Forex News
Francesco Pesole at ING highlights that EUR/USD short-term fair value from the bank’s 60‑day model has fallen below 1.150, with equities and rate differentials driving moves more than Oil. He expects only one more hike from both the ECB and Fed this year, supporting a 1.160 year-end EUR/USD forecast, but sees near-term risks skewed toward a retest of June’s 1.1320–1.1330 lows.
Model signals weaker Euro against Dollar
"EUR/USD short-term fair value based on our 60-day model has dropped below 1.150 for the first time since late July. Interestingly, oil prices are showing a small beta, with equities and rate differentials the dominant drivers. The spread between the two-year SOFR and ESTR has rewidened to 150bp, also to levels last seen in July."
"European Central Bank officials have so far maintained a notably hawkish tone, keeping an October hike firmly on the table. Even so, investors appear increasingly willing to embrace the opposite narrative, pointing to further near-term downside pressure on EUR/USD."
"Our baseline, still, is that hawkish expectations are too aggressive on both sides of the Atlantic. We expect just one additional hike from both the ECB and the Fed this year, followed by no further tightening in 2027. That view supports our 1.160 year-end EUR/USD forecast. In the near term, however, the risks favour a retest of the 1.1320-1.1330 lows reached in June."
"Today’s focus is on a busy slate of ECB speakers, including ECB President Christine Lagarde. On the data side, the only notable release is the eurozone consumer confidence indicator for September."
"Meanwhile, the French 10-year spread over German bunds has hit the 100bp mark. The FX market is treating this with caution, but risks of further spread widening remain, and the EUR may start to pay greater attention soon."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/CAD depreciates as the Canadian Dollar gains strength on higher oil prices amid market caution.
- President Trump may meet Iranian President Masoud Pezeshkian and Gulf leaders at the UN, while scheduling talks with President Xi.
- Euro faces pressure after Germany's far-right AfD state election victory leaves Chancellor Friedrich Merz's leadership increasingly vulnerable.
EUR/CAD depreciates after three days of gains, trading around 1.6080 during early European hours on Tuesday. The currency cross is losing ground as the commodity-linked Canadian Dollar (CAD) draws strength on higher oil prices, which could be attributed to the heightened market caution. Investors are keeping a close watch on potential US-Iran diplomatic developments at this week's United Nations General Assembly in New York, especially after increased energy supplies safely navigated through the Strait of Hormuz over the weekend.
Geopolitical attention is centered on US President Donald Trump, who is scheduled to address the UN General Assembly later in the day. His agenda includes a possible side meeting with Iranian President Masoud Pezeshkian, alongside planned talks with Chinese President Xi Jinping and leaders from other Gulf nations throughout the week. Adding to these diplomatic efforts, the Trump administration has proposed establishing a $5 billion fund to support the reconstruction of war-damaged infrastructure across the Middle East.
Meanwhile, the Euro (EUR) is coming under pressure against major currencies due to intensifying political instability in Germany. Following Sunday's state elections in northeastern Germany, the far-right Alternative for Germany (AfD) claimed first place, while Chancellor Friedrich Merz's conservative party suffered its worst regional defeat in post-war history, leaving his position increasingly precarious.
Euro eyes French spread widening as market caution builds
Analysts at ING point out that “the French 10-year spread over German bunds has hit the 100bp mark,” a development they say the FX market is still “treating…with caution.” However, ING warns that “risks of further spread widening remain,” and suggests that the Euro “may start to pay greater attention soon” if the move in French yields extends.
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.
- NZD/USD bounces to 0.5740 after finding support around 0.5700.
- Lower Oil prices are supporting the pair, although Fed-RBNZ rate hike divergence is likely to weigh on the pair.
- The current recovery seems corrective, with 0.5800 likely to cap rallies.
The New Zealand Dollar (NZD) shows a modest recovery against the US Dollar (USD) on Thursday, favoured by somewhat brighter market sentiment as Brent Oil prices remain below the $100 level, which provides some relief to Oil-importing economies like New Zealand’s. The NZD/USD pair trades at 0.5740 after bouncing from the 0.5700 area earlier on the day, but remains below a key resistance area just above 0.5800.
