Forex News
- USD/CAD gains traction to around 1.4010 in Monday’s early European session.
- The Bank of Canada is set to raise rates to 2.50% on Wednesday.
- Markets price in around a 90.6% chance that the Fed will hold rates steady at its October policy meeting.
The USD/CAD pair trades with mild gains near 1.4010 during the early European trading hours on Monday. A decline in crude oil prices weighs on the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD). Traders brace for the US Federal Reserve (Fed) and Bank of Canada (BoC) interest rate decisions later on Wednesday.
Oil prices fall on Monday after a report that Qatari mediators were in Tehran on Sunday as part of an effort to de-escalate regional tensions in coordination with the US. It is worth noting that Canada is a major oil-exporting country, and low crude oil prices generally have a negative impact on the Loonie.
"Concerns over renewed military hostilities in the Middle East, which drove much of last week’s crude rally, have eased this morning, but the reprieve may prove temporary," said Vandana Hari, founder of oil market analysis provider Vanda Insights.
The BoC is likely to raise its overnight rate by 25 basis points (bps) to 2.50% at its October policy meeting on Wednesday and follow with one more hike by the end of March to pre-empt any further rise in inflation expectations, according to a majority of economists polled by Reuters.
A cautious tone from Fed officials could undermine the Greenback against the CAD. Fed Chair Kevin Warsh said on October 16 that he would not prejudge future rate decisions.
New York Fed President John Williams said that one additional rate increase this year could be appropriate. Meanwhile, Fed Vice Chair Philip Jefferson and Governor Christopher Waller stated that there was no need to rush further hikes. According to the CME FedWatch tool, the chance of no change in rates at the October meeting now stands at 90.6%.
Canada sentiment improves but tariffs, inflation and borrowing costs cloud outlook
Analysts at Rabobank highlight that recent gains in Canadian confidence are being driven in part by financial markets and the labour backdrop, with “much of the improvement in the CSCE indicator” attributed to an improved outlook for financial markets and “confidence in the labor market.” However, they caution that the underlying growth picture remains fragile. In their view, “US tariffs pose a risk to Canadian manufacturing and could reverse some of the improvement in the goods-producing sector,” while “investment in Canada has had a weak post-pandemic recovery, and elevated trade tensions continue to weigh on businesses’ capital expenditures and hiring plans.”
On the inflation front, Rabobank notes that “consumer short- and medium-term inflation expectations have recently converged with climbing five-year expectations to a level which remains well above the Bank of Canada’s 2% target,” underscoring persistent price pressures. Against that backdrop, the bank warns that “higher borrowing costs would only add to the strain on households already facing elevated prices, rather than materially improving the cost of living for Canadian consumers,” suggesting limited scope for tighter policy without exacerbating existing household stress.
Warsh flags investment surge and AI focus but avoids pre-committing on rates
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10 and reflecting a cautious, data-dependent tone. The remark about being “over-scarred from the global financial crisis” underscores a lingering bias toward risk management even as Warsh highlights structural growth and an investment surge driven by “good policies,” while refusing to pre-judge upcoming FOMC decisions. The emphasis on AI as a near-term demand-side force and a tool to strengthen data confidence adds a forward-looking, structurally hawkish flavor, but without explicit guidance on the path for the Dollar.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.51, signaling that the speech leaves the broader policy narrative firmly in hawkish territory despite the slightly softer FXS Speechtracker score. With the index well above 100 and Warsh stressing price stability, investment strength, and financial stability risks, markets are likely to see the Dollar supported by expectations that the Fed remains inclined toward tighter policy unless data materially disappoints.
Technical Analysis: USD/CAD remains capped under the 100-day SMA
In the daily chart, USD/CAD holds a bearish near-term bias as it remains below the 100-day simple moving average (SMA) and the Bollinger middle band, keeping price capped within the lower half of the recent volatility envelope. The Relative Strength Index (14) at 39 is drifting below the neutral 50 line, which reinforces a soft downside tone rather than outright oversold conditions.
