Forex News

• Silver trades near its highest level since mid-June after last week’s strong rally.
• A firmer US Dollar limits some of the upside as markets look ahead to key US data and Fed signals this week.
• XAG/USD retains a bullish technical bias above the 100-day MA, with the upper Bollinger band and 200-day MA in focus.

Silver (XAG/USD) is little changed on Monday, fluctuating between modest gains and losses near its highest level since mid-June, with buyers struggling to clear the $70 psychological mark.

At the time of writing, XAG/USD trades around $69.17, holding firm after last week’s strong rally, although Gold (XAU/USD) is outperforming the white metal at the start of the week, up nearly 1% on the day.

The US Dollar (USD) is also firmer on Monday, limiting some of Silver’s upside. Still, the broader backdrop remains supportive after the sharp rally in precious metals following the US Treasury’s buyback announcement and fading expectations of an imminent Federal Reserve rate hike. However, the interest rate outlook remains uncertain as tensions in the Middle East keep energy-driven inflation risks elevated.

Later this week, attention turns to key US data, with the Personal Consumption Expenditures (PCE) Price Index due on Wednesday, which could shape expectations for the Federal Reserve’s September policy meeting. Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium on Friday will also be closely watched for fresh signals on the interest-rate outlook.

Technical analysis

On the daily chart, XAG/USD retains a bullish near-term bias as price holds above the 100-day Moving Average (MA) at $68 and the Bollinger middle band at roughly $63.

The pair is advancing toward the upper Bollinger band at $70.86, while the 200-day MA at $72.13 looms as a next hurdle. Momentum remains constructive, with the Relative Strength Index (RSI) near 65 and the Moving Average Convergence Divergence (MACD) positive, although the Average Directional Index (ADX) around 24 hints at a moderate trend strength rather than an aggressive breakout.

On the topside, initial resistance aligns with the upper Bollinger band at $70, followed by the longer-term barrier at the 200-day MA near $72. On the downside, immediate support is seen at the 100-day MA around $68, ahead of secondary demand at the Bollinger middle band near $63, with the lower Bollinger band down at $55 marking a more distant structural floor should a deeper correction unfold.

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

BNY’s Geoff Yu describes Hungary as a constructive story within EMEA, with post-election re-rating and scope for continued MNB easing. Yu notes corporate flows are strong, spreads still compensatory, and argues Hungarian Forint (HUF) can make a stronger case as a carry currency if inflation stays contained, even as power and energy constraints justify caution on duration and fiscal risks.

Constructive on HUF and MNB path

"Hungary is the first test. Hungary now tests whether easing can continue despite supply and fiscal constraints. The Magyar Nemzeti Bank (MNB) meets this week after a strong post-election re-rating, including a 200bp drop in the 10y government yield."

"Hungary is constructive. We remain bullish on Hungary, although client positioning argues for selectivity. Duration is expensive given fiscal slippage risk, and sovereign flows, while positive, are weaker than in Q1 and Q2."

"Given the easing in financial conditions across the Eurozone and the U.S. Treasury’s actions, HUF can make a stronger case for carry status as long as inflation figures remain contained. Clear supply constraints in power and energy justify some caution, but activity is slowing sufficiently for MNB to continue easing."

"Corporate flows tell a stronger story, surging to their strongest level in six months. Public-sector institutional reforms are beginning, and markets appear to expect positive spillovers into the private sector. Spreads still offer enough compensation to sustain demand."

"Hungary now tests whether easing can continue despite supply and fiscal constraints. The Magyar Nemzeti Bank (MNB) meets this week after a strong post-election re-rating, including a 200bp drop in the 10y government yield. The full-year deficit remains on track to reach 7.5% of GDP but record monthly surpluses in June and July change the near-term picture."

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

TD Securities economists Robert Both and Emma Lawrence expect Canada’s Q2 National Accounts to show a sharp rebound in Gross Domestic Product (GDP) growth, driven by stronger exports and solid services activity. They forecast expenditure-based GDP at 3.5% annualized and industry-level GDP up 0.3% m/m, with July flash data likely keeping Q3 GDP above potential output, reinforcing a constructive backdrop for the Canadian Dollar.

Exports seen driving Q2 recovery

"Q2 National Accounts provide the main risk event this week, where TD looks for a sharp rebound from the Q4/Q1 slowdown with expenditure-based growth of 3.5% (market: 3.3%) on stronger exports."

"We look for expenditure-based GDP to post a sharp rebound in Q2 with annualized growth of 3.5%, underpinned by stronger exports."

"Industry-level GDP for June should mirror the Q2 strength with a 0.3% m/m increase, above flash estimates for a 0.2% print."

"We also look for new flash estimates to show continued momentum into July to leave Q3 GDP tracking above potential output."

"Thursday's payroll employment report will provide a final look into June growth conditions when released Thursday alongside the current account balance for Q2."

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

OCBC’s Sim Moh Siong and Christopher Wong note that the US Treasury’s expanded long-end buyback programme has revived market fears of Dollar debasement, driving a weaker USD, stronger Gold and higher breakevens. They stress this is not classic QE, but highlight rising US policy uncertainty, questions over Fed independence and Jackson Hole risks as key constraints on the Dollar outlook.

