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ING’s Chris Turner highlights futures data showing asset managers and leveraged funds adding Euro exposure, leaving speculators underweight. He notes recovering German IFO and Eurozone PMIs, and sees limited need for EUR/USD to drop sharply below 1.1660/70 unless risk assets suffer. ING keeps forecasts of EUR/USD at 1.17 for end-September and 1.18 for year-end under review.

Speculative underweight favours Euro upside

"Latest positioning data from the futures market in Chicago points to asset managers and leveraged funds buying euro contracts."

"The amounts are not particularly large and the data does predate last Wednesday's jump in EUR/USD, but this does serve as a reminder that speculators look quite underweight the euro. This was the same conclusion we drew when looking at the EUR/USD hedging data."

"On the calendar this week is the release of the August German IFO tomorrow. Like the Eurozone PMIs, this is expected to continue its recovery after the sharp drop witnessed in March and April."

"We do not really see the need for EUR/USD to come back sharply under support at 1.1660/70 today, but last week's break-out area would be the risk if risk assets started to suffer."

"At present, we are happy with our current forecasts for EUR/USD at 1.17 end September and 1.18 for end year - but will be reviewing those this week."

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

• Gold extends last week’s strong rally and climbs to its highest level since May 15.
• Traders await US PCE inflation data and Fed Chair Kevin Warsh’s Jackson Hole speech later this week.
• XAU/USD keeps a bullish technical bias above key daily moving averages, though the RSI signals overbought conditions.

Gold (XAU/USD) extends its advance on Monday, building on the strong rally seen last week following the US Treasury’s buyback announcement. At the time of writing, XAU/USD trades around $4,644, up nearly 0.90% on the day, at levels last seen on May 15.

The Treasury’s decision to increase its liquidity-support buybacks for longer-dated government bonds weighed heavily on the Greenback, with the US Dollar Index (DXY) plunging to a three-month low. Gold received a double boost from the move, benefiting from a weaker USD while also attracting safe-haven demand as investors focused on concerns surrounding US fiscal policy and rising government debt.

Strategists at OCBC highlight that “USD debasement has re-emerged as a market theme” after the US Treasury unexpectedly expanded its long-end buyback programme, a move they say signals “discomfort with the recent rise in long-dated yields.” They add that the “resulting unwind of US steepener positions has likely reinforced other debasement trades, including a weaker USD, a rebound in gold and higher US inflation breakevens.”

However, long-term US Treasury yields remain elevated despite the buyback announcement, which could put the brakes on Gold’s advance. The 30-year Treasury yield trades around 5.24%, close to its recent 19-year high of 5.33%. Higher yields can weigh on the non-yielding metal by increasing the opportunity cost of holding Gold.

The US Dollar is also firmer on Monday after last week’s sharp decline. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 98.98, up about 0.13% on the day.

Market attention now turns to key US event risks later this week, with the July Personal Consumption Expenditures (PCE) Price Index due on Wednesday before Federal Reserve (Fed) Chair Kevin Warsh speaks at the Jackson Hole Symposium on Friday.

Investors will watch the PCE report closely to assess whether the recent moderation in inflation is enough for the Fed to leave interest rates unchanged again at its September meeting, with the CME FedWatch Tool showing around a 38% probability of a rate hike.

Still, energy-driven inflation risks remain in focus as tensions in the Middle East keep shipping through the Strait of Hormuz restricted. The United States is preparing to announce fresh sanctions against Iran on Monday, with US Treasury Secretary Scott Bessent due to unveil what he has described as “economic D-Day” measures against Tehran at 18:00 GMT.

Technical analysis: Buyers hold the upper hand as RSI turns overbought

XAU/USD maintains a bullish near-term bias as price holds above both the 200-day simple moving average (SMA) and the 100-day SMA. The metal is advancing within a strong uptrend, supported by a moderately firm Average Directional Index at 33.67, while the Relative Strength Index (RSI) on the daily chart at 71 has entered overbought territory, hinting that upside momentum is stretched but still dominant.

