Forex News
Commerzbank’s Charlie Lay highlights Hong Kong’s first five-year plan to strengthen its position as the leading offshore CNY and cross-border financial centre. Expanded CNY products, enhanced Stock/Bond/Wealth Connect schemes and broader commodity and tech financing aim to deepen two-way capital flows. While near-term USD/CNY impact is limited, the longer-term implications are modestly CNY-positive via greater international usage.
Five-year plan supports CNY use
"Hong Kong plans to deepen its role as the leading offshore CNY and cross-border financial center under its first-ever five-year plan."
"Chief Executive John Lee said the government intends to expand offshore CNY investment and risk-management products and widen mutual market access through Stock Connect, Bond Connect and Wealth Management Connect."
"The measures mark another step toward CNY internationalisation without full capital-account liberalisation. A broader range of offshore CNY assets and hedging instruments, together with expanded Connect programmes, should deepen two-way capital flows."
"This could also make it easier for international investors to hold and manage CNY exposure. More broadly, Hong Kong provides Beijing with a controlled gateway to internationalise the CNY while retaining control over cross-border capital flows."
"For USD/CNY, the near-term impact should be limited, but the longer-term implications are modestly CNY-positive. Deeper offshore liquidity and greater cross-border market access should gradually increase international use of the currency."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Labour Day closures keep liquidity thin across North America.
- Canada’s weak jobs report fades as Oil supports Loonie.
- US CPI, PPI and sentiment data guide Fed repricing.
The Loonie gains some traction versus the Greenback, while the latter posts modest losses, as US and Canadian financial markets remain closed in observance of Labour Day. Nevertheless, the USD/CAD edges lower by some 0.15%, trading at 1.3813 at the time of writing.
USD/CAD slips as Oil strength offsets soft Canadian jobs.
Last week, employment data in Canada revealed that the economy lost 41.7K workers, while the Unemployment Rate remained steady at 6.4%. This pushed USD/CAD higher as US Nonfarm Payrolls crushed estimates, with July’s print providing a leg-up that has so far been faded.
Last week’s unexpectedly strong Nonfarm Payrolls report for August confirmed Fed Chair Kevin Warsh’s statement that the jobs market is “consistent with full employment.”
Geopolitics are poised to continue to drive price action. The escalation of the US-Iran war increased upward pressure on energy prices, which typically correlate positively with the Canadian Dollar, suggesting further downside for the USD/CAD pair.
USD/CAD to be influenced by interest rate differentials
Given the backdrop, the Federal Reserve is expected to raise rates by 25 basis points, according to Prime Terminal data. Odds are at 63% to hike to 3.75% - 4$, while for holding rates, stand near 37%.
Regarding the Bank of Canada (BoC), money markets had priced in a near 70% chance of a hold at 2.25% and a slim 30% chance of a rate hike.
Although the data was positive and the US Dollar strengthened after NFP, the move faded as investors await US inflation data on the producer and consumer sides on Thursday and Friday, respectively.
Ahead of the economic calendar, it would remain absent in Canada but not so in the US. The release of inflation data on the producer and consumer side, along with jobs data and Consumer Sentiment, will provide clues about the status of the economy.
USD/CAD Price Forecast: Technical Outlook
In the daily chart, USD/CAD trades at 1.3816, maintaining a soft bearish bias as it holds below the clustered simple moving averages around 1.3999 and beneath the descending trend-line resistance drawn from 1.4248, now coming in near 1.3942. The pair still respects an underlying upward support trend line from 1.3526, but a Relative Strength Index (14) reading near 41 hints that rallies remain vulnerable while price stays capped under these overhead levels.
On the topside, initial resistance is seen at the downward resistance trend line around 1.3942, with the simple moving average cluster near 1.3999 acting as the next barrier that would need to be reclaimed to ease the current bearish pressure. On the downside, immediate support aligns with the ongoing upward trend-line zone just under the market around 1.38, with deeper levels traced back toward the former break region near 1.3598 and the trend-line origin around 1.3526 if selling extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
ING’s Chris Turner reports that USD/KRW rebounded from 1335 after news that Korea’s National Pension Service may halt or reverse its forward-market Dollar selling. Authorities appear comfortable with recent Won gains after a 15% USD/KRW drop since June. ING favours consolidation in both USD/KRW and USD/JPY, seeing reduced Dollar selling in these pairs supporting the broader Dollar tone.