On the topside, initial resistance is located at the 100-day SMA near 1.4045, followed by the Bollinger middle band at 1.4170, while the Bollinger upper band at 1.4355 marks a broader bullish threshold. On the downside, immediate support emerges at the Bollinger lower band around 1.3985, and a sustained break beneath this level would likely extend the corrective phase toward lower daily lows.
(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.
Here is what you need to know on Monday, October 26:
There seems to be a positive shift in risk mood at the beginning of the week as crude Oil prices edge lower. The European economic calendar will feature business sentiment data from Germany on Monday. Later in the week, all attention will be on policy meetings of major economies' central banks, including the Reserve Bank of New Zealand (RBNZ), the Bank of Canada (BoC), the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of Japan (BoJ).
Yemen's Houthis said on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh, Reuters reported. This move came hours after the kingdom announced that flights had resumed despite repeated attacks by Houthis. Meanwhile, United States (US) President Donald Trump has ruled out immediate military action against Iran, saying “there will not be a strike today,” as per Aljazeera. Following the previous week's sharp upsurge, crude Oil prices opened with a bearish gap and the barrel of West Texas Intermediate (WTI) was last seen losing more than 2% on a daily basis.
Reflecting the improving market sentiment, US stock index futures rise about 0.2% on a daily basis, while the US Dollar (USD) Index trades marginally lower near 101.70. Finally, the benchmark 10-year US Treasury bond yield stays in negative territory below 5% after posting losses for the third consecutive week.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.02% | 0.11% | 0.05% | 0.12% | 0.00% | -0.14% | |
| EUR | 0.14% | 0.16% | 0.23% | 0.18% | 0.26% | 0.17% | 0.00% | |
| GBP | 0.02% | -0.16% | 0.06% | 0.04% | 0.10% | 0.00% | -0.16% | |
| JPY | -0.11% | -0.23% | -0.06% | -0.04% | 0.01% | -0.10% | -0.25% | |
| CAD | -0.05% | -0.18% | -0.04% | 0.04% | 0.05% | -0.03% | -0.18% | |
| AUD | -0.12% | -0.26% | -0.10% | -0.01% | -0.05% | -0.10% | -0.25% | |
| NZD | -0.00% | -0.17% | -0.01% | 0.10% | 0.03% | 0.10% | -0.14% | |
| CHF | 0.14% | -0.00% | 0.16% | 0.25% | 0.18% | 0.25% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
FOMC patience in October seen boosting odds of December Fed hike
According to TD Securities, the Federal Open Market Committee (FOMC) is likely to "keep rates on hold this week despite rising inflation risks," with analysts judging that while "the chance of a surprise hike is higher than normal," policymakers are still expected to "prioritize patience and wait until December." In their view, "a hold in October will make a December hike all the more likely," particularly after the "upside surprise in September CPI," which underscores that "inflation risks are still pertinent." TD Securities adds that "the evolution of inflation data will determine the extent and pace of hikes later in the cycle," suggesting that incoming price figures will be crucial in shaping the Fed’s next steps.
EUR/USD fluctuates in a narrow range above 1.1200 after closing the previous week marginally lower.
GBP/USD registered marginal losses on Friday but managed to post gains for the second consecutive week. The pair stays quiet on Monday and moves sideways below 1.3400.
USD/JPY clings to small gains near 157.00 in the European morning on Monday after falling about 0.7% last week.
Gold lost nearly 4% in the previous week before stabilizing slightly above $4,000 on Monday.
Gold demand from ETFs and central banks faces another test near $4000
TD Securities analysts noted that we continue to see "strong physical demand from ETFs and central banks," even as Gold remains under pressure from systematic selling. The bank argues that prices "drifting back toward the $4000/oz level yet again will be another test if these flows can offset near-term systematic flows," underscoring the importance of official and investment demand in counterbalancing CTA-driven weakness.
