Forex News

• EUR/USD advances as the US Dollar eases from its recent highs.
• US yields remain elevated, keeping the broader Dollar backdrop supportive.
• France’s fiscal uncertainty and cautious ECB signals cap the Euro’s recovery.

EUR/USD trades on the front foot on Tuesday, drawing support from a modest pullback in the US Dollar (USD). However, concerns over France’s fiscal position keep the Euro’s (EUR) gains in check. At the time of writing, the pair trades around 1.1255, up 0.29% on the day.

The US Dollar eases as Treasury yields retreat, although the benchmark 10-year yield has recovered most of its intraday decline. It trades around 5.29% after dipping toward 5.25% earlier in the day, remaining close to Monday’s peak of 5.349%, its highest level since 2002. US yields remain elevated as persistent inflation risks, concerns over government debt and fiscal sustainability, and expectations that interest rates will remain high for longer weigh on the bond market.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.87 after climbing to a fresh year-to-date high of 102.53 on Monday.

On the monetary policy front, softer-than-expected Nonfarm Payrolls (NFP) and Personal Consumption Expenditures (PCE) inflation data released last week have reduced pressure on the Federal Reserve (Fed) to raise rates at its October 27-28 meeting.

The CME FedWatch Tool shows roughly a 78% probability of a hold this month, although the Fed’s commitment to bringing inflation back toward its 2% target keeps a December rate hike in play. Traders now await the Federal Open Market Committee (FOMC) meeting minutes, due on Wednesday, for clues on the Fed’s next move.

According to TD Securities, the policy backdrop is no longer providing incremental support for the Dollar. The bank argues that “we have likely already seen the peak in market pricing for Fed hawkishness, and the Fed is unlikely to hike beyond what the market has already priced in,” limiting scope for further upside from expectations of tighter policy.

In their view, “recent US data shows the Fed also cannot hike rates at a more accelerated pace than once per quarter to give the USD the additional boost from tighter monetary policy channel,” reinforcing the notion that “it is hard for us to see persistently bullish USD signals from the US data/ Fed channel alone.”

On the European side, France’s public finances remain a near-term concern as the government faces a difficult task in securing support for its 2027 budget in a divided parliament.

Meanwhile, cautious remarks from European Central Bank (ECB) officials add uncertainty over further monetary tightening. Speaking on Tuesday, policymaker Olli Rehn said, “We have not seen inflation spread to non-energy prices or wages.” He added that high long-term interest rates are slowing growth and limiting the pass-through of energy costs to other prices and wages.

Michael Wan at MUFG argues that Asian currencies have been more resilient than others, supported by strong AI-related exports and a less acute Oil and diesel supply situation in the region. He sees a good chance that Asia FX can outperform across various scenarios, though with dispersion across pairs. Previous concerns around FX carry unwinds in Latam have stabilised, reinforcing Asia’s relative appeal.

Resilient Asia FX with tech support

"Looking at Asia, it’s interesting that Asian currencies in general have been somewhat more resilient this time around relative to other currencies."

"We think this is due to AI exports remaining quite strong so far, while from an oil and oil product perspective especially diesel the supply situation in our region seems less acute relative to others."

"Concerns around unwinding of FX carry trades have earlier dominated markets and led to underperformance of Latam currencies but this has stabilised."

"Moving forward, we see a good chance that Asia FX can outperform across a range of scenarios but with some continued dispersion across key FX pairs."

"We like the tech-linked currencies such as TWD and KRW, and to a smaller extent MYR and SGD."

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

TD Securities’ Macro Research team, led by Jayati Bharadwaj with contributions from Howard Du and Linda Cheng, argues that recent EUR/USD weakness has been driven by high Oil and diesel prices and French OAT concerns. They see sentiment stabilizing, expect near-term Euro pressure through October, but are fading the EUR/USD selloff via a 3‑month risk reversal expressing a bearish Dollar year-end view.

Euro pressured yet sentiment stabilizing

"We expect EUR to remain under near-term pressure as markets navigate key October dates and the Moody’s ratings review. While renewed fiscal concerns have weighed on EUR, the reaction remains relatively tame compared with the last episode of comparable OAT-Bunds widening."