Won rally seen due for consolidation
"USD/KRW bounced off the lows today at 1335 after news emerged that Korea's National Pension Service could be halting, if not reversing, its USD/KRW sales in the forward market."
"Remember, changes to NPS FX hedging were one of the measures introduced in June to help support the beleaguered won."
"Today's news suggests Korean authorities feel that the won has come far enough for the time being."
"And certainly the 15% drop in USD/KRW since June has been impressive and matches a similar move seen in 2022."
"We tend to favour some consolidation both in USD/JPY and USD/KRW for the time being. And the easing of dollar selling pressure in these two big FX pairs can allow the dollar to find support more broadly."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY trades just above 154.00, down 1.22% on Monday.
- Japanese wage growth is seen at 3.9% YoY at 23:30 GMT tonight.
- Swaps price the Bank of Japan at 97% and the Fed at 59%.
USD/JPY trades just above 154.00 after giving up 1.22% on a Monday with American desks shut. Everything the pair has left to argue about arrives inside ten days, and the first of it lands tonight. Japanese wage data at 23:30 GMT is the number the Bank of Japan (BoJ) has made the condition of everything else.
Tonight is Tokyo's own test
Japanese labour cash earnings for July land at 23:30 GMT, seen at 3.9% YoY after 3.4%. The second estimate of Japanese Gross Domestic Product (GDP) follows at 23:50 GMT with growth seen at 0.4% on the quarter after 0.3% and the deflator at 2.6%, alongside a current account seen at ¥2.87 trillion after a ¥92.3 billion deficit.
The wage figure is the one that counts, and the useful comparison sits on the same release. Nominal pay seen at 3.9% against a deflator seen at 2.6% is a real gain, which is precisely what the hawkish case has been short of. The country that could not manufacture wage growth for a generation is scheduled to report some at half past eleven tonight.
What it cannot do is add to September. That hike is priced at close to 97% and there is no room above it. What tonight can move is October, where the pricing is thinner and where a board member has already raised the possibility of consecutive moves rather than the one-every-six-months cadence the BoJ has kept to. The ten-year Japanese Government Bond (JGB) yield cleared 3% on September 1 for the first time since 1996, so the bond market has already taken that side of it.
Two meetings, and the doubt has changed sides
The Federal Reserve decides on September 16 and the BoJ on September 18, forty-eight hours apart. Swaps have the Japanese quarter point at close to 97%. The Federal Reserve's own market pricing puts its quarter point at 59%, with the target band at 3.50% to 3.75% and the effective rate at 3.63%.
That is a reversal of how this pair has worked for years. The Yen leg was the one nobody could predict and the Dollar leg the one that moved on schedule. Going into a fortnight with both banks live, Tokyo is the near certainty and Washington is the open question.
The size of the gap is not the story. Tokyo's policy rate is 1% against a Federal Reserve midpoint of 3.625%, and delivering both hikes moves that by nothing worth trading. What is being traded is which of the two paths bends first, and by how much after the meeting rather than at it.
There is nothing left to price on the Yen side
Friday showed what a decided market looks like from the other direction. US Nonfarm Payrolls (NFP) printed 162K against a 53K consensus, USD/JPY spiked to just under 157.00 within seconds of the 12:30 GMT release, and the entire move was gone inside the hour. Monday then took 1.22% out of the pair on a session when the country that produced those payrolls was shut.
So the arithmetic of the week is one-sided. There are three points of room left in the Japanese pricing and forty-one in the American, which leaves Friday's inflation print as the only scheduled number capable of moving this pair by more than it moves back.
The rest of the week is American
The US ADP employment reading lands Tuesday at 12:15 GMT. The US Producer Price Index (PPI) follows Thursday at 12:30 GMT, seen at 0.4% on the month after a flat July and 5.3% YoY after 4.7%, with the core measure at 4.6% YoY after 4.2%. Initial jobless claims land alongside them, seen at 205K after 206K.
The US Consumer Price Index (CPI) arrives Friday at 12:30 GMT, seen at 0.4% on the month after 0.1%, with the annual rate steady at 3.4% and the core measure easing to 2.4%. Michigan sentiment and the one-year inflation expectations measure, last at 4%, follow at 14:00 GMT. A print at consensus firms a hike already priced at 59% and hands the Dollar leg the only thing that has gone its way in a fortnight.