A positive Moving Average Convergence Divergence (MACD) reinforces the constructive tone, with the broader structure favoring further gains as long as price stays above the key moving averages and upper Fibonacci supports.

On the topside, initial resistance is located at the 78.6% Fibonacci retracement at $4,685, followed by the cycle high anchor near the 100.0% retracement at $4,886. On the downside, first support is seen at the 61.8% retracement at $4,528, closely backed by the 200-day SMA at $4,516, forming a nearby demand cluster.

Deeper support levels emerge at the 50.0% retracement at $4,417 and the 100-day SMA at $4,379, with additional structural floors at the 38.2% retracement at $4,307 and the 23.6% retracement at $4,170, where buyers would likely attempt to defend the broader bullish trend if a corrective pullback unfolds.

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

Brown Brothers Harriman’s (BBH) Elias Haddad highlights that New Zealand retail sales volumes unexpectedly fell in Q2, driven by fuel and motor-related categories, while core sales still rose, showing resilient domestic demand. Markets have virtually fully priced a 25 bps Reserve Bank of New Zealand (RBNZ) hike to 2.75% on September 2 and a total of 75 bps tightening over twelve months, but NZD/USD upside is seen as limited.

RBNZ tightening but NZD upside capped

"New Zealand retail sales volume unexpectedly plunges in Q2. Total retail sales volume dropped -0.5% q/q (consensus: 0.2%) vs. 1.0% in Q1, driven by fuel, motor vehicle and parts retailing."

"Excluding these volatile items, core retail sales volume increased 0.7% q/q vs. 1.1% in Q1, indicative of resilient domestic demand activity."

"The next RBNZ policy decision, which also includes a fresh Monetary Policy Statement, is on September 2 and a 25bps back-to-back hike to 2.75% is virtually fully priced-in."

"Over the next twelve months, the swaps curve implies 75bps of tightening to 3.25%. That’s reasonable given above target inflation and a policy rate near the lower-end of the RBNZ’s neutral range (2.20%-4.10%). "

"Still, NZD/USD upside is limited as the cross has already outrun rate differentials. "

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

• AUD/USD ticks down from 0.7180 highs but remains within the upper range of the 0.7100s.
• Market expectations of further RBA tightening are keeping the Aussie buoyed.
  Technical indicators hint at an overextended rally and suggest the possibility of a deeper pullback.

The Australian Dollar (AUD) ticks lower against the US Dollar (USD) on Monday, but maintains its broader bullish tone, with the AUD/USD pair trading at 0.7164, a few pips shy of the 12-week high of 0.7180 hit last Friday. A mild risk-averse market mood is weighing on the Aussie, but the US Treasury’s plan to repurchase long-term securities keeps weighing on USD bulls.

Beyond that, economists at Wells Fargo see the Aussie supported as investors await next week's Australian Consumer Price Index (CPI) to confirm whether “ the inflation relief seen in June can be sustained.”

Wells Fargo experts forecast “headline inflation to rise 1.0% in July, leading the year-over-year rate down to 3.4%, while trimmed mean inflation remains at 3.6% year over year.” Against that backdrop, “a September or Q4 rate hike remains in play if inflation remains elevated and demand conditions continue to prove resilient,” say the bank strategists in a note.

Technical Analysis: A moderate bearish correction looks likely

AUD/USD trades at 0.7165, holding a bullish near-term bias yet with technical indicators showing signs of exhaustion. The 4-hour Relative Strength Index (14) highlights a bearish divergence as it pulls back from oversold levels, while the Moving Average Convergence Divergence (MACD) line has turned lower and attempts to cross the Signal line, which is considered a bearish sign.

Bears are likely to be challenged at a previous resistance area near 0.7130 (August 17, 20 highs) ahead of the August 19 low, just below 0.7070. On the topside, immediate resistance is located at the 0.7200 area, which capped gains in late May and early June. Above here, the next target is the year-to-date high, near 0.7280.

