Forex News

• Gold reclaims $4,000 as Middle East diplomatic efforts prompt a pullback in Oil prices.
• Traders await the Fed's monetary policy announcement scheduled for Wednesday.
• Technical indicators remain bearish, with RSI near oversold territory and MACD in negative territory.

Gold (XAU/USD) consolidates modest gains on Monday after last week’s sharp decline pushed the metal to $3,975, its lowest level since August. A pullback in Oil prices offers support as traders react to diplomatic efforts to ease tensions in the Middle East. At the time of writing, XAU/USD trades around $4,016, up 0.50% on the day.

Reuters reported that officials from Saudi Arabia, Pakistan and Turkey, the three Mecca Pact members, are holding talks with Iranian leaders in Tehran on Monday. Iranian Foreign Ministry spokesman Esmaeil Baghaei said the discussions will cover Israel’s expansionist policies, developments in Lebanon and the US war against Iran.

The meeting follows talks between Qatari mediators and Iranian officials in Tehran on Sunday as part of efforts to ease regional tensions. West Texas Intermediate (WTI) Oil eases to around $100.39 per barrel after reaching $103.28 on Friday, its highest level since May. 

The metal lost around 4% last week as rising Oil prices reinforced expectations of further Federal Reserve (Fed) tightening, outweighing support from falling US Treasury yields and a softer US Dollar (USD). Treasury yields came under pressure as concerns over AI-related investments drove demand for government bonds. The broader equity sell-off may also have prompted some traders to sell Gold to cover losses elsewhere.

The US Dollar and US Treasury yields pause their decline at the start of the week, limiting Gold’s recovery. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.83, while the benchmark 10-year US Treasury yield stands near 4.99%.

Attention now turns to this week’s Federal Reserve (Fed) monetary policy announcement, which could determine whether Gold holds above the $4,000 psychological mark or faces another round of selling.

The Fed is widely expected to leave interest rates unchanged at 3.75%-4.00% when its two-day meeting concludes on Wednesday. However, a pause may offer little reassurance to Gold buyers if policymakers keep the door open to another increase in December, with traders pricing in around a 79% probability of a hike, according to the CME FedWatch Tool.

Fed seen on hold now but December hike risk builds as inflation stays above target

According to TD Securities, analysts don't expect "much new communication from the FOMC or Chair Warsh." In their view, "a hold in October will make a December hike all the more likely," particularly after the "upside surprise in September CPI," which underscores that "inflation risks are still pertinent." TD Securities therefore "expect the Fed to hike two more times (December and March)," noting that "inflation remains above target while risks are growing." They add that "the evolution of inflation data will determine the extent and pace of hikes later in the cycle," suggesting that incoming price figures will be crucial in shaping the policy path beyond early next year.

Technical analysis: Lower Bollinger Band caps upside

On the daily chart, XAU/USD maintains a bearish near-term bias as prices hover below the lower Bollinger Band at $4,020. The Relative Strength Index (RSI) at 35 sits just above oversold territory, while the Moving Average Convergence Divergence (MACD) histogram remains negative; both indicators hint at persistent downside pressure rather than a decisive exhaustion of the recent slide.

On the upside, initial resistance emerges at the lower Bollinger Band near $4,020, followed by the middle band around $4,131 and the upper band near $4,241. A sustained break above these levels could open the door for a recovery toward the $4,400-$4,500 zone, followed by $4,700.

On the downside, immediate support lies in the $3,975-$3,950 region. A decisive break below this zone could trigger a deeper decline toward the $3,900 psychological mark, followed by $3,800.

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

• GBP/USD dips below 1.3350, from last week's highs near 1.3420.
• The US Dollar ticks up in calm markets as traders trim USD short positions heading into the Fed's decision.
• The BoE is widely expected to hike rates in early November, which is likely to limit Pound dips.
  

The British Pound (GBP) extends its reversal from the five-week highs reached against the US Dollar (USD) last week, as investors trim USD short positions ahead of the Federal Reserve’s (Fed) monetary policy meeting, due on Wednesday. The GBP/USD pair hits session lows just below 1.3350, on Monday about 0.5% below last week’s peak, at 1.3419.