Levels and bias
Resistance: The 154.50 area caps the bounce, and Monday's rebound stalled short of 155.00 before handing most of it back. Above that, 156.00 is Monday's open and sits just beneath the session high. The 200-day Exponential Moving Average (EMA) near 158.00 broke on September 3 and now caps any retracement, with the 50-day EMA just under 159.50 above it.
Support: The 154.00 handle is the whole map. Monday's low sits a few pips above it and the pair spent the European evening within forty pips without breaking it. Beneath it the chart carries no traded structure at all, which leaves 153.50 and 153.00 as round figures rather than tested levels.
Bias: Bearish while 155.00 caps. The daily Stochastic Relative Strength Index (Stoch RSI) sits at 82 with price at the lows of its range, so no oversold reading is available to support a bounce and the oscillator has its whole range left to give back. The intraday measure near 58 is mid-range after the afternoon rebound faded, which is neither help nor hindrance. A daily close above 155.50 invalidates the call. A soft wage print tonight does it faster, and a hot American inflation number on Friday does it with more staying power.
USD/JPY daily chart
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 Lloyd Chan warns that upcoming US inflation data could test the recent Rupiah recovery, as firmer US inflation may reinforce elevated US yields and challenge USD/IDR’s break below 17,700. He notes limits to domestic buffers, rising foreign ownership of SRBI, and that higher Oil prices could revive concerns over Indonesia’s fiscal risks and subsidy costs.
Rupiah recovery faces external tests
"In Indonesia, US inflation data this week could test the recent rupiah recovery."
"Firmer US inflation could reinforce elevated US yields and challenge USD/IDR's recent break below 17,700. While domestic buffers remain supportive, there are limits."
"Foreign ownership of outstanding SRBI has already reached around 27%, close to previous highs seen in late 2024. More importantly, Indonesia's commodity offsets are proving insufficient to fully counter the deterioration in the oil and gas trade balance."
"Our calculations suggest Brent prices above US$82/bbl begin to erode the cushioning effect from coal, palm oil and base-metal exports."
"If oil prices move above US$100/bbl and remain there for an extended period, renewed concerns over fiscal risks and subsidy costs could re-emerge."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/USD holds just under 1.3550 after a 42-pip Monday, up 0.17%.
- One of Tuesday's four MPC witnesses voted to hike in July.
- Markets price a 59% Fed hike on September 16 and 16% from the BoE.
GBP/USD holds just under 1.3550 after a Monday that covered 42 pips with American desks shut for Labor Day. The week that follows is not that. Pound Sterling (GBP) carries the higher policy rate of the two, the larger tightening path over twelve months, and almost none of the event risk that decides where the pair sits by Friday.
A holiday is not a verdict
The last thing to move this pair was Friday's US Nonfarm Payrolls (NFP), which printed 162K against a 56K consensus. GBP/USD fell 57 pips inside minutes to just beneath 1.3500 on the 12:30 GMT release and had recovered about two thirds of it by the European afternoon.
The mechanism matters more than the move. A strong American labour market raises the odds the Federal Reserve (Fed) tightens again, a tighter Fed means a stronger Dollar, and a stronger Dollar means a lower GBP/USD. Sterling spent Friday being punished for somebody else's good news, and Friday next runs the same experiment on the price data.
Sterling already won the rate argument
Bank Rate is 3.75%. The Federal Reserve's target band is 3.50% to 3.75%, a midpoint of 3.625%, with the effective rate at 3.63%. The Dollar's rate advantage over the Pound, the thing that set the terms of this pair for most of four years, has gone.
The forward path reads the same way. Markets price 71.9 basis points of Bank of England tightening over twelve months against 59.5 from the Federal Reserve, and a terminal rate of 4.47% in London against 4.22% in Washington by the middle of 2027.
The inflation data does not obviously support that ordering. UK CPI inflation was 2.6% in June and the Bank's July report expected it to rise from there as energy costs pass through rather than to have peaked. The American annual rate is seen at 3.4% on Friday. London has the lower inflation, the higher policy rate and the larger path priced against it, and GBP/USD sits roughly 330 pips beneath its January high all the same.
Tuesday is the only British thing that counts
Monetary Policy Report hearings begin at 13:15 GMT on Tuesday. Four Monetary Policy Committee (MPC) members appear before the Treasury Committee: the Governor, the Deputy Governor for Markets and Banking, and two external members. The session covers July's report and the decision to hold Bank Rate.
