Forex News
- The Canadian Dollar remains under pressure as trade tensions between Washington and Ottawa persist.
- Canada retaliates against US tariffs with duties of up to 50% on certain imports.
- Investors await Kevin Warsh’s Jackson Hole speech for fresh clues on US monetary policy.
USD/CAD trades around 1.3870 on Thursday, down a modest 0.05% on the day at the time of writing. The Canadian Dollar (CAD) is struggling to fully benefit from the stability of the US Dollar (USD), as escalating trade tensions between the United States (US) and Canada continue to fuel concerns over the Canadian economic outlook.
Trade relations between the two countries remain in focus after US tariffs of 50% on a range of Canadian goods came into effect. The move follows the failure of negotiations between Washington and Ottawa to reach a trade agreement.
In response, Canadian Prime Minister Mark Carney announced tariffs of up to 50% on around $20 billion worth of US imports. The escalation raises concerns about a more pronounced impact of the trade dispute on Canadian economic activity and limits the Loonie’s ability to strengthen.
The Canadian Dollar, however, receives some support from Oil prices, as geopolitical risks maintain a premium in the energy market. As Canada is a major Oil exporter to the United States, resilient energy prices help limit downside pressure on its currency.
On the US side, attention turns to the Federal Reserve (Fed). Investors await Fed Chair Kevin Warsh’s speech on Friday at the Jackson Hole Symposium, looking for fresh indications about the path of interest rates.
The latest US inflation data have reinforced market caution over the monetary policy outlook. The Personal Consumption Expenditures (PCE) Price Index stands at 3.7% YoY in July, above expectations, signaling that inflationary pressures remain persistent.
Against this backdrop, the US interest-rate outlook and developments in the trade dispute between Washington and Ottawa are likely to remain the main drivers of USD/CAD in the near term, while fluctuations in Oil prices could also influence the Canadian Dollar.
USD/CAD technical analysis
In the one-hour chart, USD/CAD trades at 1.3871, holding a mildly bullish intraday bias as it consolidates above the 100-period simple moving average (SMA) at 1.3840 and the 200-period SMA at 1.3839. The pair is hovering just over nearby horizontal support at 1.3865, suggesting buyers still defend the latest pullbacks, while the Relative Strength Index (14) around 46 hints at fading but not yet bearish momentum as the pair pauses beneath overhead barriers.
On the topside, initial resistance is seen at the horizontal level of 1.3893, with a break exposing a higher cap near 1.3910. On the downside, immediate support is located at 1.3865, followed by the clustered trend supports from the 100-period SMA at 1.3840 and the 200-period SMA at 1.3839, ahead of a deeper structural floor around 1.3825.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- GBP/JPY stays technically constructive above its major daily moving averages.
- Momentum indicators suggest limited buying pressure, keeping the cross in consolidation mode.
- Tokyo CPI data on Friday could provide the next directional catalyst.
GBP/JPY trades broadly flat on Thursday after Wednesday’s modest pullback ended a four-day winning streak. At the time of writing, the cross trades around 216.45, with momentum indicators suggesting limited buying interest.
The Japanese Yen (JPY) stays broadly weak as concerns over Japan’s fiscal outlook and its relatively low interest rates compared with other major economies continue to weigh on the currency. This keeps the broader bias for GBP/JPY tilted to the upside.
That said, sentiment around the British Pound (GBP) also remains somewhat fragile, with UK fiscal concerns elevated ahead of the October 28 Budget. At the same time, the Bank of England’s (BoE) cautious stance and reluctance to raise interest rates further are limiting additional support for the Pound.
In the near term, GBP/JPY is likely to remain in consolidation mode, with Tokyo Consumer Price Index (CPI) data due on Friday potentially providing the next directional catalyst.
Technical Analysis
On the daily chart, GBP/JPY maintains a mildly bullish bias, although the technical setup points to consolidation rather than a strong directional move. The cross holds above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), while also staying above the 61.8% Fibonacci retracement at 215.72, keeping the broader structure constructive.
Momentum indicators, however, remain subdued. The Relative Strength Index (RSI) hovers around 54, while the Moving Average Convergence Divergence (MACD) stays slightly above zero but shows fading positive momentum. At the same time, the Average Directional Index (ADX) near 17 points to a weak trend, supporting the case for near-term consolidation.