AUD/USD stays in a consolidation phase above 0.7000 after rising more than 1% last week. In the early trading hours of the Asian session on Wednesday, September inflation data from Australia could ramp up the pair's volatility.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann keep a constructive stance on GBP/USD, noting recent price action remains range-bound but within an overall positive bias. Intraday, the pair is seen trading between 1.3355 and 1.3400, while on a 1–3 week horizon they still see room for gains toward 1.3440, barring a break below 1.3340 support.
Pound-Dollar retains mild bullish bias
"24-HOUR VIEW: Following last Thursday’s price action, we indicated on Friday that “there has been no clear shift in either downward or upward momentum,” and we expected GBP “to trade between 1.3360 and 1.3420.” GBP subsequently traded within a range of 1.3362/1.3407. The current price movements still appear to be part of a range-trading phase, likely between 1.3355 and 1.3400."
"1-3 WEEKS VIEW: We have been holding a positive GBP view since the middle of the month. In our most recent narrative from last Wednesday (21 Oct, spot at 1.3375), we highlighted that “there is scope for GBP to rise to 1.3440 next.” While GBP subsequently rose to a high of 1.3418, it has not been able to make much headway on the upside. That said, only a breach of 1.3340 (‘strong support’ level previously at 1.3330) would mean 1.3440 is not coming into view"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Commerzbank’s Thu Lan Nguyen notes that EUR/USD has remained relatively stable as both the Euro and US Dollar have weakened broadly against other currencies. However, rising oil prices and stronger Euro-area inflation expectations pose downside risks, while demand for German bonds helps explain why French fiscal concerns have not exerted greater pressure on the currency.
Euro resilience faces inflation and fiscal risks
"A look at our currency indices, however, shows that both currencies have indeed moved, namely lower. But as the euro and the dollar have weakened broadly in tandem, EUR/USD has remained relatively stable."
"Higher oil prices in particular should put greater pressure on the euro, as their impact on both inflation and economic activity in the euro area is more pronounced and, on balance, negative for the currency."
"At the same time, short-term inflation expectations have risen more strongly in the euro area than in the US. In other words, higher inflation expectations are currently not being offset by a corresponding shift in relative interest-rate expectations. This is, in principle, a negative signal for the euro."
"German government bond yields fell noticeably last week. This suggests that many investors simply sold French government bonds and bought Bunds instead. Such a portfolio shift within the euro area does not require investors to change their EUR exposure and therefore does not necessarily have an impact on the exchange rate."
"Against this backdrop, it is hardly surprising that the euro has so far not come under greater pressure, at least against the US dollar. But as we already saw at the end of September, sentiment in the euro area can turn quickly. So it is far too early to sound the all clear..."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/USD surrenders early gains and flattens at around 1.3373 as the US Dollar rebounds slightly.
- The Fed is expected to leave interest rates steady on Wednesday.
- Investors expect the BoE to tighten monetary policy conditions next week.
The British Pound (GBP) gives back its early gains and flattens at around 1.3373 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair flattens as the US Dollar recovers some of its early losses.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower to near 101.70.
This week, investors will pay close attention to the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The Fed is almost certain to leave interest rates unchanged in the 3.75%-4.00% range, according to the CME FedWatch tool. The tool also shows that the United States (US) central bank will raise them in the December meeting.
Apart from the Fed’s policy, investors will also focus on the preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index data for September, which are scheduled for Thursday. The US economy is expected to have grown at an annualized pace of 3.2%, faster than the previous reading of 2.2%.
On GBP front, the major trigger will be the Bank of England’s (BoE) monetary policy announcement next week. The BoE is highly anticipated to hike interest rates by 25 basis points (bps) to 4%.
GBP/USD Technical Analysis
In the daily chart, GBP/USD trades at 1.3370. The pair holds above the 20-day exponential moving average (EMA) at 1.3323, which suggests a mildly constructive near-term tone as buyers defend the recent recovery. The Relative Strength Index (RSI) at 54.8 stands in neutral-to-positive territory, hinting that momentum remains supportive without yet reaching overbought conditions.