"We therefore see scope for near-term EUR underperformance, but not a derailment of the broader trajectory beyond October, particularly if France can keep the 2027 deficit in the low-5% range and stress remains concentrated in OATs rather than becoming a systemic euro-area concern."

"Our trend-following framework suggests the USD rally was becoming stretched vs EUR, GBP, CAD, SEK and MXN. G10 FX positioning is also now broadly short vs the USD except for JPY."

"We prefer to fade the EUR/USD selloff than to chase it back to the pre-Liberation Day range. We entered a long EUR/USD trade via a 1.16/1.11 zero-cost risk reversal."

"We fade the EUR/USD selloff via risk reversal. We entered a 3m EUR/USD risk reversal (buy 1.1610-strike call funded by short 1.11-strike put) last week to express our bearish USD year-end forecast at attractive spot entry level."

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

• Gold rebounds from a two-month low as US Treasury yields and the US Dollar ease.
• High-for-longer Fed expectations and elevated borrowing costs continue to cap the upside.
• The technical setup remains fragile, with $4,100 providing the first line of support.

Gold (XAU/USD) rebounds on Tuesday as a pullback in US Treasury yields weighs on the US Dollar (USD), helping the metal recover after falling to a two-month low of $4,104 during Asian trading hours. At the time of writing, XAU/USD trades around $4,151, up 0.29% on the day, after reaching an intraday high of $4,179.

The benchmark 10-year US Treasury yield eases to around 5.27% after touching 5.349% on Monday, its highest level since 2002. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, retreats toward 101.80 after reaching a fresh year-to-date high of 102.53 the previous day.

The pullback gives Gold some breathing room, although the rebound leaves its recent consolidation intact. The metal remains largely confined between $4,100 and $4,200, with buyers struggling to build a sustained recovery as yields hold near multi-year highs.

Elevated yields increase the opportunity cost of holding non-yielding metal and help keep demand for the US Dollar firm. Sticky inflation and a resilient US growth outlook reinforce expectations that interest rates will stay high for longer, while growing fiscal and government debt concerns add further upward pressure on borrowing costs.

Data released on Tuesday showed that ADP’s four-week average of weekly private-sector job gains rose to 23.75K from 22.5K. However, softer-than-expected US Nonfarm Payrolls (NFP) and Personal Consumption Expenditures (PCE) inflation data released last week have reduced pressure on the Federal Reserve (Fed) to raise interest rates at its October 27-28 meeting. The CME FedWatch Tool shows a 78% chance of a hold.

A pause in October offers near-term support for the yellow metal, but a broader recovery may remain difficult as markets anticipate further tightening. The Fed’s commitment to bringing inflation back toward its 2% target keeps the door open to a December rate hike.

The stalemate between the United States and Iran keeps energy-driven inflation risks elevated as Oil prices remain above pre-war levels. However, recovering Gulf exports and emergency reserve releases are weighing on Oil prices, with West Texas Intermediate (WTI) trading around $87, near one-month lows.

Against this backdrop, a stronger recovery in Gold would likely require a meaningful shift toward a less restrictive Fed outlook, accompanied by a sustained decline in Treasury yields and the US Dollar. Wednesday’s Federal Open Market Committee (FOMC) minutes could offer fresh insight into how officials view the need for further rate hikes.

Over the longer term, Gold remains supported as the same debt and fiscal concerns pushing borrowing costs higher also strengthen its appeal as a store of value. Meanwhile, strong central-bank demand and inflows into Gold-backed exchange-traded funds further underpin demand for the metal.

Technical analysis: XAU/USD remains bearish below mid-Bollinger SMA

On the daily chart, XAU/USD maintains a bearish near-term tone as it holds below the 20‑day Bollinger simple moving average (SMA) at $4,263. Momentum is soft, with the Relative Strength Index (RSI) hovering around 40, while the Moving Average Convergence Divergence (MACD) remains in negative territory, hinting that recent downside pressure is not yet exhausted despite a modest stabilization above nearby support.

