Forex News

• Gold dips below $4,100 after rejection at $4,185 on Wednesday.
• Rising Oil prices have reactivated concerns about higher inflationary risks, pushing US Treasury yields to fresh highs.
• Technical indicators show bullish pressures unwinding.

Gold (XAU/USD) trades lower on Thursday, snapping a four-day rally. Price action is exploring levels below $4,100 at the time of writing, following a rejection at $4,165 on Wednesday as the surge in Oil prices, with the Brent barrel trading above $90.00, has reactivated concerns about higher inflationary risks, sending US Treasury yields to fresh highs, and posing a heavy weight for precious metals

Analysts at TD see the recent Gold recovery as a corrective reaction, likely to be short-lived, as the move "does not seem to be an aggressive extension of long positions, but is rather driven by short covering and dip buying, after technical supports held during the preceding selloff."

Looking ahead, TD Securities experts observe that "there are no fundamental reasons to think that the US rate and FX environment will be conducive to increasing long gold exposure any time soon." In their view, "it is likely that the Middle East war-driven oil price increases will continue to increase the probability of a Fed rate hike," limiting the scope for a more durable upside extension for Gold.

Technical Analysis: Momentum indicators show bearish signals

XAU/USD trades at $4,087.60, holding a constructive near-term bias although the 4-hour Relative Strength Index is nearing the 50 midline, which, together with the bearish cross of the Moving Average Convergence Divergence (MACD) line, suggests that bulls have given up and sellers are taking back control.

On the downside, immediate support is seen at the reverse trendline now around $4,005, followed by the year-to-date lows at the $3,940 area. Furhter down, the late October 2025 low just below $3,900 emerges as the next target. Rallies, on the other hand, are expected to meet significant resistance at the $4,200 area, where bulls were capped in late June and early July. This area needs to give way to confirm a deeper recovery, aiming for mid-June highs at the $4,385 area.

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

Brown Brothers Harriman’s Elias Haddad notes that the US Dollar is holding on to most of its weekly gains as US Treasury yields remain elevated. BBH sees near-term USD risks skewed to the upside, supported by US economic outperformance, hawkish Fed pricing and strong foreign demand for long-term US securities. Upcoming PMI releases will test whether the US growth advantage remains intact.

Dollar supported by yields and growth

"USD is clinging to most of this week’s advance, though performance is uneven."

"In our view, USD risk remains skewed to the upside in the near-term underpinned by: (i) US economic outperformance, (ii) the Fed's resolve to get inflation back to 2% anchoring hawkish rate pricing, and (iii) strong foreign demand for US long term securities."

"The July PMI readings for the major economies, due tomorrow, will test whether the US growth advantage remains intact."

"Today, second-tier US economic data is on deck: weekly jobless claims, June Chicago Fed activity index, and July Kansas City Fed manufacturing index."

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

Lee Hardman at MUFG notes that Euro-zone yields have climbed to fresh year-to-date highs ahead of the European Central Bank (ECB) meeting, with markets pricing 2–3 further rate hikes and almost fully discounting another move in September. The report aligns with Hardman's forecast for one final September hike, while warning that sustained higher energy prices could increase risks of additional tightening and weigh on Euro-area growth.

Rising yields and ECB pricing

"In response to rising energy prices, market participants have been moving to price in more hawkish expectations for major central banks including the ECB and Fed resulting in short-term yields rising to fresh year-to-date highs. The euro-zone rate market is now pricing in two to three further ECB rate hikes in the year ahead while the US rate market is pricing in around two Fed hikes over the same period. Short-term yields have risen more recently in Europe than in the US resulting in yield spreads moving against the USD."

"Another hike as soon as the following policy meeting in September is almost fully priced in. It fits with our own forecast for one final hike in September, although we acknowledge that the risk of an additional hike later this year would is increasing if higher energy prices are sustained during the second half of this year."

"We see little scope today for President Lagarde to push back strongly against market expectations for multiple rate hikes given inflation risk are increasing. Higher energy prices will add to downside risks for growth in the euro-zone as well. Like in the US, the euro-zone economy has held up better than expected so far to the energy price shock providing some reassurance."

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

Commerzbank’s Volkmar Baur sees it as almost certain that South African Reserve Bank (SARB) will hike 25 bps to 7.25%, reversing a third of its 2024–25 easing after inflation re-accelerated on fuel and core components above target. He argues future South African Rand (ZAR) performance hinges on how resolute SARB remains, with a continued hawkish tone and focus on the inflation target likely best for the Rand.

Hawkish SARB supports ZAR outlook

"If there were any doubts remaining, they should have been dispelled by the inflation figure released yesterday. It seems certain that the South African Reserve Bank (SARB) will raise interest rates again today by 25 basis points to 7.25%."