On the downside, immediate support is seen at the 20-day EMA near 1.3323, where a break would likely soften the bullish bias and expose deeper pullbacks. Looking up, the previous week high near 1.3420 is the immediate hurdle; a decisive break above that would open the door for further updie towards 1.3500.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Oct 28, 2026 18:00
Frequency: Irregular
Consensus: 4%
Previous: 4%
Source: Federal Reserve
- EUR/USD gathers strength to around 1.1220 in Monday’s early Asian session.
- The cross keeps a negative tone below the 100-day, with bearish RSI momentum.
- The first upside barrier emerges at 1.1270; 1.1185 acts as an initial support level for the pair.
The EUR/USD pair holds positive ground near 1.1220 during the early European trading hours on Monday. The US Dollar (USD) softens against the Euro (EUR) as US Treasury bond yields drop in extended rally. All eyes will be on the US Federal Reserve (Fed) and the European Central Bank (ECB) interest rate decisions later this week.
The 10-year US Treasury yield fell to 4.97% in the previous session, while the 30-year bond yield was at 5.299%, hovering near one-month lows. "For the time being, it seems to point to the US bond market being in the driving seat for broader dollar performance," said Ray Attrill, head of FX strategy at National Australia Bank.
Many analysts anticipate the Fed to hold interest rates steady just days before the midterm elections. Markets are now pricing in nearly 90.6% odds that the Fed will keep rates on hold at its upcoming October meeting on Wednesday, according to the CME FedWatch tool, with a 79.4% probability that the US central bank will lift interest rates in December.
On the other hand, concerns about growing unrest in France and the country's worsening budget problems could weigh on the shared currency in the near term.
Traders await the ECB interest rate decision on Thursday, with no change in rates expected. Traders will scrutinize any hint of the rate outlook after ECB President Christine Lagarde said in late September that a moderate policy response to inflation was appropriate.
Warsh flags investment surge and AI focus but avoids pre-committing on Fed path
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10, reflecting a cautious tone despite upbeat references to structural growth and an investment surge. The remark about being “over-scarred from the global financial crisis” underscores a lingering bias toward risk management and financial stability, even as Warsh highlights policy-driven investment strength and refuses to prejudge upcoming October and December meetings. Emphasis on AI’s demand-side impact, data confidence, and the November field hearing signals a forward-looking stance, but the lack of explicit guidance keeps the overall tone balanced rather than overtly hawkish.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, indicating that the speech did not materially shift perceived policy bias. With the index firmly above 100, the Fed remains in hawkish territory, and the stable reading suggests Warsh’s comments largely reinforced the existing policy narrative captured by the FXS Speechtracker.
Technical Analysis: EUR/USD retains a bearish tone under the 100-day SMA
In the daily chart, EUR/USD keeps a bearish near-term tone as spot holds beneath the 100-day simple moving average (SMA) and below the upper Bollinger band. Price is flirting with the Bollinger middle band, which sits just above the market and acts as immediate overhead resistance, while the 14-day Relative Strength Index around 40 suggests weak, still-bearish momentum rather than an outright oversold condition.
On the topside, initial resistance level is located at the October 16 high of 1.1270, en route to the upper boundary of Bollinger band at 1.1315. Sustained trading above this level could pave the way to the 100-day SMA at 1.1450, where a break would be needed to ease the broader downside pressure.
On the downside, the October 23 low of 1.1185 offers the first support level, followed by the lower limit of Bollinger band around 1.1138. A clear move beneath this floor would open the path toward the 1.1100 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- AUD/USD continues its struggle to make it through the 100-day SMA resistance.
- US bond yields undermine the USD, supporting spot prices amid RBA hike bets.
- The focus remains on Australia’s CPI report, Fed decision and key US macro data.