One of those four voted to raise Bank Rate by a quarter point in July. That vote was 6-3 to hold, after 7-2 in June, so the hawkish minority has been growing a member at a time while the headline decision has not moved. The July report framed the problem as an energy shock the Committee cannot influence but has to set policy around.
None of which touches September. The Bank of England meets on September 17 with a hike priced at 16%, and the first move the market genuinely expects is November, at 56%, with December at 54% behind it and 1.25 hikes priced into Bank Rate by mid-December. Tuesday cannot change next week. It can change November, which is more than anything else on the British calendar can claim.
The rest of the week belongs to the Dollar
British Retail Consortium (BRC) sales land at 23:01 GMT on Monday, seen at 1.2% YoY after 1%. The US Producer Price Index (PPI) follows on Thursday at 12:30 GMT, seen at 0.4% on the month after a flat July and 5.3% YoY after 4.7%, with the core measure at 4.6% YoY after 4.2%.
Friday opens with UK growth at 06:00 GMT, where July output is seen flat after 0.3% and industrial and manufacturing production are both seen at 0.1%. UK consumer inflation expectations follow at 08:30 GMT, last at 4% against a CPI rate well beneath it. The US Consumer Price Index (CPI) arrives at 12:30 GMT, seen at 0.4% on the month after 0.1%, with the annual rate steady at 3.4% and the core measure easing to 2.4%. A stalled British quarter and a hot American print land six and a half hours apart, and only one of them moves a policy rate.
Levels and bias
Resistance: The 1.3550 area caps the pair and Monday's high stopped short of it, in the same place Friday's high stopped. Above it, 1.3600 is the first round figure and the late-August peak in the 1.3650 area is what defines the range. The January high just under 1.3900 is not this week's business.
Support: The 1.3500 handle is doing all the work. Monday's low sat just above it and Friday's NFP low just beneath, with the 50-day Exponential Moving Average (EMA) between the two: the spike undercut that average by less than three pips before the pair took it back. Beneath there, 1.3450 is the next figure and the 200-day EMA sits just above 1.3400.
Bias: Bearish while 1.3550 caps, with 1.3500 and the 50-day EMA beneath it the objective. The daily Stochastic Relative Strength Index (Stoch RSI) has fallen from above 90 in late August to 38 while price held its range, so momentum has left without price following, though the intraday reading near 67 was still rising into the European evening. The scheduled risk points the same way, because Friday's American inflation consensus is hot enough to firm a Fed hike already priced at 59% while nothing British this week can move a September call priced at 16%. A daily close above 1.3550 invalidates the call, and a hearing on Tuesday that lifts November pricing does it faster.
GBP/USD daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Commerzbank’s Vietnam update highlights rising inflation and a narrowing trade deficit, with strong manufacturing-led imports and resilient exports. The bank notes elevated CPI and external deficits limit scope for aggressive easing, but robust activity persists. USD/VND has been stable in a tight range, with potential support from portfolio inflows as FTSE upgrades Vietnam to Secondary Emerging Market status.
Rising prices and inflows support VND
"August CPI inflation picked up to 4.9% yoy (Bloomberg consensus: 4.7%) vs 4.5% in July, reversing the moderation seen over the previous two months. Inflation has remained elevated this year, with average CPI rising 4.5% yoy in the first eight months, broadly in line with the authorities' 4.5% full-year inflation objective. The renewed increase underscores the challenge facing policymakers as they seek to support strong economic growth while containing price pressures."
"Looking ahead, the intensification of El Nino weather conditions could add further upward pressure on food prices in the coming months. Core CPI, which excludes food, energy and administered prices, remained broadly stable at around 4.5% in August, suggesting limited broadening in underlying price pressures as yet."
"On trade, the August trade deficit narrowed more than expected to USD0.1bn (Bloomberg consensus: USD1.1bn) vs USD3.6bn previously. This was largely driven by a downside surprise in import growth, which rose 37.9% yoy (Bloomberg consensus: 41.5%) vs 41.4% in July. "
"Overall, the data continue to point to strong underlying manufacturing momentum rather than a deterioration in Vietnam's external competitiveness."
"In FX, USD/VND fell 0.1% to 26,080 on Friday but was broadly unchanged for the week. The pair has traded in a narrow 26,070-26,100 range since late August, declining from the late July peak of 26,340. Portfolio inflows could provide further support for the VND in the coming months."
"FTSE is set to upgrade Vietnam from Frontier Market to Secondary Emerging Market effective 21 September, a move that could attract up to USD5bn in equity inflows."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Thin US holiday liquidity amplifies USD/MXN’s modest rebound.