"This would mean that one-third of the rate-cut cycle from 2024–25 -when the policy rate was lowered from 8.25% to 6.75% - would have been reversed after just two meetings. However, the SARB is likely justified in feeling compelled to take this step."

"The conflict in Iran and rising fossil fuel prices have halted and even reversed the decline in inflation in the country. At an annual rate of 5%, prices rose in June at their fastest pace in two years. Gasoline prices, which have risen by about 35% compared to the previous year, are the main driver of this trend."

"However, this development can no longer be attributed solely to energy costs. The core rate - excluding energy and food - also rose in June at an annual rate of 4.1%, the fastest pace in nearly two years. More importantly, it exceeded the upper end of the central bank’s inflation target range (3% ± 1)."

"For the ZAR, the key factor will be how resolute the SARB continues to be. At its last meeting, the SARB announced that, if necessary, it would raise interest rates three more times to defend the inflation target."

"Now that the geopolitical situation has improved in the meantime, it is likely more difficult than before to assess future developments. A continued hawkish tone, keeping the inflation target at the center of the central bank’s efforts, would therefore probably be best for the ZAR."

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

TD Securities strategists look for Canadian Retail Sales to rise 1.1% month-on-month in May, slightly above the 1.0% consensus, driven by higher gasoline prices and a rebound in core spending. They expect ex-autos sales to climb 1.4% and see a recovery in ex-autos/gas as fuel price pressures ease alongside stronger May job growth and higher consumer goods imports.

Canada May Retail Sales preview

"We look for retail sales to rise by 1.1% m/m in May, just above the flash estimate and market consensus for a 1.0% print, on another large tailwind from higher gasoline prices alongside a rebound in core sales."

"Gasoline prices rose by another 5% m/m in May before stabilizing, which will provide a key driver for the headline print after fuel stations contributed 0.5pp to retail sales growth in April."

"Motor vehicles should see more modest gains to build on their 1.7% increase last month, leaving the ex-autos measure up 1.4% (market: +1.1%)."

"We also look for a rebound in the ex-autos/gas measure after the consecutive declines over Mar/Apr; higher fuel prices have been pinching core retail sales since the beginning of the US-Iran conflict, but we look for these to bounce back with the rebound in May job growth along with a sharp increase in consumer goods imports."

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

• GBP/USD consolidates losses below 1.3400 after its reversal from 1.3558 highs last week.
• A mix of softer inflationary pressures and renewed fiscal worries is hammering the Pound.
• FX analysts from major commercial banks see the Pound depreciating further in the near-term.

The British Pound (GBP) consolidates losses below 1.3400 against the US Dollar (USD) on Thursday, on track for a 0.6% weekly decline, following a reversal from 1.3558 highs last week. The soft inflation figures released on Wednesday, coupled with growing concerns about Prime Minister Andrew Burnham’s spending plans, have sent the Pound lower across the board this week.

Data released on Tuesday revealed that UK consumer inflation eased to a 2.6% year-on-year pace, its lowest growth pace since March last year, with producer prices slowing down well beyond expectations in June. These figures provide the Bank of England (BoE) with more time to assess the impact of the volatile energy prices on the UK economy and push back hopes of any rate hikes.

UK fiscal risks cloud outlook

Beyond that, the first policy announcements by PM Burnham have left investors wondering how he will fund his spending pledges, which has brought fiscal worries back to the table. Strategists at Brown Brothers Harriman warn that “the prospect of higher spending and borrowing under incoming Prime Minister Andy Burnham risks worsening UK fiscal credibility and is a drag on GBP,” reinforcing a cautious stance on the Pound.

Against this background, FX experts from some of the world's main commercial banks see the Pound trading lower in the coming weeks. Analysts at UOB Group maintain a cautious medium-term stance on GBP, reiterating that “downward momentum is increasing rapidly, and if GBP closes below 1.3340, it is likely to decline further to 1.3300.”

They note that this bearish bias was first highlighted “following the sharp decline in GBP two days ago,” when they judged that “the likelihood of GBP closing below 1.3340 will remain intact as long as the ‘strong resistance’ level, now at 1.3455, is not breached.” While UOB says it “continue[s] to hold the same view,” the bank has now adjusted that technical marker, “revising the ‘strong resistance’ level to 1.3435,” thereby lowering the threshold that would invalidate the current downside scenario.

• The Indian Rupee regains ground against the US Dollar amid possible RBI intervention to support the domestic currency.
• Surging oil prices will likely keep the Indian Rupee under pressure.
• FIIs turned out to be net sellers on Wednesday.

