Forex News

• The Australian Dollar trades around 0.7130 on Wednesday, virtually unchanged on the day.
• Investors await the US monetary policy decision due later in the day.
• Expectations of another interest-rate hike in Australia help limit pressure on the Australian currency.

AUD/USD trades around 0.7130 on Wednesday at the time of writing, virtually unchanged on the day, as investors remain cautious ahead of the Federal Reserve (Fed) monetary policy decision. Expectations of a US interest-rate hike support the US Dollar (USD), while prospects of further monetary tightening in Australia provide some support to the Australian Dollar (AUD).

Markets widely expect the Fed to raise interest rates by 25 basis points (bps) at its September meeting on Wednesday. According to the CME FedWatch tool, the chance of such a move stands at around 92%.

With a rate hike already largely priced in, investors' attention is likely to focus primarily on signals regarding the future path of US monetary policy. Fed Chair Kevin Warsh will hold a press conference following the decision.

A message suggesting that the US central bank is in no hurry to tighten its monetary policy further could weigh on the US Dollar and support AUD/USD. Conversely, comments leaving the door open to additional rate hikes could strengthen the Greenback and put pressure on the pair.

In Australia, monetary policy expectations also provide support to the Australian Dollar. The Reserve Bank of Australia (RBA) has kept its Official Cash Rate (OCR) unchanged at 4.35% at its last three meetings, following three consecutive increases earlier this year.

Persistent inflationary pressures are nevertheless fueling expectations of further monetary tightening. According to the RBA Rate Tracker, markets assign around a 78% chance that the Australian central bank will raise the OCR to 4.6% at its next meeting.

The prospect of another RBA rate hike could therefore limit downside pressure on the Australian Dollar, although the near-term direction of AUD/USD is likely to depend primarily on the message delivered by the Fed on Wednesday.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.7134. The pair holds below the 100-period and 200-period moving averages at 0.7147 and 0.7181, respectively, keeping the near-term bias capped despite a mildly positive tone in the Relative Strength Index (14) around 56. Price is hovering just under immediate horizontal resistance at 0.7137, suggesting recovery attempts face supply while intraday momentum remains constructive but not strong enough yet to challenge the broader bearish structure.

On the topside, initial resistance is seen at 0.7137, followed by the 100-period moving average near 0.7147 and then the 0.7150 barrier, with the 200-period moving average at 0.7181 and the horizontal hurdle at 0.7188 forming a wider cap higher up. On the downside, immediate support emerges at 0.7120, ahead of the lower horizontal floor at 0.7108, where a break would open the door to a deeper pullback within the prevailing bearish context.

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

Commerzbank’s Antje Praefcke notes that the FOMC is widely expected to raise the federal funds rate by 25 basis points after stronger-than-expected August inflation. She argues that a surprise pause would hurt Fed credibility and the Dollar, while a hike is largely priced in. Future Dollar moves are seen depending more on macro data as Chairman Warsh shuns forward guidance.

Fed decision and Dollar reaction

"Tonight’s FOMC meeting will be exciting. Not only because of the question of whether the Fed will raise the benchmark interest rate by 25 basis points today - which is what the market and our experts expect, given that last Friday’s August inflation figures came in higher than expected."

"So how will the foreign exchange market react to all this? The decision not to raise rates would come as a surprise and is likely to raise serious doubts about the Fed’s commitment to ensuring price stability."

"Hence, given the latest inflation figures, a majority on the FOMC is likely to vote to increase the federal funds rate. This would help allay doubts about the Fed’s credibility."

"However, if the dot plots suggest that further hikes are quite likely, the market is likely to see this as confirmation that the benchmark interest rate could rise further, which could cause the dollar to gain ground."

"In general, however, the dollar’s reaction on the FOMC meeting is difficult to predict, as Warsh is not a supporter of forward guidance and the Fed's reaction function under his leadership is not yet clear."

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

• The Indian Rupee trades weakly against the US Dollar due to higher US Treasury Yields.
• Investors expect the Fed to continue the interest rate hike cycle even after raising them later in the day.
• Rising India’s inflation prompts RBI’s interest rate hike expectations.

The Indian Rupee (INR) holds onto over-a-week long losses against the US Dollar (USD) on Wednesday. The USD/INR pair trades firmly near its seven-week high at around 96.00, as the Indian currency remains under pressure due to higher United States (US) Treasury Yields ahead of the Federal Reserve’s (Fed) monetary policy decision at 18:00 GMT.

As of writing, 10-year US Treasury Yields trade 0.35% lower to near 4.98%, but is still close to its 19-year high of 5.04% posted on Tuesday.