- Rising Fed hike odds keep inflation data in focus.
- Mexico inflation and industrial output guide Peso sentiment next.
The Mexican Peso (MXN) loses some ground versus its North American counterpart, the US Dollar (USD), as the USD/MXN pair rises over 0.25% to 16.93, even though the Greenback edges lower against a basket of six currencies, the so-called US Dollar Index (DXY).
USD/MXN slips despite softer Dollar as Fed hike bets linger
Thin liquidity conditions as the financial markets remained closed in the US in observance of Labor Day. In the meantime, an escalation of the Middle East conflict, with the US retaliating against Tehran’s attack on Oil vessels, pushed Oil prices higher, to the detriment of the US Dollar.
Meanwhile, inflation expectations in the US continued to rise, forcing investors to price in a nearly 61% chance of a 25-basis-point rate hike by the Federal Reserve (Fed) at the September 15-16 meeting.
Last week’s stronger-than-expected Nonfarm Payrolls (NFP) report for August confirmed Fed Chair Kevin Warsh’s saying that the jobs market is “consistent with full employment.”
Although the data was positive and the US Dollar strengthened after NFP, the move faded as investors await US inflation data on the producer and consumer sides on Thursday and Friday, respectively.
In Mexico, private economists expect interest rates to remain unchanged for the foreseeable future, meaning that for the rest of 2026 and throughout 2027, Mexico’s main reference rate will be 6.50%. Regarding the exchange rate, analysts expect the Mexican Peso to depreciate to 17.50 by the end of 2026 and to 18.07 by the end of 2027.
Data-wise, Mexico’s schedule will feature 12-month inflation for August, expected at 3.3%, up from 3.12%, on Wednesday. On Friday, Industrial Output for July is forecast at 0.1% MoM, down from 0.2%, and for the same period on an annual basis is projected to rise from 1.7% to 1.8%.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 16.9293, keeping a bearish near-term tone as the pair holds below the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 17.2401 and beneath the active descending trend lines, the nearest of which is capping price near 17.0838. The Relative Strength Index (14) hovers at 36.5, staying in weak territory and hinting that downside pressure persists, even if the latest slide is showing signs of moderation.
On the topside, initial resistance emerges at the nearby descending trend cap around 17.08, ahead of the broader SMA cluster close to 17.24, while the longer-term downtrend barrier tied to prior highs sits much higher near 18.12. On the downside, the immediate level to watch is the horizontal support drawn at 16.89, where a clear break lower would expose further weakness toward fresh lows, whereas holding above this floor could encourage a short-term consolidation within the broader bearish structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- EUR/USD holds above 1.1600 after a 28-pip session, up 0.06%.
- AfD won Saxony-Anhalt with 43.9%, the CDU's share halved to 17.2%.
- Money markets see a third ECB hike that no surveyed forecaster expects.
EUR/USD holds above 1.1600, seven pips above where Monday opened. The pair has had three chances to move over four sessions and has taken none of them. Both central banks are priced to raise rates this month for the same energy shock, and a rate gap that is not moving does not move a currency.
Three catalysts and seven pips
Friday's US Nonfarm Payrolls (NFP) printed 162K against a 53K consensus, and September hike odds for the Federal Reserve went to 58% from 49.4%. EUR/USD lost roughly 40 pips to just beneath 1.1600 on the 12:30 GMT release and had the whole move back by the New York afternoon.
Sunday delivered the first outright win for a far-right party in a German state since the war. The Alternative for Germany (AfD) took 43.9% in Saxony-Anhalt and 39 of the 83 seats, three short of a majority, while the chancellor's Christian Democrats fell to 17.2% from 37.1% in 2021. The 10-year Bund yield rose a single basis point on Monday and the Euro's entire session covered 28 pips.
Monday's Eurozone releases landed at 08:30 GMT and 09:00 GMT. Second-quarter growth was revised up to 0.6% against a 0.4% consensus and the Sentix investor survey jumped to 5.1 from 0.9. EUR/USD spiked to a high short of 1.1650 and was back where it started inside the hour.
Unanimity is not information
The European Central Bank (ECB) announces at 12:15 GMT on Thursday and is expected to lift the deposit rate to 2.5% and the main refinancing rate to 2.65%. All 65 economists in the Reuters survey taken between August 31 and September 3 expect exactly that, up from 83% of them in August. A decision nobody disputes cannot move a price.