On the upside, initial resistance is seen at the 78.6% Fibonacci retracement at 217.40, followed by the recent swing high and 100% retracement at 219.50. On the downside, the 215.84-215.72 area, where the 50-day SMA meets the 61.8% retracement, offers immediate support. A break lower could expose the 100-day SMA at 215, followed by the 50% retracement at 214.54 and the 200-day SMA near 212.82.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
MUFG’s Derek Halpenny notes that the Japanese Yen reaction to Deputy Governor Himino’s speech was limited, even as his comments aligned with market expectations for a Bank of Japan rate hike in September. The BoJ is seen shifting toward a faster pace of tightening, with FX developments increasingly central to its inflation outlook, while Jackson Hole and Naoki Tamura’s participation frame the near-term policy narrative.
BoJ hike expectations stay elevated
"The Fed on hold on 16th September looks likely to then be followed by a hike by the BoJ. Today, Deputy Governor Himino gave a key speech and with pricing for a rate hike at over 80% it was important that Himino’s comments were seen to endorse that. His comments were generally consistent with a policy board that appears to be shifting its strategy and considering a faster pace of rate hikes."
"The yen weakened back in response to his speech suggesting some disappointment that Himino was not more explicit but while he did not explicitly give a signal of a hike next month, his general tone was certainly on the hawkish side. Himino gave a speech and then later a press conference and on both occasions stated that the BoJ needed to “pay more attention to upside inflation risks than before”. That to us is the closest you will get to guidance that the pace of rate hikes could be increased."
"Himino also confirmed that the BoJ did not need to have the full data on assessing the impact of past rate hikes before moving again. The BoJ has also upped the emphasis on the importance of FX to the inflation outlook which shows alignment with the MoF in not wanting the yen to continue weakening."
"With nearly all the rate hike pricing still intact after the meeting we would say the job has been done by the BoJ in giving a clear signal of intent. Jackson Hole will now come into focus, and Naoki Tamura will attend Jackson Hole instead of Governor Ueda. He is an interesting choice to attend given he is a vocal proponent of a faster pace of monetary tightening having stated in June that his view was a rate hike “at intervals of a few months” to get the policy rate to the neutral rate around 2.00% more quickly."
"There is no top tier economic data today so we would expect a subdued day for the markets ahead of the Warsh speech at Jackson Hole tomorrow at 15:00 BST."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- European Central Bank policymakers considered that incoming data provided a strong case for pausing rate hikes in July.
- Some policymakers would not have opposed another increase, highlighting persistent upside risks to inflation from the energy shock.
- Another rate hike is likely to be necessary unless the inflation outlook improves significantly, although no decision has been made for September.
The European Central Bank (ECB) Accounts of the July 22-23 monetary policy meeting show that policymakers remain open to further monetary tightening despite unanimously deciding to keep interest rates unchanged. Members stress that another rate hike will likely be necessary unless the inflation outlook improves significantly, while avoiding any commitment to a move at the September meeting.
The Governing Council considers that incoming economic data provided a strong case for pausing the tightening cycle in July. Headline inflation fell to 2.8% in June from 3.2% in May, while core inflation eased to 2.4% from 2.6%. Underlying price pressures also continued to moderate, with more persistent components of inflation developing more favourably than previously expected.
Wage developments provided additional arguments for keeping rates unchanged. Labour cost pressures are moderating and the softening of labour market conditions reduces the probability that the energy shock will generate significant second-round effects. Policymakers note that these effects have not yet become embedded in domestic prices and wages, while longer-term inflation expectations remain broadly anchored around the ECB's 2% target.
However, the Accounts maintain a hawkish bias. Some members would not have opposed raising rates in July and argued that the likelihood of another increase eventually proving unnecessary was low. They warned that waiting too long could delay inflation's return to target and potentially require more aggressive monetary tightening at a later stage.
Energy prices remain at the heart of the ECB's concerns. Policymakers warn that the full inflationary impact of the recent shock has yet to materialise and that the longer energy prices remain elevated, the greater the risk of broader indirect and second-round effects. High natural gas prices and seasonally low European gas storage levels are among the main upside risks, alongside geopolitical disruptions to energy supply chains.
The Governing Council therefore continues to see risks to inflation as tilted to the upside. Although current evidence on wages, profit margins and inflation expectations remains relatively reassuring, the projected persistence of above-target inflation reinforces the need to monitor the duration and intensity of the energy shock.