The AUD/USD pair retreats slightly from a one-month high, touched earlier this Monday, though it lacks follow-through and holds above the 0.7000 psychological mark through the Asian session.
The Australian Dollar (AUD) continues to draw some support from rising market expectations for another interest rate hike by the Reserve Bank of Australia (RBA) at its upcoming November policy meeting. The bets were lifted by recent hawkish comments from RBA Assistant Governor Sarah Hunter, saying that inflation has not yet been brought fully under control and that interest rates may need to rise further amid the risk of overseas price pressures becoming entrenched in the economy.
The US Dollar (USD), on the other hand, struggles to capitalize on Friday's modest recovery from a three-week low amid hopes of de-escalation of tensions in the Middle East and a further decline in US bond yields. This, in turn, might continue to act as a tailwind for the AUD/USD pair. Bulls, however, seem hesitant and opt to wait for the release of the latest Australian consumer inflation figures and the outcome of the highly anticipated two-day FOMC monetary policy meeting on Wednesday.
Traders will further take cues from the release of the Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index on Thursday for more cues about the Federal Reserve's (Fed) future policy path, which will drive the USD. In the meantime, geopolitical uncertainties could support the safe-haven buck and cap the AUD/USD pair, making it prudent to wait for a move beyond the 100-day Simple Moving Average (SMA) before positioning for an extension of a short-term uptrend.
AUD/USD daily chart
Technical Analysis
The AUD/USD pair keeps a capped bias beneath the 100-day Simple Moving Average (SMA) at 0.7033 and has now slipped back below the mid-range Fibonacci retracements. The 50.0% level at 0.7065 and the 61.8% level at 0.7105 could act as overhead barriers, while initial support emerges at the 38.2% Fibo. retracement at 0.7025. Further demand is expected near the 23.6% level at 0.6976 and the broader structural floor around the Fibonacci anchor at 0.6896.
(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.
- Fed expected to hold rates steady in October before a potential December hike, lowering dollar demand.
- Markets anticipate a 90.6% chance of an October pause while awaiting key US PCE and GDP data.
- Dollar weakens as immediate US-Iran strike risks abate, though geopolitical uncertainty persists after upcoming elections.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground after registering gains in the previous day and trading near 101.70 during Asian hours on Monday.
The Greenback is facing downward pressure due to market expectations surrounding the Federal Reserve’s upcoming policy path. Financial markets anticipate that the Fed will hold interest rates steady in October before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, market pricing reflects a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a rate increase in December.
Brown Brothers Harriman’s Elias Haddad notes that the FOMC is widely expected to leave policy unchanged this week, with the Fed funds target range “steady at 3.75-4.00% after raising rates 25bps in September.” He points out that “calls for patience from several key Fed officials support a pause,” while the futures market “imply only 10% odds of a hike this week, with a December 9 rate increase virtually fully priced in.” Against a backdrop of firm US data and persistent inflation pressures, Haddad argues this stance continues to underpin the Dollar.
Investors are closely monitoring key US economic releases scheduled for this week, specifically the Personal Consumption Expenditures (PCE) inflation data and preliminary third-quarter GDP figures, to gauge future rate moves.
Simultaneously, the US Dollar is struggling as safe-haven demand eases following recent comments from US President Donald Trump. Citing reports from Al Jazeera, President Trump ruled out immediate military action against Iran, clarifying that "there will not be a strike today."
Despite this temporary pause, market anxiety remains elevated over the risk of strikes resuming after this week’s Israeli elections and next week’s US midterm elections. Intelligence reports indicate that Iran is prepared to retaliate by targeting key regional sites in Israel and the United Arab Emirates should military operations restart.
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.
- Indonesian Rupiah struggles due to fiscal worries from higher oil import costs and BI growth trade-offs.
- Indonesia’s new measures target stock manipulation after MSCI warned of potential standalone market demotion.
- Fed rate pause expectations and reduced immediate geopolitical safe-haven demand restrain further US Dollar gains.