The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) on Thursday on possible Reserve Bank of India (RBI) intervention in spot and non-deliverable forwards (NDFs) markets to support the currency. The USD/INR pair edges down to near 96.47, but is still close to its two-month high of 96.75 posted on Monday.

According to a Reuters report, the RBI ‌likely intervened in the foreign exchange market on Thursday to limit the INR's ⁠losses as a relentless rise ⁠in oil prices deepened the South Asian unit's drift back ‌towards record lows.

The Indian central bank is seen intervening several times in the past few weeks, as the Asian currency has underperformed significantly due to higher oil prices and the consistent outflow of foreign funds from the Indian stock market.

Oil prices will likely keep INR’s upside limited

The recovery move in the Indian Rupee on Thursday will likely prove to be short-lived as intensified Middle East energy supply risks are fuelling oil prices.

In the opening trade, the MCX Crude Oil contract expiring on August 19 trades 1.75% higher at around Rs. 8,570, the highest level seen in over six weeks.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.

Earlier in the day, Yemen’s Iran-aligned Houthis carried out missile and drone strikes on two Saudi oil tankers in the Red Sea– naming one as the Encelia – as part of a maritime blockade on the kingdom amid the US-Iran war, The Guardian reported.

Oil shock seen supporting commodity FX while Asia buffers hold

Strategists at BNY Mellon argue that “oil at $95 is an FX shock, but not a broad Asia balance-of-payments crisis,” pointing to “stronger current-account buffers” in ASEAN and India alongside “lighter positioning” as key shock absorbers. In their view, the “cleaner opportunity is in high-carry commodity FX such as BRL, CLP and ZAR,” where elevated energy prices can underpin currencies with attractive yield. They add that NOK may attract some “oil-linked demand,” but caution that “elevated holdings and limited Norges Bank buying cap the upside,” tempering the scope for a more pronounced Krone rally.

FIIs remain net sellers on Wednesday

There seems to be a sense of caution among Foreign Institutional Investors (FIIs) toward the Indian stock market amid surging energy prices. On Wednesday, FIIs turned out to be net sellers, offloading their stake worth Rs. 819.20 crore.

So far this month, foreign investors have remained overall net sellers and have reduced their stake worth Rs. 4836.95 crore.

Technical Analysis: USD/INR approaches all-time high near 97.10

USD/INR trades marginally lower at around 96.53 in India's late afternoon trading hours, but holds a bullish near-term bias as it trades above the 20-period exponential moving average (EMA), which is at 95.88.

The Relative Strength Index (RSI) at 64.10 stays in positive territory but below overbought levels on the daily chart, suggesting firm upward momentum without yet signaling exhaustion.

On the downside, immediate support is located at the 20-period EMA at 95.88, which reinforces the broader constructive structure while it remains intact. Looking up, the all-time high at around 97.10 is the key resistance level.

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

• EUR/JPY pulls back from 12-week highs at 186.67 but remains above previous highs at 186.32.
• The Yen keeps struggling amid the interest rate gap between the BoJ and the rest of the major central banks.
• The Euro is correcting lower within the broader bullish trend.

The Euro (EUR) is giving away previous gains against the Japanese Yen (JPY) on Thursday, as investors position for the European Central Bank's (ECB) monetary policy decision. The EUR/JPY pair, however, remains positive in daily charts, trading at the highest levels in nearly three months, with dips contained above previous highs at the 186.30 area.

Markets are focusing on the ECB's monetary policy decision, due later on the day. The bank is widely expected to leave its benchmark Rate on Deposit Facility at the current 2.25%, and leave the door open for further monetary tightening, as the recent rally in Oil prices points to higher inflationary pressures in the near-term.

The Yen, on the other hand, remains broadly offered with the wide divergence between the Bank of Japan and the rest of the major central banks’ monetary policies acting as headwinds for JPY rallies. Bloomberg reported on Wednesday that the BoJ is ready to accelerate its monetary normalisation cycle, although investors have remained sceptical.

Technical Analysis: Correcting lower from overbought levels

EUR/JPY trades at 186.44 with the bullish bias intact as the pair corrects lower after reaching overbought territory. The 4-hour Relative Strength Index (14) at 65 sits within bullish levels, while the Moving Average Convergence Divergence (MACD) indicator remains slightly positive, hinting that upside momentum is still constructive.

Bearish attempts remain contained at the mid-June highs in the 186.30 area, closing the path towards last week's highs at the 186.00 area and Tuesday's lows at 185.78. On the topside, initial resistance appears at the intraday highs of 186.65, which is also the 161.8% Fibonacci extension of the June 21-22 rally. Further up, the area between the 261.8% Fibonacci extension of the mentioned cycle at 187.44 and the April 30 high, at 187.55, emerges as the next target.

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