Market volatility remains at relatively low levels, as traders bide their time ahead of monetary policy decisions by the Fed and other central banks later this week, with the US Dollar showing a somewhat firmer stance than in the previous weeks.

Fed - BoE immediate monetary policy divergence is Pound-supportive

The US central bank is widely expected to leave its monetary policy unchanged on Wednesday. Fed policymakers have been requesting some more time to assess the impact of September’s rate hike before tightening monetary policy further, which has prompted investors to ditch hopes of back-to-back interest rate hikes.

Bets of a December hike, however, remain high with futures markets pricing in 80% odds for at least a quarter-point rate hike. Against this background, traders are likely to be very attentive to September’s Personal Consumption Expenditures (PCE) Price Index figures, due on Thursday, to confirm those hopes.

The Bank of England (BoE) will meet next week and markets are nearly fully pricing a 25-basis-point rate hike. Recent macroeconomic data, especially the unexpected Gross Domestic Product (GDP) growth and the overshot September Consumer Price Index (CPI), provide the ideal conditions for some monetary tightening, which is likely to keep Pound reversals limited.

Analysts at Societe Generale note that GBP/USD is “off five-week highs but up 0.5% this week after 0.7% last week, atypical path pre-budget, while observing that a “BoE rate increase [is] nailed on in November,”

“The brace of upside surprises for CPI and PPI output price inflation, and firmer wage data (...) will alert the MPC to the budding risk of second-round effects and will almost certainly trigger a hawkish response on interest rates the next meeting in two weeks.” says the bank in a note.

Danske Research Team notes UK flash PMIs strengthened in October, with the composite rising to 53.1 and new orders growing at the fastest pace in over two years. Employment returned to growth, but input cost inflation hit its highest level since June. The bank judges the release leans hawkish for the BoE ahead its November meeting, despite some supply‑chain distortions.

Improving data supports BoE tightening risk

"In the UK, the flash PMIs strengthened in October, with both services and manufacturing picking up. The composite rose to 53.1 from 52.0 as services increased to 53.1 from 52.1 and manufacturing edged up to 52.8 from 51.9."

"The details were also encouraging, with new orders growing at the fastest pace in over two years and employment returning to growth for the first time since September 2024."

"At the same time, input cost inflation rose to its highest level since June, mainly driven by higher energy, raw material and transport costs in manufacturing."

"However, part of the manufacturing gain reflected longer supplier delivery times, pointing to supply-chain disruptions rather than stronger demand. Overall, the print leans to the hawkish side for the BoE ahead of its November meeting."

"In the UK, the 2027 budget on Wednesday could gather attention ahead of the BoE's November meeting, as inflation concerns coupled with stronger growth could trigger a hike"

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

Brown Brothers Harriman’s (BBH) Elias Haddad expects the Bank of Japan (BoJ) to keep its policy rate at 1.25% while assessing September’s hike before tightening again. Firmer underlying inflation could lead to a more hawkish Outlook Report, with swaps pricing a high probability of a December move to 1.50%. This shift in expectations is seen as supportive for the Japanese Yen (JPY).

BoJ hold but hawkish expectations build

"The BoJ is widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again."

"In September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

"Still, firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY."

"The swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months."

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

• The Euro ticks up acrross the board as the German IFO Business Climate Index jumps to three-year highs in October.
• The improvement in economic expectations has offset the deterioration in current economic conditions sentiment.
• The EUR/GBP pair has retraced previous losses to reach session highs at the 0.8400 area.

The Euro (EUR) extends gains against the British Pound on Monday, following the release of a better-than-expected German IFO Business Climate report. The EUR/GBP pair has reversed a previous pullback and is testing the 0.8400 level at the time of writing, posting a 0.3% recovery from the year-to-date lows near 0.8360 hit earlier on Friday.