On the downside, initial demand is seen near the psychological $4,100 level, closely aligned with the lower Bollinger Band around $4,087. A break below this area could expose the deeper horizontal support zone around $4,000-$3,950.

On the topside, a first cap emerges at the mid‑Bollinger SMA at $4,263, ahead of the upper band resistance near $4,439 and the charted horizontal barriers at $4,500 and $4,700, which together define a dense supply zone that gold would need to clear to shift the bias back to constructive.

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

Royal Bank of Canada’s (RBC) Nathan Janzen notes Canada’s trade balance swung to a $4.2 billion surplus in August, helped by higher energy prices and a rush of exports to the United States (US) ahead of new tariffs. He highlights strong energy exports, resilient non-tariffed trade flows, and improving domestic demand, while expecting limited broader economic spillovers and a gradual per-person recovery.

Trade surplus and tariff effects

"Canada's trade balance rose sharply to a $4.2 billion surplus in August, boosted by higher energy prices and a surge in exports ahead of new U.S. tariffs imposed late in the month."

"The monthly trade data is notoriously volatile, but looking ahead to September, energy prices continued to move higher with crude oil prices up another 16%. And global shortages of refined products are also driving Canadian energy exports higher -- refined product exports (like diesel) were up 13% excluding price impacts in August."

"Still, exports to the U.S. excluding tariffed products, and energy products rose ~16% by our count year-over-year."

"And domestic demand continues to show signs of life -- import volumes (excluding price impacts) fell by 1.7% but imports of machinery and equipment (a key indicator of business investment) and consumer goods (an indicator of consumer demand) both rose."

"We continue to expect the new tariffs imposed by the U.S. administration will have a significant impact on directly targeted sectors but with more than 80% of Canadian exports to the U.S. still maintaining duty free access under CUSMA we expect limited spillover to the broader economy."

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

• USD/CAD falls 0.15% on Tuesday and trades around 1.4240 despite persistent pressure on the Canadian currency.
• Recovering Middle East Oil exports fuel expectations of higher global supply and weigh on crude prices.
• Improving US private employment provides some support to the US Dollar, although monetary policy expectations limit its rebound.

USD/CAD falls 0.15% on Tuesday and trades around 1.4240 at the time of writing, pulling away slightly from recent highs near 1.4300. The Canadian Dollar (CAD) nevertheless remains vulnerable, weighed down by falling Oil prices as signs of improving global crude supply continue to emerge.

Oil prices remain weak amid recovering exports from the Middle East. According to JPMorgan, crude shipments from the region have reached 17.5 million barrels per day, around 98% of pre-war levels, while flows of refined products, including diesel and gasoline, have recovered to 3 million barrels per day.

The improvement in supply comes after the Group of Seven (G7) nations agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves. Kuwait also reported that its Oil production has recovered to around 75% of pre-conflict levels, while Saudi Arabia has lowered its official selling prices for Asian buyers.

The prospect of more abundant supply therefore keeps pressure on Oil prices. This remains a negative factor for the Canadian Dollar, as Canada is a major Oil-exporting country and fluctuations in crude prices can have a significant impact on the Canadian currency.

However, Tuesday's decline in USD/CAD suggests that weakness in Oil prices is not enough to fuel an immediate extension of the pair's recent rally. On the US side, the latest employment figures provide a more encouraging signal. The National Employment Report (NER) Pulse from Automatic Data Processing (ADP) showed that US private employers added an average of 23.750K jobs per week during the four weeks ending September 19, up from 22.50K previously.

This modest acceleration in hiring contrasts with recent signs of cooling in the US labor market. It could provide some support to the US Dollar, although investors continue to assess the outlook for Federal Reserve (Fed) monetary policy following recent disapointing employment figures and easing pressures from energy prices.

Expectations surrounding the Fed's next policy decision should therefore remain an important driver for USD/CAD, while developments in Oil prices will continue to determine the Canadian Dollar's ability to recover.

