee Khoon Chong highlights that institutional investors bought Dollar and sold Japanese Yen after the June BoJ hike, and again following late-July joint intervention to weaken USD/JPY. Despite official action, real money treated the move as a USD/JPY buying opportunity. Chong questions the durability of FX interventions as USD/JPY trades lower with long-end JGB yields elevated.

Investors fade joint FX intervention

"On June 17, despite a widely anticipated BoJ rate hike, institutional investors poured into USD and sold JPY due to the hawkish interpretation of new Fed Chair Kevin Warsh’s first meeting at the helm of the FOMC."

"Fast forward to the end of July, when joint intervention between the U.S. and Japan was aimed at weakening the USD/JPY cross."

"Despite the move, real money bought USD and sold yen, perhaps indicating the perception of a USD/JPY buying opportunity."

"With the yen having weakened since July 31, and observing the behavior of institutional investors, that begs the question of whether these interventions have any durable efficacy."

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

• The New Zealand Dollar extends its decline for a third consecutive day, weighed down by cautious market sentiment.
• Uncertainty surrounding negotiations between the US and Iran supports safe-haven demand ahead of US inflation data.
• Markets remain divided over a US rate hike in September, while a rate increase in New Zealand remains widely expected.

NZD/USD extends its decline for a third consecutive day on Wednesday and trades around 0.5860 at the time of writing, down 0.28% on the day. The risk-sensitive New Zealand Dollar (NZD) remains under pressure as uncertainty surrounding negotiations between the United States (US) and Iran boosts demand for the US Dollar (USD).

Hopes of a diplomatic breakthrough in the Middle East remain fragile. Reports suggest that Washington and Tehran are moving closer to an agreement regarding the Strait of Hormuz, while parallel negotiations between Iran and Oman have reportedly made progress. However, US President Donald Trump's demands that Tehran pay reparations to victims of attacks linked to the Islamic Republic are keeping investors cautious.

A senior Iranian official also said that no discussions are currently taking place regarding an extension of the ceasefire between Iran and the United States, according to Reuters. From Tehran's perspective, there is no official start date for the ceasefire and therefore nothing to extend. This uncertainty is helping to maintain an unfavorable environment for risk-sensitive assets such as the Kiwi.

Market attention now turns to US inflation data due later on Wednesday. The Consumer Price Index (CPI) is expected to rise 0.1% on a monthly basis in July, while the core index is forecast to increase 0.2%. On an annual basis, however, headline and core inflation rates are expected to ease to 3.4% and 2.5%, respectively.

The release could play an important role in shaping expectations surrounding the Federal Reserve's (Fed) next policy decision. Following the decision to keep interest rates unchanged in July, investors remain divided over the possibility of monetary tightening as higher Oil prices add to inflationary risks. According to the CME FedWatch tool, markets price in around a 46% chance of a 25-basis-point rate hike in September, down from 54.4% a week earlier. A hotter-than-expected inflation reading could reinforce these expectations and provide further support to the US Dollar.

In New Zealand, the monetary policy outlook nevertheless provides some support to the Kiwi. Markets continue to anticipate a September rate hike from the Reserve Bank of New Zealand (RBNZ), as policymakers signal the need to continue withdrawing monetary stimulus to contain inflationary pressures.

Domestic political uncertainty adds another source of caution. New Zealand Prime Minister Christopher Luxon survives a second leadership challenge in four months on Wednesday. Less than three months before the general election, the episode highlights divisions within the National Party and adds another source of uncertainty for the New Zealand Dollar.

NZD/USD technical analysis

In the four-hour chart, NZD/USD trades at 0.5864, holding a neutral, range-bound tone as it consolidates slightly above the 100-period simple moving average (SMA) at 0.5842 and the 200-period SMA at 0.5791. The clustering of nearby supports under price suggests underlying demand, but the Relative Strength Index (RSI) around 42 hints at waning bullish momentum, keeping upside attempts in check for now.

On the topside, initial resistance is seen at the horizontal barrier at 0.5909, followed by a higher cap at 0.5930. On the downside, immediate support aligns near 0.5860, ahead of the 100-period SMA at 0.5842 and the horizontal level at 0.5825; deeper losses would expose the 200-period SMA at 0.5791 and a more distant floor around 0.5760.

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