The Indian Rupee struggles to regain ground despite the Reserve Bank of India (RBI) intervening through spot and Non-Deliverable Forwards (NDFs) markets. According to a Reuters report, the Indian central bank likely selling US dollars to support the currency.

What’s drove US Treasuries higher

The borrowing costs for the US government have accelerated significantly as markets price in deeper Fed tightening on the back of higher inflation.

According to strategists at Deutsche Bank, investors pricing in a growing chance of a full-blown hiking cycle for the months ahead,” as markets reassessed the policy path. Looking further out along the curve, Deutsche Bank highlights that “90bps of hikes are now priced by the June 2027 meeting, underscoring how expectations for additional Fed tightening have firmed.”

What to expect from the Fed at the policy meeting

The Fed is almost certain to raise interest rates by 25 basis points (bps) to 3.75%-4.00% at the policy meeting after five straight holds. The CME FedWatch tool shows that the odds of the Fed hiking interest rates at the policy meeting later in the day are 92.5%.

Fed Chairman Kevin Warsh would be able to take a hawkish decision without any political pressure, as recent remarks from US President Donald Trump signaled that he has come into terms with higher interest rates.

While speaking to reporters at the Irish Open golf tournament over the weekend, US President Trump said that he did not ​know whether Fed policymakers will raise interest rates ​at their meeting this week. But stressed that the US "should be paying the lowest interest rate in the world" ​no matter what the Fed’s data indicates about inflation and the economy, Business Standard reported.

Investors will pay close attention to the monetary policy statement and Chair Kevin Warsh’s press conference to get fresh cues regarding inflation and the economic outlook. Warsh is expected to stay with “no forward-guidance policy”.

RBI seen edging toward mini hiking cycle as inflation pressures broaden

According to Societe Generale, the recent “pickup in services inflation is particularly important from a monetary policy perspective,” underscoring that price pressures are becoming more entrenched beyond volatile food components. The bank notes that “with headline inflation above the median target for a third consecutive month and underlying inflation beginning to firm, the room to look through food-led price pressures is narrowing.” Against this backdrop, Societe Generale reiterates that “we continue to believe that the RBI will initiate a mini rate-hike cycle, announcing a 25bp hike at its October meeting, followed by two similar increases at its December and February meetings.” The bank adds that, “although this is not our baseline scenario, we also do not rule out a 50bp hike,” highlighting the risk of a more forceful policy response if inflation dynamics deteriorate further.

USD/INR Technical Analysis: Aims to revisit all-time high near 97.00

In the daily chart, USD/INR trades at 95.93. The pair holds a bullish near-term bias as it extends its rebound above the 20-day exponential moving average (EMA) at 95.37, suggesting buyers are reasserting control after the recent pullback.

The Relative Strength Index (RSI) at 63.2 sits in bullish territory but shy of overbought conditions, hinting that upside momentum remains constructive without yet signaling exhaustion.

On the downside, initial support is seen at the 20-day EMA near 95.37, where dip-buying interest could re-emerge if the pair corrects lower. On the upsdie, the pair aims to revisit the all-time high near 97.00

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

ING notes that New Zealand’s Q2 GDP slowdown could magnify market impact given infrequent data, but the Reserve Bank of New Zealand remains focused on inflation and jobs. The bank still expects one final hike in December, with rising odds of an October move, while NZD/USD is seen driven mainly by global risk sentiment and US events, with a 0.570–0.590 range into year-end.

GDP data and RBNZ path in focus

"New Zealand publishes second-quarter GDP data overnight. Expectations are for a material growth slowdown to just 0.1% QoQ after a strong first quarter (0.8%). Those figures play a secondary role for the Reserve Bank relative to inflation and jobs, but given the low (quarterly) frequency of key data releases, the market impact can be magnified."

"At its September meeting, the RBNZ delivered a dovish surprise, signalling there is only room for another 25bp to 3.0%. That should not be taken as a commitment, and the longer energy prices remain elevated, the higher the chances of upward revisions in policy projections by year-end."

"Our call remains for the next and last hike in December, but chances of an October move are increasing, with markets pricing in around 65% probability. Tomorrow's GDP can be an important input for those October expectations."

"That said, NZD/USD remains primarily driven by global risk sentiment and US events. We think the decline has a bit further to go on a Fed hike and risk assets' fragility. For the moment, we see 0.570 as a bottom, though, with room to bounce back towards 0.59 as early as year-end on some dovish Fed repricing."

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

• Gold regains ground as traders trim bearish positions ahead of the Federal Reserve interest rate decision.
• The Fed is widely expected to deliver its first rate hike since July 2023.
• XAU/USD trades in a neutral technical setup, supported by the 50-day and 100-day SMAs, while the 200-day SMA caps the upside.