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

• Gold extends its bullish move, supported by lower US Treasury yields and fading expectations of an imminent Fed rate hike.
• XAU/USD maintains a strong bullish technical bias above its key moving averages, although overbought conditions increase the risk of a short-term correction.
• Gold bulls target the $4,773 resistance level, while the $4,530-$4,517 area provides key support in case of a pullback.

Gold (XAU/USD) maintains a bullish bias on Monday and trades near its highest levels since mid-May. The precious metal remains supported by fading expectations of an imminent interest rate hike by the Federal Reserve (Fed) and lower US Treasury bond yields, which boost the appeal of non-yielding assets. Meanwhile, geopolitical tensions surrounding Iran sustain demand for safe-haven assets but also support the US Dollar (USD), limiting Gold’s upside potential.

In the daily chart below, XAU/USD trades at $4,647.02, extending its advance well above the 100-day and 200-day simple moving averages (SMAs) at $4,379.73 and $4,516.92, respectively, which reinforces a bullish near-term bias. The reclaim of the broken downward trendline currently around $4,389.60 further underpins the constructive tone, while the Relative Strength Index (RSI) at 72.03 shows overbought conditions, hinting that upside momentum is strong but increasingly vulnerable to a corrective pause rather than a trend reversal at this stage.

On the topside, initial resistance is seen at the horizontal barrier near $4,773.00, followed by a higher cap around $4,890.00. On the downside, immediate support emerges from the 200-day SMA at $4,516.92, with the former trend-line region at $4,389.60 and the 100-day SMA at $4,379.73 forming a deeper demand zone ahead of the more distant horizontal floor near $4,003.29.

In the one-hour chart below, XAU/USD trades at $4,649.38, extending its advance firmly above the 100-period and 200-period simple moving averages (SMAs) at $4,492.92 and $4,440.88, respectively, which underpins a clear bullish near-term bias. The pair also sits above the ascending trend-line around $4,641.28, while the Relative Strength Index (RSI) near 68 suggests strong but increasingly stretched upside momentum as price hovers just below the overbought band.

On the downside, initial support is seen at the trendline level around $4,641.28, ahead of the more substantive horizontal floor at $4,530.00. Below that, the 100-period SMA at $4,492.92 and the $4,450.00 horizontal level line up over the 200-period SMA at $4,440.88, forming a deeper demand area that would come into play on a more pronounced correction.

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

• NZD/USD eases to the 0.5960 area from last wee¡k highs near 0.6000.
• New Zealand Retail Sales dropped 0.5% in Q2 against expectations of a 0.1% uptick.
• Investors are looking at Jackson Hole's symposium for clarity about the Fed's monetary policy.

The New Zealand Dollar ticks down against the US Dollar on Monday, weighed by an unexpected decline in New Zealand’s Retail Sales in the second quarter of the year. The NZD/USD pair has pulled back to session lows near 0.5960 from Friday’s highs near 0.6000, yet with the broader bullish trend intact as the US Treasury’s plan to boost bond buybacks keeps undermining speculative demand for the USD.

Data released earlier on the day revealed that New Zealand’s Retail Sales declined 0.5% from April to June, instead of the 0.1% increase expected by the market. This is the first contraction in sales in nearly two years and  follows a 0.1% growth in the previous quarter.

The US calendar is thin on Monday, and market sentiment remains moderately averse to risk following US Treasury Secretary Scot Bessent's vow of an "economic D-day" that is expected to sever Iran's every economic lifeline. The specific measures of this new package of sanctions, which are expected to affect countries that collaborate with Tehran, will be announced later in the day.

Fed communication gap raises questions over Dollar policy anchor

The US Dollar, meanwhile, remains on the defensive, hit by a mix of renewed concerns about the country's debt and an uncertain Federal Reserve (Fed) monetary policy.

DBS Bank’s Analyst Philip Wee argues that recent market moves have exposed a critical communication gap at the Fed, and that the bank “needs to explain how a Fed without forward guidance intends to anchor expectations, how much tightening the Fed is prepared to tolerate through long-term yields, and the policy boundary between the Fed and the Treasury.”