Attention now turns to the September meeting, as new economic projections and additional inflation data should provide greater visibility, particularly after consumer prices ticked up in July. The ECB reiterates its data-dependent and meeting-by-meeting approach, making clear that the July pause does not signal the end of the tightening cycle, but equally that a September rate hike is not predetermined.
Markets remain firmly positioned for further tightening, pricing in a 96% chance of a 25-basis-point (bps) interest rate hike in September, according to the ECB Watch tool.
Market reaction
The Euro (EUR) shows little reaction to the release, with EUR/USD remaining under modest bearish pressure around 1.1640 on Thursday at the time of writing, down 0.08% on the day. Traders remain cautious ahead of Federal Reserve (Fed) Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
ING’s Francesco Pesole highlights that the Australian Dollar (AUD) is the only G10 currency gaining this week as hotter July inflation and strong household spending fuel hawkish Reserve Bank of Australia (RBA) expectations. ING’s macro team still favours a prolonged RBA hold, expecting benign inflation and a steady Fed to reduce urgency, with AUD/USD targeted at 0.730 by year-end but near-term gains limited as rate pricing is unwound.
Hot data versus prolonged RBA hold
"The Aussie dollar is the only G10 currency gaining ground this week amid a broad USD rebound. Hotter-than-expected inflation for July (3.5% headline, 3.6% trimmed mean) has caused a rapid rebuilding of hawkish expectations, with markets now pricing in a 28bp by year-end. That’s around a 15bp jump since the start of the week."
"This morning, Australia reported very strong household spending data for July (7% YoY), further helping the case for more tightening. However, our macro team is still leaning towards a prolonged hold by the Reserve Bank of Australia, but we admit the hawkish risks have increased."
"House prices are declining and unemployment has edged higher, trends that should become clearer in the 2Q GDP data. Moreover, the Reserve Bank of Australia will likely wait for another set of quarterly numbers before concluding that the pickup in inflation is anything more than a one-off."
"Ultimately, we expect the inflation trajectory to prove benign enough to avert another hike, with our call for a Fed on a prolonged hold also diminishing any sense of urgency in Australia."
"Markets are pricing in 12bp for the 29 September meeting, and we expect that pricing to be unwound, limiting AUD gains for now. Our view on AUD/USD remains upbeat into year-end with a 0.730 target, but that’s relying on our dovish Fed call, which should have a net-positive impact on the pair even if a dovish repricing in the AUD curve happens."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Silver price remains in a tight range between $67.35 and $70 this week.
- Investors keenly await Fed Warsh’s remarks at the Jackson Hole Symposium.
- Fed’s Warsh could reiterate the central bank’s commitment to bring inflation down to the 2% target.
Silver price (XAG/USD) trades 0.35% higher to near $68.40 during the European trading session on Thursday, but is broadly sideways in a range between $67.35 and $70 this week. The white metal struggles for direction as investors await Federal Reserve (Fed) Chairman Kevin Warsh’s speech at the Jackson Hole Symposium on Friday.
Investors will pay close attention to Fed Chair Warsh’s comments regarding inflation and the United States (US) interest rate outlook.
In the July policy meeting, Fed Chair Warsh didn’t deliver any forward guidance, but stressed that the central bank is committed to bringing inflation down to the central bank’s 2% target.
Financial markets believe that the Fed’s commitment to ease price pressures would be favorable for the US Dollar (USD). Such a scenario could diminish the appeal of non-yielding assets, like Silver. Also, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Strategists at OCBC said that the USD could “find support if Warsh and other Fed officials push back against debasement concerns and reaffirm their commitment to returning inflation to the Fed's 2% target,” with the conference seen as a key venue for the Fed to clarify its stance on inflation and policy credibility.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $68.40, keeping a bullish near‑term bias as price holds above the 20‑day Exponential Moving Average (EMA) at $65.34. The metal has extended its advance away from this dynamic support, while the Relative Strength Index (14) around 62 suggests firm upside momentum that is approaching overbought territory but still favors buyers.
On the downside, immediate support is seen at the 20‑day EMA near $65.34, where a pullback could attract fresh bids to maintain the broader upswing. On the topside, with no nearby structural price barriers traced yet, momentum remains the main guide; the elevated RSI reading hints that while the bullish trend persists, upside may become more gradual as the market works through increasingly stretched conditions.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- New Zealand Dollar approaches weekly lows near 0.5939 after rejection ahead of the 0.6000 area.