The level it arrives at is no more interesting. A 2.5% deposit rate is the top of the range most estimates put at neutral, between 1.75% and 2.5%, so Thursday completes the journey and stops. Anything past it is a choice to restrict demand rather than to contain a price shock, and the Federal Reserve is being repriced for the same barrel of Crude Oil at the other end.
The market and the forecasters cannot both be right
The argument is not about Thursday. It is about whether the 2% deposit rate the ECB left behind in June was the floor of a short defensive move or the base of a cycle. Interest rate futures price a third increase to 2.75%. The economists in that same survey do not, and the July minutes record some Governing Council members wanting a move into mildly restrictive territory.
The Council has reasons to keep its options open. Its own research this month argued that the energy shock has not fed into non-energy inflation the way it did in 2022, which is the case for stopping at neutral. Monday's growth beat came from trade, which added 0.9 percentage points to the quarter, so the number arguing for restriction is the one a stronger Euro would erode.
Berlin supplies another reason. The governing coalition lost a state on Sunday and faces two more votes on September 20, with Oxford Economics flagging the risk that political stalemate derails reform and drags German potential growth lower. Tightening into that is a harder sell in December than it is this week.
Everything arrives inside 26 hours
Rates and the statement come at 12:15 GMT Thursday and the press conference at 12:45 GMT, with the United States Producer Price Index (PPI) printing between them at 12:30 GMT, seen at 0.4% on the month after a flat July and 5.3% YoY after 4.7%. The ECB President speaks again at 14:00 GMT Friday and on Saturday morning.
Friday belongs to the Dollar leg. The Consumer Price Index (CPI) at 12:30 GMT is seen at 0.4% on the month after 0.1%, with the annual rate steady at 3.4% and the core measure easing to 2.4%. It is the last inflation print before the Federal Reserve meets September 15-16 with a quarter point priced near 58%.
A soft American number and a hint from Frankfurt that neutral is not the destination takes EUR/USD through 1.1700. A hot number and no guidance sends it back to the moving averages. Everything the pair has declined to do for three weeks is scheduled for two consecutive lunchtimes.
Levels and bias
Resistance: The 1.1650 area caps the range and Monday's high stopped short of it again. Above that, the late-August peak just under 1.1700 defines the whole three-week range, and a daily close through it opens 1.1750 and then the May highs in the 1.1800 area.
Support: The 1.1600 handle held through Monday, and Friday's payrolls low sat just beneath it without closing there. Under it the 50-day and 200-day Exponential Moving Averages (EMA) sit within eight pips of each other just above 1.1550, which puts the entire downside case in one place. Beneath them 1.1500 is the next round figure, with the early-August base below that.
Bias: Bearish while 1.1650 caps, with the EMA cluster just above 1.1550 the objective. The daily Stochastic Relative Strength Index (Stoch RSI) has fallen from above 85 to 46 in four sessions while price held its range, which is momentum leaving without price following it yet, and the intraday reading has faded to 26 from the afternoon push. The scheduled risk points the same way: the curve is priced for more tightening than any surveyed economist expects, and Friday's inflation consensus is hot enough to restore the Fed hike. A daily close above 1.1650 invalidates the call and puts 1.1700 back in play.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
BNY’s Geoff Yu highlights that a stronger US Dollar (USD), higher Oil prices and rising global yields are pressuring Asian currencies and assets. Chinese Yuan (CNY) remains relatively resilient but is drawing official scrutiny, while Indian Rupee (INR), Philippine Peso (PHP), Thai Baht (THB) and South Korean Won (KRW) look vulnerable or stretched. Yu maintains its call to increase CNY hedges without chasing recent appreciation.
CNY resilience and regional pressure
"Asia’s macro calendar will test whether external demand remains resilient as domestic momentum stays uneven."
"A stronger U.S. dollar, elevated oil prices, rising global bond yields and renewed foreign outflows continue to pressure Asian currencies, equities and fixed income."
"Differentiation remains the key regional theme, but recent divergences are becoming stretched, while further currency depreciation is testing the limits of central-bank FX smoothing operations."
"CNY remains one of the region’s most resilient currencies, but its strength is drawing greater official attention, reflected in the widening counter-cyclical factor (CCF) in daily USD/CNY fixings."
"Our call to increase CNY hedges without chasing the rally continues to play out: iFlow scored holdings have moved further into underheld territory as the pace of appreciation slows."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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