Kiwi’s recovery, however, seems corrective. Federal Reserve's (Fed) hawkish turn last week has boosted hopes of higher interest rates in the US. This is likely to widen the interest rate differential with the Reserve Bank of New Zealand, as investors are dialing back hopes of immediate rate hikes, amid signs of weakening economic growth and a loosening labour market.
Technical Analysis: The immediate rebound seems corrective
From a technical perspective, the NZD/USD is correcting higher from the 78.6% Fibonacci retracement ot the July-August rally, with price action contained within previous ranges and upside attempts so far lacking conviction to turn into a trend shift. Momentum indicators remain negative, with the Relative Strength Index (RSI) near 36 just above oversold conditions, and the Moving Average Convergence Divergence (MACD) below zero hinting at persistent downside pressure.
Upside attempts are likely to find significant resistance at the 0.5810-0.5825 area, the August 13 and September 2 lows, but also the neckline of a bearish Head & Shoulders (H&S) pattern. Further up, the key 200-day Simple Moving Average SMA lies at 0.5853.
On the downside, immediate support emerges at the mentioned 78.6% retracement at 0.5705. Below here, the late June low in the 0.5630 area is coincident with the H&S's measured target.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar Price Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.02% | -0.01% | 0.24% | -0.05% | 0.08% | -0.35% | -0.05% | |
| EUR | -0.02% | -0.03% | 0.24% | -0.05% | 0.06% | -0.35% | -0.05% | |
| GBP | 0.01% | 0.03% | 0.23% | -0.05% | 0.08% | -0.34% | -0.02% | |
| JPY | -0.24% | -0.24% | -0.23% | -0.27% | -0.14% | -0.59% | -0.25% | |
| CAD | 0.05% | 0.05% | 0.05% | 0.27% | 0.13% | -0.30% | 0.02% | |
| AUD | -0.08% | -0.06% | -0.08% | 0.14% | -0.13% | -0.43% | -0.10% | |
| NZD | 0.35% | 0.35% | 0.34% | 0.59% | 0.30% | 0.43% | 0.33% | |
| CHF | 0.05% | 0.05% | 0.02% | 0.25% | -0.02% | 0.10% | -0.33% |
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 New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann remain negative on GBP/USD after the pair eased to around 1.3370. They expect a test of last week’s low near 1.3335, though a sustained break below that level and the major 1.3300 support is seen as unlikely. On a 1–3 week horizon, downside risk persists but momentum to reach 1.3300 is questioned.
Pound stays vulnerable but oversold
"24-HOUR VIEW: GBP traded between 1.3366 and 1.3399 yesterday, closing slightly lower by 0.18% at 1.3369. There has been a tentative build-up in downward momentum. Today, GBP could test last week’s low, near 1.3335. A continued decline below this level is unlikely. We also do not expect the major support at 1.3300 to come into view. Resistance is at 1.3385; a breach of 1.3400 would suggest that the mild downward pressure has eased."
"1-3 WEEKS VIEW: We turned negative on GBP last Monday. In our latest update from last Friday (18 Sep, spot at 1.3360), we highlighted the following: “While the risk remains on the downside, conditions remain deeply oversold, and it is unclear whether GBP has sufficient momentum to reach 1.3300. On the upside, a breach of the ‘strong resistance’ at 1.3435 would indicate that the weakness in GBP is stabilising.” There is no change in our view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- US Dollar Index strengthens to around 100.45 in Tuesday’s early European session.
- Fed policymakers signaled another potential rate increase before the end of the year, supporting the DXY.
- Traders await developments on potential US-Iran talks.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 100.45 in the early European trading hours on Tuesday. The DXY gains momentum as the US Federal Reserve (Fed) delivers a rate hike and signals more rate hikes this year.