Gold (XAU/USD) rebounds on Wednesday as sellers trim their exposure ahead of the Federal Reserve’s (Fed) monetary policy announcement. A modest pullback in US Treasury yields and a steady US Dollar (USD) also help the precious metal recover from its lowest level in over a month, touched earlier this week. At the time of writing, XAU/USD trades around $4,350, up 1.30% on the day.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, holds near two-week highs around 99.65, little changed on the day. The benchmark 10-year US Treasury yield stands near 4.99% after hitting 5.04% on Tuesday, its highest level since 2007.

The US central bank will announce its decision at 18:00 GMT, followed by Fed Chairman Kevin Warsh’s press conference at 18:30 GMT. Markets widely expect a 25 basis-point rate hike, taking the federal funds target range to 3.75%-4.00%. If delivered, it would be the Fed’s first interest-rate increase since July 2023.

The anticipated rate increase reflects growing inflation risks from the energy shock caused by the war in the Middle East. With the United States and Iran still far from reaching a resolution and Oil prices holding at elevated levels, the Fed’s task of returning inflation to its 2% target has become more difficult. At the same time, the US labour market appears stable after a strong August employment report, giving policymakers more room to tighten policy.

Strategists at ING expect the Fed to deliver what they describe as a “consensus 25bp” rate increase “to 4.0% today,” noting that “markets are pricing in 23bp for today, 52bp by year-end, and 89bp by June.” They caution that “a surprise hold would likely deliver a big blow to the Dollar: both through the dovish repricing in front-end rates and a likely selloff in the back end.”

In their view, this risk profile “also argues for a hawkish message,” as “a dovish hike may not be enough to convey the monetary policy discipline bond investors currently demand, particularly given the amount of tightening already priced into swaps.”

Higher borrowing costs are usually negative for Gold because they increase the appeal of interest-bearing assets such as government bonds. However, with a quarter-point increase almost fully priced in, the metal’s reaction is likely to depend more on the updated Summary of Economic Projections, including the dot plot, and Warsh’s post-meeting remarks.

A hawkish Fed signal pointing to more rate increases could weigh on Gold. However, if the Fed avoids committing to another rate hike, the metal could build on its recovery.

Technical Analysis: 200-day SMA remains key barrier for XAU/USD bulls

On the daily chart, XAU/USD sits in a mid-range configuration, holding above the 50-day Simple Moving Average (SMA) and the 100-day SMA, yet remaining capped well below the 200-day SMA around $4,540. This alignment suggests a neutral-to-capped bias, with price supported by medium-term averages but still below the broader downtrend marker. The Relative Strength Index (RSI) at 48 underscores a flat momentum profile, while the Moving Average Convergence Divergence (MACD) histogram remains in negative territory, hinting that upside attempts could struggle while the 200-day SMA stays overhead.

On the downside, initial support is seen at the 100-day SMA around $4,326, followed by the 50-day SMA near $4,280, with more robust demand expected at the horizontal levels of $4,150 and then $4,000 if selling pressure accelerates.

On the topside, the first significant resistance comes at the 200-day SMA around $4,540, and a break above this barrier would expose the next key cap at the horizontal resistance zone near $4,700.

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

• EUR/USD edges down to near 1.1535 in the countdown to the Fed’s policy outcome.
• The Fed is widely anticipated to hike interest rates by 25 bps to the 3.75%-4.00% range.
• The ECB is expected to deliver one more interest rate hike this year.

The Euro (EUR) trades subduedly at around 1.1535 against the US Dollar (USD) during the European trading session on Wednesday. The major currency pair trades cautiously ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

The CME FedWatch tool shows that the odds of the Fed hiking interest rates by 25 basis points (bps) to 3.75%-4.00% at the policy meeting later in the day are 92.5%.

This suggests that the Fed will break its five-meeting hold streak and kick-off the monetary tightening cycle.

With the Fed looking almost certain to tighten monetary conditions, market reaction would be majorly influenced by the monetary policy statement and Chairman Kevin Warsh’s remarks on inflation and the economic outlook.

In the policy meeting, investors will also focus on Fed’s dot plot, which shows where policymakers see interest rates heading in the near term.

According to the CME FedWatch tool there is an almost 79% chance that the Fed will deliver at least two interest rate hikes by the year-end.

On the Eurozone front, European Central Bank (ECB) officials have signaled that inflationary pressures could remain higher and prompt the need of more interest rate hikes this year. Last week, the ECB raised its policy rates by 25 bps, as expected.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1532, keeping a bearish near-term tone as it holds below the 20-period exponential moving average (EMA) at 1.1589.