- The US Dollar retraces some losses, supported by hot US inflationary pressures.
- The Kiwi's near-term trend remains bullish while above trendline support and the 200-day SMA.
The New Zealand Dollar (NZD) heads lower for the second consecutive day against a stronger US Dollar (USD) on Monday, as hot US inflation data released on Wednesday has renewed pressure on the US Federal Reserve (Fed) to hike interest rates in the coming months. NZD/USD bears are looking at the bottom of the weekly range, around 0.5930, after rejection ahead of the 0.6000 area earlier this week.
On Wednesday, the US Personal Consumption Expenditures (PCE) Price Index confirmed that inflationary pressures keep growing at levels well above the Fed's target, although bets for a September rate hike have remained practically unchanged, as measured by the CME’s FedWatch Tool.
Strategists at ING remain “reasonably confident in [their] call for the Fed to hold on 16 September and, by extension, in a weaker Dollar.” The experts, however, caution that “the next three weeks may need to bring a more convincing combination of data and Fedspeak before markets move closer to a hold outcome,” underscoring that incoming US releases and policy communication will be critical in shaping rate expectations and the Dollar’s near-term trajectory.
Technical Analysis: NZD/USD remains supported by an ascending trendline
NZD/USD trades at 0.5944, holding a constructive bullish bias with price action supported above an ascending trendline support from late June lows, now around 0.5900, and the 200-day Simple Moving Average (SMA) at 0.5844, a popular indicator in FX markets for assessing currency trends.
Momentum indicators in the daily chart remain neutral-to-bullish, with the Relative Strength Index (14) around 60, and a mildly positive Moving Average Convergence Divergence (MACD) reading underscoring that buyers still retain control, despite weakening traction.
On the topside, bulls are likely to face significant resistance in the mentioned 0.6000 area, which capped rallies in May and June. If that level gives way, the February 18 high, at 0.6054, and the year-to-date highs around 0.6100 would come into focus.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.14% | 0.10% | -0.02% | -0.17% | 0.06% | 0.01% | |
| EUR | -0.09% | 0.05% | -0.02% | -0.13% | -0.27% | -0.13% | -0.08% | |
| GBP | -0.14% | -0.05% | -0.04% | -0.19% | -0.29% | -0.17% | -0.13% | |
| JPY | -0.10% | 0.02% | 0.04% | -0.12% | -0.24% | -0.15% | -0.07% | |
| CAD | 0.02% | 0.13% | 0.19% | 0.12% | -0.13% | -0.01% | 0.05% | |
| AUD | 0.17% | 0.27% | 0.29% | 0.24% | 0.13% | 0.12% | 0.17% | |
| NZD | -0.06% | 0.13% | 0.17% | 0.15% | 0.01% | -0.12% | 0.09% | |
| CHF | -0.01% | 0.08% | 0.13% | 0.07% | -0.05% | -0.17% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Geoff Yu at BNY notes that improving flows through the Strait of Hormuz are easing Oil supply fears and supporting a lower Brent price profile. Kuwait and Qatar have restored crude shipments to about 70% of pre-war levels, lifting total Hormuz flows. As more Gulf barrels reach the market, the disruption premium in Oil prices continues to compress despite ongoing U.S.–Iran tensions.
Brent pressured by supply normalization
"Improving Hormuz flows are providing further reassurance on inflation. Kuwaiti and Qatari crude shipments have reportedly recovered to around 70% of pre-conflict levels, while broader traffic through the strait is also rising. Brent is falling again as supply fears ease, removing some of the energy-driven pressure on the global disinflation outlook."
"Brent crude is holding near $87/bbl, well below its late-April peak above $120, as rising oil flows through the Strait of Hormuz ease fears of a prolonged supply shock. Kuwait and Qatar have restored shipments to around 70% of pre-war levels, while total flows through the strait have climbed to roughly 7mn to 8mn barrels a day from about 4mn in mid-July."
"With more Gulf barrels reaching the market, the supply disruption premium in oil has continued to compress, even though Washington and Tehran remain deadlocked over control of the strait."
(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 notes USD/JPY is stuck between resistance at 160.00 and support at the 200‑day moving average, as Bank of Japan (BoJ) officials maintain hawkish guidance and underlying inflation firms near the 2% target. Haddad expects a 25bps BoJ hike in September but argues a lower USD/JPY is more likely to be driven by a dovish Fed repricing than additional BoJ tightening.