Last week, the US central bank unanimously raised its benchmark interest rate by 25 basis points (bps), bringing the target range to 3.75% to 4.00%. This marked the Fed's first rate hike in three years. Fed Chair Kevin Warsh said during the press conference that “the plain fact is that inflation is too high and has been for too long.” “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” he added.
Traders are now pricing in roughly 56.5% odds for a rate hike of at least 25 bps at the Fed's October meeting, according to the CME FedWatch tool, up from 43.5% a week earlier.
On Monday, St. Louis Fed President Alberto Musalem said that additional rate increases may be necessary to achieve the Fed’s inflation target. Chicago Fed President Austan Goolsbee stated that the central bank cannot overlook repeated and persistent supply shocks.
Traders will closely monitor the developments on potential US-Iran talks at the United Nations General Assembly on Tuesday. President Masoud Pezeshkian will lead an Iranian delegation at the UN session in New York amid renewed hopes for a diplomatic solution to the Middle East conflict.
US President Donald Trump signalled that he is “probably open to meeting Pezeshkian during the assembly. Any signs of progress between the US and Iran talks could improve risk sentiment and weigh on the DXY.
Fed and ECB speakers in focus as markets track policy tone
Deutsche Bank flags a busy day for monetary policy commentary, noting that, beyond scheduled data releases, attention will turn to a slate of central bank speakers. The bank highlights that “we’ll hear from Fed’s Vice Chair Jefferson, the Fed’s Williams and Barkin, ECB President Lagarde, and the ECB’s Kaasik, Nagel, Kocher, Seijpen and Simkus,” suggesting that markets will be closely watching any guidance on the policy outlook from both sides of the Atlantic.
Musalem leans more hawkish as inflation risks call for earlier, incremental hikes
Musalem’s speech scores 8/10 on the FXS Speechtracker, modestly above the 7.4/10 historical average and signaling a firmer hawkish tilt relative to the established baseline. The warning that without further policy restraint inflation is likely to remain substantially above the 2% target over the next 18 months, even with core pressures still “too high” around 3% and businesses planning price increases closer to 3%, underscores a clear preference for additional rate hikes that are “earlier and incremental” to counter both demand- and supply-driven inflation, including broader commodity shocks beyond oil. The characterization of a labor market around full employment but not the main source of inflation pressure suggests policy is aimed squarely at persistent price dynamics rather than overheating employment.
The FXS Fed Sentiment Index rose by 0.42 points to 149.96, reinforcing that the broader Fed tone remains deeply in hawkish territory well above the neutral 100 threshold. This incremental uptick, aligned with the stronger-than-average FXS Speechtracker score, confirms that Musalem’s remarks contribute to a sustained bias toward tighter policy, a backdrop typically supportive of the Dollar against lower-yielding peers.
Technical Analysis: US Dollar Index keeps a bullish vibe above the 100-day SMA
In the daily chart, the near-term bias of Dollar Index Spot is bullish as price holds above the 100-day simple moving average (SMA) and the Bollinger middle band, keeping the recent recovery well supported. The upper Bollinger band acts as immediate overhead resistance, while a Relative Strength Index (14) reading near 65 suggests firm positive momentum without yet reaching overbought conditions.
On the downside, initial support is located at the 100-day SMA at 99.90, followed by the Bollinger middle band at 99.50, with deeper support at the lower Bollinger band around 98.45. On the topside, a clear break above the upper Bollinger band near 100.60 would open the door for further gains, reinforcing the bullish bias as long as price continues to trade above the clustered moving-average support.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Deutsche Bank strategists note that Brent briefly fell below $100/bbl as hopes for a diplomatic solution in the Middle East weighed on oil prices. They link the pullback to positive headlines around potential US-Iran talks, while renewed sanctions risks on Iran helped limit the decline and supported a rebound toward $101/bbl.
Crude retreats on diplomacy hopes
"Markets have put in a strong performance over the last 24 hours, with Brent crude oil (-3.40%) briefly falling beneath $100/bbl again as hopes grew for a diplomatic solution in the Middle East."