The pair has retreated from recent highs and the Relative Strength Index (14) around 40 hints at persistent downside pressure rather than an oversold extreme, suggesting sellers remain in control while the recovery attempts are capped by nearby dynamic resistance.

On the topside, the 20-period EMA at 1.1589 is the first resistance to clear for bulls to ease the current downward bias, with a sustained break above that level needed to suggest a more meaningful rebound. On the downside, the psychological figure of 1.1500 is the key support level.

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

UOB’s Quek Ser Leang and Lee Sue Ann note AUD/USD has pulled back after Monday’s sharper-than-expected drop, with intraday price action now seen confined to a 0.7100–0.7140 band. For the next 1–3 weeks, they maintain that further downside is possible, with a close below 0.7100 opening the way toward 0.7050, while resistance is capped near 0.7175.

Downside bias while below resistance

"24-HOUR VIEW: AUD fell more than we expected on Monday. Yesterday, we highlighted the following: “Our call for AUD to weaken was not wrong, but we did not anticipate the sharp drop that reached a low of 0.7109. The decline appears to be overdone, and AUD is unlikely to weaken much further. Today, AUD is more likely to consolidate between 0.7110 and 0.7155.” AUD then traded within a range of 0.7117/0.7141. Downward momentum has increased, albeit slightly. Today, AUD could edge lower, but any decline should stay within a 0.7100/0.7140 range."

"1-3 WEEKS VIEW: We continue to hold the same view as yesterday (15 Sep, spot at 0.7135). As highlighted, “while further weakness is not ruled out, short-term conditions are oversold, and AUD must close below 0.7100 before a move to 0.7050 can be expected.” The likelihood of AUD closing below 0.7100 will remain intact as long as AUD holds below the ‘strong resistance’ at 0.7175 (no change in level from yesterday)."

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

The US Dollar (USD) is trading with a firm undertone heading into the Federal Open Market Committee (FOMC) interest rate decision, supported by a relentless march higher in US Treasury yields that has pushed the 10-year yield to 5.00% and the 2-year yield to 4.66%. Financial markets have almost fully discounted a 25 basis point rate hike, bringing the benchmark policy rate to 4.00%. Driven by persistent commodity price pressures — with Brent crude holding above $100/bbl amid Middle East supply vulnerabilities — policymakers are managing a tight balancing act between sticky inflation and the rising fiscal cost of debt servicing. Institutional strategists argue that Chair Kevin Warsh is likely to deliver a hawkish message, keeping the Greenback supported against major peers.

Rising yields and energy-driven inflation force Fed trade-offs

According to Lloyd Chan at MUFG, the surge in US Treasury yields across the curve reflects persistent inflation anxieties sparked by global commodity shocks. While escalating Middle East geopolitics and $100+ crude Oil strengthen the case for monetary tightening, the central bank must balance price stability against rising borrowing costs for the federal government and key domestic sectors.

"The US 10y Treasury yield has now reached 5.00%, while the 2y yield climbed to 4.66%... Market attention now turns to the FOMC meeting decision later today. Markets are pricing more than a 90% probability of a 25bps Fed rate hike, while expecting a cumulative two hikes by year-end. That said, the Fed faces a difficult trade-off... On one hand, inflation risks remain elevated, with Brent crude holding above US$100/bbl... On the other hand, tighter monetary policy raises debt servicing costs for the US government and adds further strain on interest-rate-sensitive sectors such as housing."

Hawkish Fed message and elevated Oil prices back US Dollar upside

Taking a pro-USD stance, Francesco Pesole and Frantisek Taborsky at ING assert that the Federal Reserve has little choice but to maintain a hawkish posture to reassure bond market participants. With energy prices threatening to push Oil higher toward $110/bbl, Chair Kevin Warsh's press conference is expected to keep the door open to additional rate increases, creating a high barrier for US Dollar downside.

"Markets are fully expecting a 25bp hike to 4.0% today, and a surprise hold or strong dovish dissent could have a materially negative impact on the dollar... Openness to further hikes by Warsh can leave the dollar broadly supported... Incidentally, the external picture argues against building sizeable USD shorts at this stage. Brent is aiming for $110/bbl, as Iran-Gulf negotiations are delayed again, and softness in tech stocks is weighing on overall sentiment."

Based on the combined perspective of both institutions, the US Dollar remains in a strong tactical position anchored by 5.00% long-end Treasury yields and elevated global energy prices. While MUFG underlines the macro trade-offs constraining the Federal Reserve's long-term trajectory, ING projects that a standard 25 basis point hike combined with hawkish guidance from Chair Warsh will deter bearish greenback bets and preserve the Dollar's upward momentum.