Fed repricing key for Japanese Yen
"USD/JPY remains entrenched between resistance at 160.00 and support at the 200-day moving average (158.40). Bank of Japan (BoJ) Deputy Governor Ryozo Himino stuck to the bank’s hawkish guidance."
"Himino stressed that “raising rates in a timely manner will help avoid a spike in inflation and abrupt rate hikes in the future,” adding “we should pay greater attention to the upside risk to prices than in the past.”"
"Indeed, underlying inflation in Japan has firmed, though it remains around the BoJ’s 2% target or just below. We expect the BoJ to deliver a 25bps rate hike to 1.25% at its next September 18 meeting (80% priced-in)."
"In our view, the catalyst for a lower USD/JPY will come from a dovish Fed repricing rather than a hawkish BoJ repricing. We doubt the BoJ can tighten more aggressively than is currently implied over the next twelve months (75bps) given that underlying inflation pressures remain contained and private consumption activity was flat over Q2."
"In the meantime, FX intervention threat significantly raises the cost of shorting JPY and limits USD/JPY overshoots above 160.00."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold gives up earlier gains as buyers turn cautious after a strong August rally.
- A firmer US Dollar and sticky US inflation keep the upside in check ahead of Fed Chair Kevin Warsh’s Jackson Hole speech.
- XAU/USD retains a bullish technical bias above key daily SMAs, although RSI and MACD point to easing upside momentum.
Gold (XAU/USD) erases its earlier intraday gains on Thursday as buyers turn cautious after a strong rally this month. The precious metal climbed to $4,697 earlier this week, its highest level since May 14, and is still up around 13% so far in August. At the time of writing, XAU/USD trades around $4,585, easing from an intraday high of $4,643.
The pause comes as traders lock in some profits near recent highs, while Wednesday’s US Personal Consumption Expenditures (PCE) Price Index data showed that price pressures remain sticky and well above the Federal Reserve’s (Fed) 2% target.
Following the figures, the US Dollar (USD) staged a modest recovery as they reinforced expectations that the Fed may need to keep interest rates higher for longer. Gold is often viewed as a hedge against inflation, but higher interest rates reduce the appeal of the non-yielding metal. As a result, Gold ended Wednesday with a loss of around 1.40%.
Even so, the latest PCE figures, along with recent Consumer Price Index (CPI) and Producer Price Index (PPI) data, suggest inflation is no longer accelerating sharply. This reduces the chances of an immediate Fed rate hike and could help limit the downside in Gold. According to CME FedWatch Tool, markets currently see a near 62% chance that the central bank will keep borrowing costs unchanged in September.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.25 on Thursday, extending its recovery from last week’s losses. The Greenback had come under heavy pressure after the US Treasury announced plans to increase buybacks of longer-dated government securities, a move that also revived demand for Gold.
Traders now look ahead to Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium on Friday for greater clarity on the interest rate outlook. Middle East tensions also remain an important factor as elevated energy prices continue to pose upside risks to inflation, while there are still no clear signs that normal vessel traffic through the Strait of Hormuz will resume soon.
Iran and Oman recently said they had reached an agreement on the strait. However, a senior Iranian official told Reuters that the deal has not been finalised and that details are still being negotiated. Meanwhile, Qatar’s Prime Minister is visiting Tehran on Thursday for talks aimed at de-escalation and restoring US-Iran dialogue.
Looking ahead, the US economic calendar is relatively light on Thursday, with weekly Initial Jobless Claims the main release. This leaves Gold largely at the mercy of US Dollar dynamics, shifting Fed expectations and fresh developments from the Middle East.
Technical analysis: XAU/USD bulls pause below $4,700 resistance
From a technical perspective, XAU/USD retains a bullish bias, although momentum indicators point to waning upside strength on the daily chart. The metal holds above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), supporting the broader uptrend.
Meanwhile, the Relative Strength Index (RSI) has eased to the mid-60s after climbing into overbought territory, while the Moving Average Convergence Divergence (MACD) remains positive but is losing momentum, suggesting that upside pressure is moderating rather than reversing.
On the upside, initial resistance is seen at the $4,700 psychological mark, followed by the $4,900 level. On the downside, the 200-day SMA at around $4,525 offers immediate support, followed by the 100-day SMA near $4,376 and the 50-day SMA around $4,200. A broader support zone is seen at the $4,000 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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