"Brent is a little above $101/bbl this morning but net net the week has started more optimistically."
"Although oil is back up a little overnight, Brent fell back beneath $100/bbl yesterday for the first time in nine trading sessions before closing at $100.34/bbl."
"In part, that followed more positive headlines over the weekend, including comments from President Trump to Fox News that he would be open to meeting Iran’s President at the UN this week. So that raised hopes about some kind of deal between the two sides, and it helped drive a big reduction in energy prices across the board."
"Even though there are hopes of diplomatic progress, the rise back in oil overnight seems to be in part due to Bessent suggesting that all Iranian airlines will be shut down from tomorrow with anyone providing fuel, landing services etc., shut out of the dollar system."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY consolidates gains near 157.50, with bulls looking at key resistance above 158.00.
- The Fed's hawkish hike and a somewhat more dovish BoJ have reversed the Yen's bullish trend.
- Bank analysts anticipate a Tokyo intervention if the JPY keeps trending lower.
The Japanese Yen (JPY) maintains its near-term bearish trend against the US Dollar (USD) on Tuesday. The USD/JPY pair is trading in the mid-157.00s at the time of writing, with bulls aiming for a previous support area just above 158.00 and the key 200-day Simple Moving Average (SMA) at 157.45.
The Federal Reserve’s (Fed) hawkish turn has offset the impulse of the Bank of Japan’s (BoJ) monetary tightening plans. Beyond that, the two dovish dissenters at the BoJ meeting have cast some doubt about the scope of the bank's tightening cycle. All in all, the Yen has lost the shine of previous weeks, which is prompting Japanese authorities to set the stage for an intervention if the JPY weakens further
Yen rebound highlights Japan’s two-pronged defence of USD/JPY
Analysts at MUFG note that "the BoJ had conducted a rate check during the New York trading session,” sending “a clear signal that they are prepared to intervene again if the yen continues to weaken.” MUFG warns that this move came “ahead of the 3-day holiday period where liquidity for USD/JPY is likely to be lower.”
According to Societe Generale, the spot rate checks by the MoF late on Friday "underlined the two-pronged policy approach in Japan where intervention is obfuscating the price action and wrong-footing tactical investors.”
Regarding the intervention trigger, strategists at ING observe that the reported Bank of Japan rate check on Friday "may suggest that Japanese authorities are focused more on the pace of moves over a rolling x-day period than on defending a specific level.”
"The hope is that this approach avoids creating a clear line in the sand for markets to target and helps keep positioning cautious,” says Ing in a note, also observing that “the Fed has sounded distinctly more hawkish than the Bank of Japan this month, leaving room for further USD/JPY gains.”
Looking ahead, Commerzbank’s Thu Lan Nguyen warns that “over the longer run, however, merely threatening intervention is unlikely to be enough.” “Sooner or later, the BoJ will have to back up its words with action” if it wants to restore confidence in its commitment to tighter policy and more durable Yen stability, says Nguyen.
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.
Danske Research Team describes a strong, broad-based risk-on session in equities, catalyzed by declining Oil price. They emphasize how retreating energy costs ease inflation expectations, push central bank pricing more dovish and improve confidence, while noting cyclicals led by technology outperformed, with the Nasdaq at record highs and MSCI World close to its peak, supported by robust growth and earnings.
Risk-on session led by technology
"Yesterday delivered a strong, broad-based risk-on session, with the decline in oil price acting as the catalyst for another move higher in equities. We have written extensively about this transmission mechanism recently, and the correlations and intraday moves across equities and asset classes yesterday are likely to remain defining features for much of the rest of the year."
"As oil price retreats, fears of an energy crisis heading into winter fade, inflation expectations ease, central banks are priced more dovishly and confidence improves. This cascade is currently unusually sensitive to energy, oil and developments around the Strait of Hormuz. With the underlying growth and earnings backdrop exceptionally strong, the energy situation remains the principal constraint on further market upside."