In Wee’s view, clarity on these points is essential to restoring confidence in the Dollar at a time when investors are increasingly scrutinising the interaction between monetary policy, Treasury operations and the broader rate backdrop.

• EUR/JPY trades around 185.65 on Monday, virtually unchanged on the day.
• Japan’s core inflation accelerates in July, reinforcing expectations of higher interest rates in Japan.
• The interest rate gap with other major economies and concerns over Japan’s fiscal position continue to limit the Japanese Yen’s appreciation.

EUR/JPY trades around 185.70 on Monday at the time of writing, virtually unchanged on the day. The Japanese Yen (JPY) draws some support from firmer inflation data in Japan published on Friday, although its appreciation potential remains limited by the wide interest rate differential between Japan and other major economies, as well as concerns over the country’s fiscal position.

Japan’s National Consumer Price Index (CPI) rose 1.9% YoY in July, up from 1.6% in June and reaching its fastest pace so far this year. Core inflation, which excludes fresh food, accelerated to 1.8% YoY from 1.6% previously.

The data reinforces expectations of further monetary tightening by the Bank of Japan (BoJ). According to Bloomberg, markets are pricing in around an 82% chance of a September rate hike, up sharply from just 23% immediately before the July monetary policy meeting. This shift in expectations provides some support to the Japanese Yen and limits the upside potential for EUR/JPY.

Attention now turns to a speech by BoJ Deputy Governor Ryozo Himino on Thursday. Comments pointing to a relatively rapid continuation of monetary policy normalization could reinforce rate hike expectations and provide further support to the Japanese currency.

However, several factors continue to curb the Japanese Yen’s appreciation. Despite expectations of faster monetary tightening, borrowing costs in Japan remain significantly lower than in other major economies. This wide interest rate differential continues to encourage carry trades, in which investors borrow in a low-yielding currency to invest in higher-yielding assets.

Concerns over Japan’s deteriorating fiscal position also remain a headwind for the JPY. In addition, risks to the Japanese economy stemming from the prolonged conflict in the Middle East and disruptions in the Strait of Hormuz weigh on the currency. These factors partially offset the support from expectations of BoJ rate hikes and help keep JPY balanced.

At the same time, expectations of tighter monetary policy from the European Central Bank (ECB) provide support to the Euro (EUR), limiting the downside in EUR/JPY. Markets are pricing in a 95% chance of an ECB interest rate hike in September, according to the ECB Watch tool. The prospect of higher borrowing costs in the Eurozone helps underpin the single currency and partly offsets the support that rising BoJ rate hike expectations provide to the Japanese Yen.

Deutsche Bank sees localized energy shocks keeping ECB on track for one last September hike

Strategists at Deutsche Bank argue that the ECB may be overinterpreting recent goods price dynamics, noting that the central bank had viewed the latest acceleration as evidence of indirect effects from the oil shock broadening out. In their view, the July jump in core goods inflation to "0.95% y/y was largely a one-off 5.2% m/m spike in German medicine prices due to regulatory changes." Stripping out this distortion, they say "momentum is softer"; they highlight that "airfares even surprised to the downside, showing slow fuel cost pass-through," while "high-energy-sensitive indices remain below May levels and the Inflation Shock Momentum index ticked down, indicating localized one-off shocks rather than a generalized broadening of energy prices."

Against that backdrop, Deutsche Bank contends that "without clear evidence of broad-based second-round effects, a hike past the 2.50% neutral upper bound is unlikely," reiterating that "we continue to expect a final 25bps ECB hike in September to a 2.50% terminal rate." They add that "robust bank lending would signal to the ECB that the domestic economy is resilient, and suggest there is scope for the ECB to hike further if they need to," making credit dynamics a key variable for any extension of the tightening cycle beyond September.

Looking ahead to the policy debate, Deutsche Bank notes that "the ECB will release the accounts of their July meeting next Thursday." With "a September hike [feeling] more or less a done deal (as we noted in our reaction note)," they point out that "we have heard little from the Governing Council over the summer break, so the accounts might get a bit more weight than they usually do."