Canada labor data seen soft as BoC pricing leaves Dollar exposed

Brown Brothers Harriman’s Elias Haddad points to Friday’s release of Canada’s September labor force survey as a key test for the domestic outlook, with the economy expected to add “just +5.0k jobs after losing -41.7k jobs in August.” BBH notes that the “unemployment rate is seen rising 0.1ppt to 6.5% on an unchanged participation rate of 65.0%, pointing to weak labor demand,” underscoring a fragile backdrop for hiring.

Against this softer labor picture, BBH argues that “BoC rate hike pricing (100bps in the next twelve months) looks too aggressive and leaves CAD vulnerable to a dovish repricing.” The bank stresses that “Canada core inflation is near the banks’ 2% target and indicators point to continued excess supply in the economy,” suggesting limited justification for the current degree of tightening embedded in the curve and, in turn, a potentially vulnerable Canadian Dollar.

USD/CAD technical analysis

In the one-hour chart, USD/CAD trades at 1.4247, holding a constructive intraday bias as it remains above both the 100-period simple moving average (SMA) near 1.4244 and the 200-period SMA around 1.4203. Price action is grinding higher from the day’s open at 1.4263 but still faces immediate overhead supply at the horizontal resistance aligned with 1.4260, while the latest Relative Strength Index (14) reading around 42 suggests only modest, consolidative momentum rather than overbought conditions.

On the downside, initial demand is seen at the minor horizontal support at 1.4232, followed by a broader support band formed by 1.4200 and 1.4175, ahead of deeper levels at 1.4150 and 1.4133. On the topside, a break above the 1.4260 barrier would open the way toward the next resistance at 1.4293, where buyers would need to overcome a more significant supply zone to extend the hourly uptrend.

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

UOB’s Alvin Liew highlights that weaker US September Payrolls and softer wage growth have reduced expectations for an October Federal Reserve rate hike, with markets now focused on September CPI. The report notes that the labor market lost momentum, but UOB still projects further tightening in December 2026 and 1Q 2027 before a prolonged hold through 2027.

Fed expectations cool after payrolls

"The unexpectedly soft Sep jobs report dampened confidence in US labor market momentum (following the temporary Aug NFP uplift) and lowered expectations of a near-term Oct Fed rate hike."

"According to Bloomberg WIRP, the probability of a Fed rate hike at the Oct FOMC meeting fell to below 20% (as of 5 Oct) following the payrolls report (vs 64% on 25 Sep) while markets still fully priced in a rate hike by end-2026."

"We have ruled out a back-to-back rate hike in the Oct FOMC, which falls less than a week from the midterm elections (3 Nov)."

"We expect two additional hikes, in Dec 2026 and 1Q 2027, thereafter on hold for rest of 2027."

"Surprisingly weak Sep NFP greatly reduced Oct Fed rate hike expectations, but the crucial test will be Sep CPI (14 Oct)."

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

TD Securities highlights a constructive Brazilian Real (BRL) backdrop, with diversified commodity exposure and strong carry. Their short-term fair value model places USD/BRL near 5.00 excluding political risk, but they favor the cross below 5.00 toward 4.60 longer-term. A narrow first-round election result and center-right skew in remaining votes support Bolsonaro, and they would buy BRL on USD/BRL spikes.

Election dynamics reinforce BRL strength

"A political tailwind joins an already constructive BRL story, fueling today’s sharp rally. No Brazilian runoff has started with such a narrow first-round margin, but the Round 1 leader has won every runoff since 1989."

"The remaining vote also skews center-right, favoring Bolsonaro at the margin."

"Our short-term fair-value model puts USD/BRL near 5.00 excluding political risk premium, but we continue to favor the cross below 5.00 and closer to our longer-term fair value around 4.60."

"BRL retains a solid macro backdrop, diversified commodity/trade exposure and compelling vol-adjusted carry, even through further BCB easing. The election result removes a key near-term hurdle and reinforces LatAm’s broader rightward shift."

"We would buy BRL on any USD safe-haven-driven USD/BRL spikes, with scope to break the May lows and test 4.80 on a decisive Bolsonaro Round 2 win."

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