German businesses' sentiment about the economy improved in October to a 90.2 reading, its best performance in more than three years, from 89.9 in September, against market expectations of a deterioration to 89.8. The assessment of the current economic conditions deteriorated to 88.8 from 89.5 in the previous month, but these figures were offset by an improvement in the expectations gauge, which rose to 91.6 from 90.4 in September.

Lower Oil prices and retreating French yields are buoying the Euro

The Euro is drawing support from a moderate reversal in Oil prices; The price of the Brent Oil barrel dropped below $110.00 on Monday, posting a 2% decline from Friday’s highs amid news reporting that Qatari mediators arrived in Tehran on Sunday to push another initiative to de-escalate tensions between the US and Iran.

Apart from that, Moody’s ratings agency kept France’s debt status unchanged at Aa3 despite the country’s ballooning debt and the social unrest, which has led to massive protests in most of the major cities this weekend. Moody’s decision has been celebrated by the market, which had anticipated a downgrade, and France’s 10-yearTreasury yields fell below the 5% level before trimming some gains through Monday’s European trading session.

Looking ahead, investors are likely to look from the sidelines, awaiting monetary policy decisions by the European Central Bank (ECB) and other major central banks this week. The Bank of England’s (BoE) time is next week, and markets are bracing for a quarter-point rate hike. This is highly likely to keep the Pound's dips limited this week.

United Overseas Bank analysts Quek Ser Leang and Lee Sue Ann note that USD/CHF has shifted from a prior negative bias into a range-trading phase. They see the Dollar’s rapid rebound losing momentum below key resistance, with intraday support levels defining near-term risks. Over the 1–3 week horizon, they expect consolidation between 0.8200 and 0.8290.

Dollar rebound capped below resistance

"24-HOUR VIEW: USD declined to a low of 0.8190 last Thursday. When it was at 0.8200 on Friday, we highlighted the following: “Downward momentum is increasing, albeit not significantly. However, there is scope for USD to decline to 0.8180. To keep the momentum going, USD must hold below 0.8230.” The subsequent price movements did not unfold as expected. USD dipped to 0.8188 and then rose sharply to a high of 0.8255. The rapid rise could extend, but a clear break above 0.8265 appears unlikely. Support is at 0.8235; a breach of 0.8220 would indicate that the immediate upward pressure has eased."

"1-3 WEEKS VIEW: Following our negative USD view from the middle of the month, we highlighted last Friday (23 Oct, spot at 0.8200) that “while USD could continue to decline, given that there has been no significant increase in downward momentum, it remains to be seen whether 0.8140 is within reach.” We did not expect USD to rebound and break above our ‘strong resistance’ level at 0.8250. The breach of our ‘strong resistance’ level indicates that downward momentum has faded. USD has likely entered a rangetrading phase, and it is likely to trade between 0.8200 and 0.8290."

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

Societe Generale’s Dev Ashish analyzes Brazil after Lula’s surprise re-election over Flávio Bolsonaro. The note highlights likely pressure on Brazilian assets as markets unwind positions built on a Bolsonaro victory. It stresses challenging governability under a more conservative Congress, gradual fiscal consolidation, unresolved debt concerns and a higher-for-longer interest-rate outlook, including a shallower easing path for the Selic rate.

Markets reassess post-election Brazil

"Lula secured a surprise re-election victory, overturning a first-round deficit to defeat Flávio Bolsonaro 51.8%-48.2%, marking the first successful runoff comeback in Brazil's democratic era."

"Bolsonaro is challenging the result over the extension of voting hours, but a legal reversal appears unlikely. However, protests, judicial disputes and political tensions could persist."

"Governability will be challenging, as Lula faces a more conservative Congress that may constrain his legislative agenda while also limiting fiscal expansion."

"Fiscal consolidation is likely to remain gradual, leaving debt concerns unresolved and supporting a higher-for-longer interest-rate outlook."

"We expect a shallower easing cycle, with Selic ending 2027 at 12.25% and remaining above market expectations through 2028."

"Brazilian assets are likely to face immediate pressure and heightened near-term volatility as market unwinds positions built on expectations of a Bolsonaro victory."