"Unsurprisingly, cyclicals outperformed decisively, led by technology. The Nasdaq reached another record high, while MSCI World moved to within 1% of its record. Technology has clearly outperformed year to date, but 2026 earnings estimates for the sector have also been revised almost 45% higher."
"By comparison, health care estimates have been cut by around 5%. Technology has therefore become cheaper this year, while health care has become more expensive, despite technology outperforming health care by almost 30%. The relative earnings impulse between the two sectors remains exceptionally powerful."
"This morning, Asia is catching up following the strong US session, European markets are also pointing higher, while the US picture is more mixed as oil edges higher again."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD flattens at around 0.7117 and is broadly stable above the 38.2% Fibo retracement cushion near 0.7100.
- RBA Governor Bullock says that both higher oil prices and strong demand are fuelling inflationary pressures.
- The Fed is expected to deliver more interest rate hikes this year.
The Australian Dollar (AUD) trades flat at around 0.7117 against the US Dollar (USD) during the European trading session on Tuesday. The antipodean is broadly firm against its peers amid firm expectations that the Reserve Bank of Australia (RBA) will continue tightening its monetary conditions even after delivering three interest rate hikes so far this year.
Australian Dollar Price Last 7 Days
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies last 7 days. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.76% | 0.96% | 2.11% | 0.91% | 0.32% | 0.53% | 0.54% | |
| EUR | -0.76% | 0.19% | 1.34% | 0.09% | -0.49% | -0.11% | -0.25% | |
| GBP | -0.96% | -0.19% | 1.16% | -0.08% | -0.64% | -0.30% | -0.40% | |
| JPY | -2.11% | -1.34% | -1.16% | -1.21% | -1.88% | -1.26% | -1.56% | |
| CAD | -0.91% | -0.09% | 0.08% | 1.21% | -0.64% | -0.07% | -0.36% | |
| AUD | -0.32% | 0.49% | 0.64% | 1.88% | 0.64% | 0.34% | 0.22% | |
| NZD | -0.53% | 0.11% | 0.30% | 1.26% | 0.07% | -0.34% | -0.08% | |
| CHF | -0.54% | 0.25% | 0.40% | 1.56% | 0.36% | -0.22% | 0.08% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Analysts at Commerzbank note that expectations for near-term RBA tightening have intensified, with the bank highlighting that the “RBA’s OIS market is now pricing in 85% chance of a 25bp hike during next week’s monetary policy board meeting.” This elevated probability underscores the increasingly hawkish policy outlook that has been lending support to the Aussie in recent sessions.
Earlier in the day, RBA Governor Michele Bullock didn’t explicitly comment on how the monetary policy will shape in the future, but signaled that the benchmark for neutral rates is rising globally and is supporting bond yields. “Believe neutral rates are rising around the world, pushing up real bond yields,” Bullock said. She warned that high inflation in Australia is coming from energy supply shocks and strong demand environment.
On the US Dollar front, the currency is also broadly firm as the Federal Reserve (Fed) is almost certain to deliver more interest rate hikes this year. According to the CME FedWatch tool, the odds of the Fed delivering at least one more interest rate hike this year are almost 90%.
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.7120, retaining a mildly bearish bias as it holds beneath the 20-period Exponential Moving Average (EMA) at 0.7138 and the 23.6% Fibonacci retracement at 0.7150.
The pair has slipped back from recent highs, while the Relative Strength Index (14) near 47 suggests consolidating momentum rather than directional conviction, hinting that sellers still have a slight edge while these overhead levels cap the topside.
On the downside, initial support is seen at the 38.2% Fibonacci retracement at 0.7096, followed by the 50.0% level at 0.7052 and the 61.8% retracement at 0.7008, which together outline a broader demand band on pullbacks. On the topside, a daily close above the 20-period EMA at 0.7138 would open the way toward the 23.6% retracement at 0.7150, with stronger resistance emerging at the Fibonacci anchor near 0.7237 where the latest bullish cycle high is located.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
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 Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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