USD/IDR gains ground for the fourth successive day, trading around 18,150 during Asian hours on Monday. The pair appreciates as the Indonesian Rupiah (IDR) faces challenges due to fiscal concerns that persist amid higher oil prices, given Indonesia’s status as a net oil importer. Concerns also grew that Bank Indonesia (BI) may face a difficult trade-off between defending the currency and supporting near-term growth.
Indonesia on Monday introduced more measures to address stock market manipulation, including adding independent parties to a committee determining stocks with concentrated ownership structures, after MSCI said the country could be demoted due to concerns about opaque trading. The measures came after MSCI announced earlier this month that it could demote Indonesia's stock exchange to "standalone" market status, saying not enough had been done to arrest coordinated trading practices in its stock market.
Indonesia eases reserve requirements to bolster liquidity
Analysts at MUFG highlight that alongside its latest policy decision, Bank Indonesia moved to inject more domestic liquidity by announcing a phased reduction in banks’ reserve requirement ratios. They note that “for conventional banks, the reserve requirement ratio will fall from 9% to 8% on 1 November and further to 7% on 1 December,” while “for sharia banks, the reserve requirement ratio will decline from 7.5% to 6.5% and subsequently to 5.5%.” MUFG interprets these steps as a targeted easing of funding conditions designed to complement BI’s broader policy mix without undermining its currency-support objectives.
However, the upside of the USD/IDR pair could be restrained as the US Dollar (USD) may face challenges on market expectations that the Federal Reserve (Fed) will hold interest rates steady in October before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, markets are currently pricing in a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a hike in December.
Moreover, the Greenback struggles due to easing safe-haven demand, driven by US President Donald Trump ruled out immediate military action against Iran, stating, “there will not be a strike today,” according to Al Jazeera. However, market anxiety persists over the possibility of strikes resuming after this week’s Israeli elections and next week’s US midterm elections, with reports indicating Iran is prepared to retaliate by targeting Israel and the UAE.
Safe-haven flows fragment as different risks drive different havens
Strategists at OCBC observe that “safe-haven demand is intensifying, but the beneficiaries differ by risk,” encapsulating their theme of “different shocks, different havens.” They note that AI-related growth concerns are channelling flows into the Japanese Yen, Middle East tensions are underpinning the Canadian Dollar and NOK, while French fiscal stress is lending support to the Swiss Franc, underscoring how the nature of each shock is now determining which haven investors reach for.
Indonesian Rupiah FAQs
The Indonesian Rupiah (IDR) is sensitive to a dynamic mix of global market conditions, domestic economic fundamentals, commodity price shifts, and proactive central bank interventions. As an emerging market currency, the Rupiah’s trajectory depends heavily on both domestic resilience and international economic momentum.
Bank Indonesia (BI) plays a central role in stabilizing the Rupiah through strategic monetary policy and direct market operations. By adjusting benchmark interest rates, the central bank manages yield differentials against major global central banks like the US Federal Reserve to attract and retain foreign portfolio investments. BI also utilizes a "triple-intervention" framework—operating across spot, derivative (DNDF), and government bond markets- to smooth out currency volatility, complemented by monetary instruments like Sekuritas Rupiah Bank Indonesia (SRBI) to bolster capital inflows.
From a broader macroeconomic perspective, domestic inflation rates, trade performance, and overall fiscal health dictate the IDR's underlying strength. Indonesia's trade and current account balances are closely tied to these fundamentals, while broader global factors, such as risk-on or risk-off sentiment among international investors and global liquidity trends, directly affect exchange rate movements.
As a major exporter of commodities such as palm oil, coal, nickel, and natural gas, Indonesia benefits from higher global commodity prices, which generate trade surpluses, increase foreign currency inflows, and strengthen the Rupiah. However, because Indonesia is also a net importer of crude oil, elevated global oil prices increase the foreign exchange burden, widening the current account deficit and weighing on the currency's value.
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