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

• Gold trades cautiously below $4,350 as investors await the Fed’s interest rate decision for fresh directional impetus.
• XAU/USD holds just above the 100-day SMA at $4,326.81, while the 200-day SMA at $4,540.24 caps the broader upside.
• On the one-hour chart, Gold shows improving bullish momentum, but resistance at $4,361-$4,371 remains the key hurdle for further gains.

Gold (XAU/USD) trades cautiously below $4,350 on Wednesday as investors refrain from taking large positions ahead of the Federal Reserve (Fed) monetary policy decision. A modest pullback in the US Dollar (USD) provides some support to the precious metal, although the sharp rise in US Treasury yields limits its upside potential.

The Fed is expected to raise interest rates by 25 basis points at the conclusion of Wednesday's meeting. Attention will primarily focus on the updated economic projections, the dot plot and comments from Fed Chair Kevin Warsh, which could provide fresh clues about the future path of interest rates.

Meanwhile, tensions in the Middle East and risks of disruptions to Oil supply continue to fuel inflationary pressures and safe-haven demand. These factors provide support to Gold, although elevated US yields and prospects of further monetary tightening by the Fed encourage traders to remain cautious ahead of the central bank's announcement.

In the daily chart above, XAU/USD trades at $4,341.86. The metal hovers just above the 100-day simple moving average (SMA) at $4,326.81, but remains well capped by the 200-day SMA near $4,540.24 and the broader downward resistance structure, keeping the broader tone neutral to slightly bearish. The Relative Strength Index (14) around 48 underscores a lack of strong directional momentum, suggesting price is consolidating rather than trending decisively.

On the topside, initial resistance is seen at the 200-day SMA around $4,540.24, with a stronger barrier aligning near the horizontal resistance at roughly $4,697.48, while the bearish trend line context also weighs. On the downside, immediate support comes from the latest low at $4,253.78, and a break below this area would expose the more substantive horizontal floor around $3,945, where buyers would likely attempt to reassert control.

In the one-hour chart above, the metal holds a neutral to slightly constructive bias as it trades above the 100-period simple moving average (SMA) near $4,324, yet remains capped below the 200-period SMA around $4,371 and the descending resistance trend line coming in close to $4,361. A firm Relative Strength Index (RSI) around 64 suggests bullish momentum is building, but the pair still needs to overcome this confluence of nearby overhead barriers to unlock a stronger upswing.

On the topside, initial resistance is aligned at the descending trend-line hurdle near $4,361, followed by the 200-period SMA around $4,371, with a more distant horizontal barrier seen at $4,511. On the downside, immediate support is provided by the 100-period SMA at roughly $4,324, ahead of more substantial horizontal support near $4,253, where buyers would likely step in to defend the broader uptrend on this timeframe.

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

Danske Research Team notes that the US Dollar (USD) remained firm, pushing EUR/USD modestly lower as risk sentiment weakened. In the euro area, Germany’s September ZEW survey showed a sharp improvement in current conditions, while expectations disappointed. The team says attention now turns to the FOMC meeting, where it expects a 25bp rate hike alongside updated economic projections and dot plots.

Dollar strength persists into FOMC

"Broad USD remained on a strong footing yesterday and EUR/USD declined modestly, as risk sentiment continued to sour."

"In the euro area, the German ZEW index in September showed a markedly better assessment of the current situation, but expectations for future growth disappointed. The assessment of the current situation rose to -47.1 (cons: -52.1, prior: -61.1), which is the highest level in three and a half years. The rebound in German growth is especially due to the significant fiscal easing and a rise in manufacturing orders."

"However, expectations for future growth disappointed, as they remained at 34.7 (cons: 40.0, prior: 34.2). This likely reflects the recent tightening in financial conditions and higher energy costs. The impact of these factors will likely take some months to affect growth, given the lag lengths in German retail energy and rate pricing, which the September ZEW survey reflects well."

"In the US, the main event of the week will be the FOMC meeting tonight. Previously this week we revised our call now expecting a 25bp rate hike at the meeting. Given the current market pricing (90% probability of a hike), and the fact that we have long argued rate hikes are eventually on the horizon in any case, tightening now likely represents the path of least resistance."

"We do not think the decision is a completely done deal, and we believe there will be 2-3 dissenters in favour of a hold. We still expect the FOMC to publish its updated economic projections and 'dots', even if Warsh opts out from submitting his personal views again. In the afternoon US retail sales for August is released too."

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