Debasement fears weigh on Dollar

"USD debasement has re-emerged as a market theme after the US Treasury unexpectedly expanded its long-end buyback programme, signalling discomfort with the recent rise in long-dated yields."

"The resulting unwind of US steepener positions has likely reinforced other debasement trades, including a weaker USD, a rebound in gold and higher US inflation breakevens."

"Several factors help explain why the buyback announcement has reignited debasement concerns. However, the view that larger buybacks amount to quantitative easing appears misplaced. The Treasury is purchasing longer-dated bonds while effectively funding the operation through increased Treasury bill issuance, rather than expanding the money supply."

"Second, investors appear increasingly uneasy with what they see as a more activist Treasury. The timing of the buyback announcement, together with the earlier intervention in EURJPY, departs from the Treasury's long-standing commitment to a "regular and predictable" approach. Rising concerns over US policy uncertainty are typically USDnegative"

"Third, markets are questioning whether the Fed could face pressure to keep rates lower than otherwise warranted in order to contain government financing costs, rather than focusing solely on inflation and employment objectives. Uncertainty around the Fed's reaction function and growing doubts about its willingness to prioritise inflation have sharpened focus on Chair Warsh's Jackson Hole remarks. The USD could face further downside if Chair Warsh and other Fed officials fail to push back against growing debasement concerns."

"Renewed policy uncertainty is constraining the scope for USD gains and puts our moderately constructive USD view over the next one to two quarters at risk. That said, rising real yields, driven by AI-related investment demand competing with heavy government borrowing, remain consistent with a resilient US economy. This should limit the risk of an overly dovish Fed and help contain USD downside. For now, we prefer to remain neutral on the USD rather than chase the latest bout of USD weakness."

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

• USD/JPY returns above 159.00 on Monday after bouncing from 158.00 lows last week and retracing all losses from Wednesday's sell-off.
• The pair remains close to the key 160.00 level despite broad-based US Dollar weakness. 
• Domestic growth and Japanese Government Bonds' sell-off are pointed as significant headwinds for yen recovery.

The Japanese Yen (JPY) extends losses against the US Dollar (USD) in a calm trading session on Monday. The USD/JPY has returned above 159.00 after bouncing from lows near 158.00 last week and approaches the key 160.00 level, which highlights that the mere threat of intervention is not enough to support a significant Yen recovery.

Economic growth seen as key to unlocking a sustainable yen rally

Strategists at Societe Generale argue that the key to a more durable recovery in the Yen lies less in rate differentials and more in the domestic growth story. "I suspect that what is really needed to kick-start a sustainable yen rally, however, is an upgrade to Japanese forecasts, more than anything to do with differentials."

While acknowledging that the "current consensus looks for average growth this year and next of 0.75%, which is better than it was a few months ago," they caution that this remains "still significantly lower than before the Gulf conflict pushed up oil prices," underscoring the need for a more convincing improvement in Japan’s growth outlook before expecting a sustained JPY rebound.

Japan flow dynamics erode support for the Yen

FX Analysts at BNY Mellon put the focus on the growing concerns about Japan's fiscal balance, underscoring that Japan’s latest portfolio flow data show foreign investors stepping up sales of Japanese Government Bonds. “Foreign investors accelerated JGB selling last week, with net outflows of ¥1.25tn, cutting YTD foreign net purchases to ¥4.99tn, the lowest cumulative level since early February,” state the analysts.

The BNY Mellon experts add that, “overall, the flow mix points in the same direction for the currency: foreign selling of Japanese bonds and stronger Japanese buying of foreign assets weaken support for JPY and leave it vulnerable to further depreciation.”

USD/JPY downside momentum fades as range-bound trade persists

In the same line, Strategists at UOB Group retain a mildly negative bias on USD/JPY but discard a significant Yen recovery in the near-term. “Downward momentum is starting to build, but it is insufficient for a sustained decline,” say the UOB Group.

Looking ahead, they judged that in the next one to three weeks, the USD “could edge lower, but any decline should be contained within a 156.60/159.60 range.” The bank's experts recall that it has “mostly traded in a range, and the build-up in momentum is fading,” concluding that they “continue to hold the same view for now” despite the loss of downside traction.

Societe Generale analysts highlight that Gold has broken out of a small base formation, reclaimed its 200‑DMA and is enjoying an extended rebound. The move is framed within broader Dollar debasement concerns and rising term premium. The bank flags successive upside hurdles at $4,730/$4,770 and the April peak at $4,890, with the 200‑DMA near $4,510 seen as key support.

Key hurdles and moving average

"Gold broke out of a small base formation earlier this month and has now reclaimed the 200-DMA, resulting in an extended rebound."

"A cross above this longer-term moving average denotes a resurgence of upward momentum."

"Defence of the moving average, now near $4,510, will be crucial for the persistence of this phase of rebound."

"For Gold, the next potential hurdles could be located at $4,730/$4,770 before the April peak at $4,890."

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