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

• The Indian Rupee slumps against the US Dollar at the start of the Fed’s policy week.
• Investors expect the Fed to leave interest rates unchanged in the 3.75%-4.00% range.
• Elevated oil prices continue to keep the Indian currency under pressure.

The Indian Rupee (INR) extends its losing streak against the US Dollar (USD) for the third trading day on Monday. The USD/INR pair jumps to near 95.25 as the Indian currency faces pressure due to elevated oil prices.

On Monday, the MCX Crude Oil contract expiring on November 19 recovers to near Rs. 9,672 after a gap down opening. The crude oil price is close to its recent highs of Rs. 9,828 posted on Friday.

Currencies from economies, such as India, which rely heavily on oil imports to meet its energy demands, tend to underperform in a high oil-price environment.

What is keeping oil prices elevated?

According to TD Securities, crude prices remain biased higher in the near term, with analysts warning that “we expect crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated.” They note that “recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,” reinforcing the geopolitical premium embedded in current pricing.

US Dollar trades lower at start of Fed week

The US Dollar trades lower at the start of the week amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, and preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data for September on Thursday.

Analysts at Royal Bank of Canada expect the Fed to keep policy steady at this week’s meeting, with the “Fed expected to hold the fed funds target range unchanged on Wednesday after hiking for the first time since 2023 in September.” While the September move marked a resumption of tightening, RBC notes that “FOMC members continue to signal that more hikes will follow, but comments after the last decision suggest a gradual approach.” In terms of the projected path, the bank reiterates that “we expect two 25-basis-point rate hikes ahead before the end of Q1 2027.”

Other than the Fed’s monetary policy and key economic data releases, investors will pay close attention to Q3 earnings of hyperscalers, including Amazon, Alphabet and Microsoft.

The impact of guidance from hyperscalers regarding their spending plans on Artificial Intelligence (AI) infrastructure would be significant on the US Dollar and US Treasury Yields. In past quarters, hyperscalers issued a substantial amount of debt to fund their AI spending plans, which had resulted in a significant jump in US bond yields.

The guidance on AI spending plans would also have a significant impact on the Indian Rupee, given India is known as anti-AI trade in global markets.

USD/INR Technical Analysis

In the daily chart, USD/INR trades at 95.25, extending its recovery move towards the 20-day Exponential Moving Average (EMA), which is at 95.37. The Relative Strength Index (RSI) has shown a V-shap recovery to near 46.25, reflecting strong demand for the pair at lower levels.

On the topside, initial resistance is located at the 20-day EMA at 95.37, and a daily close above this barrier would help alleviate current selling pressure and open the way to higher levels. On the downside, the 95.00 handle is the immediate support, with June 25 low at 94.16 remainiing the key cushion level.

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

Silver prices (XAG/USD) rose on Monday, according to FXStreet data. Silver trades at $54.02 per troy ounce, up 0.20% from the $53.92 it cost on Friday.

Silver prices have decreased by 24.00% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 74.33 on Monday, up from 74.12 on Friday.

(An automation tool was used in creating this post.)

TD Securities’ Oscar Munoz and Eli Nir expect the FOMC to keep the Fed Funds Rate at 4.00% in October, validating current market pricing while avoiding fresh forward guidance. They see inflation risks as elevated and argue that a hold now increases the likelihood of a December hike, with a non‑trivial chance of a larger 50bp move if data stay firm.

FOMC seen on hold, then hiking

"We expect the FOMC to keep rates on hold this week despite rising inflation risks. The chance of a surprise hike is higher than normal, but we believe they will prioritize patience and wait until December."

"A hold in October will make a December hike all the more likely. After the upside surprise in September CPI, inflation risks are still pertinent."

"The Fed will likely keep rates on hold this week, but we do not expect much new communication from the FOMC or Chair Warsh."

"We expect the Fed to hike two more times (December and March). Inflation remains above target while risks are growing."

"The evolution of inflation data will determine the extent and pace of hikes later in the cycle."

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