MUFG’s Derek Halpenny notes the US Dollar is broadly stable as investors focus on US Treasury actions to contain long-term yields and renewed talk of Dollar debasement. He highlights Scott Bessent’s Economic D-Day plan on Iran and Fed Chair Warsh’s Jackson Hole speech as key near-term drivers for Dollar sentiment, with risks skewed to downside.

Dollar sentiment tied to policy risks

"The US dollar is broadly stable at the start of a new week in which the word “debasement” is being used frequently as investors remain focused on the US Treasury and what else it plans to help contain the rise in long-term yields. In Friday’s FX Weekly we asked whether the US dollar debasement trade is back and while we do not expect a repeat of the dollar selling in January (-4% intra-day high-to-low) there are risks that sentiment could deteriorate further. A few events will determine near-term dollar sentiment."

"If the action is seen a credible and severe we would certainly see crude oil bouncing back and the dollar would initially at least strengthen."

"But it is hard to take a view on the dollar on just this event risk given the focus on dollar debasement. Scott Bessent is also due to provide information on fiscal consolidation plans following the UST bond buyback announcement last week. We are sceptical that much will come from that."

"We see the risk skewed to more of the same from Warsh. That could see the long-end of the bond market suffer especially if by then there has been no credible measures announced on fiscal consolidation (likely). If crude oil prices have also risen due to a severe D-Day plan, we may see the 30-year yield break above the 5.34% high set last week."

"US dollar risks are skewed to the downside ahead of this week’s event risks."

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

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight AUD/USD’s sharp rally to 0.7180 and close near 0.7170, noting the move looks stretched but still lacks signs of a pause. Intraday, they see scope to edge above 0.7180 while 0.7200 caps, and on a 1–3 week horizon they expect AUD strength to persist toward that major resistance as long as 0.7105 holds.

Strong momentum toward key barrier

"24-HOUR VIEW: We expected AUD to “trade sideways between 0.7105 and 0.7135” last Friday. We were incorrect. Instead of trading sideways, AUD soared to 0.7180 before settling at 0.7169 (+0.78%). The sharp rise appears overdone, but there are no signs of a pause just yet. Today, AUD could edge above 0.7180. The significant resistance at 0.7200 is unlikely to come into view. Support is at 0.7150; a breach of 0.7140 would indicate that the immediate upward pressure has eased."

"1-3 WEEKS VIEW: Last Thursday (19 Aug, spot at 0.7125), we highlighted that “while further AUD strength is not ruled out, it must first break clearly above 0.7150 before a move to 0.7175 can be expected.” On Friday, AUD broke decisively above 0.7150, soaring to a high of 0.7180. AUD strength remains intact, and the level to watch is 0.7200. Note that this level is a major resistance. To keep the momentum going, AUD must hold above 0.7105 (‘strong support’ level was at 0.7080 last Friday)."

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

OCBC’s Sim Moh Siong and Christopher Wong warn that renewed US-Canada trade tensions could undermine the Canadian Dollar’s (CAD) recent recovery. The collapse of trade talks, followed by 50% US tariffs and Canada’s planned dollar-for-dollar retaliation from 8 September, adds fresh uncertainty to the economic outlook just as falling unemployment had begun to support the loonie.

Tariffs threaten recent CAD recovery

"Just as a Canada-U.S. trade deal appeared within reach, negotiations collapsed at the last minute."

"The U.S. has imposed 50% tariffs on about USD20bn of Canadian imports, prompting Canada to announce dollar-for-dollar retaliation from 8 September, targeting sectors such as steel, dairy and electronics."

"The breakdown adds fresh uncertainty to the future of the USMCA and could weigh on Canada's improving economic outlook."

"Domestic conditions had been showing signs of rebound, with unemployment falling for a third consecutive month in July to a two-year low of 6.4%, helping the CAD recover some lost ground."

"However, renewed trade tensions threaten to derail that momentum and may leave the loonie vulnerable after its recent rebound."

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