Forex News
- USD/CAD attracts buyers for the fourth straight day, though it lacks follow-through amid mixed cues.
- Sliding oil prices undermine the Loonie, while receding geopolitical risks weigh on the safe-haven USD.
- Prospects for at least one Fed rate hike in 2026 favor USD bulls as traders look to the US macro data.
The USD/CAD pair trades with a positive bias for the fourth straight day and currently hovers around the 1.4070 region, or a nearly one-week high set the previous day. Spot prices, however, lack bullish conviction amid a combination of diverging forces, which warrants caution before positioning for an extension of the recent bounce from sub-1.4000 levels or the lowest since June 17.
Renewed hopes of a potential US-Iran deal to reopen the Strait of Hormuz drag crude oil prices to a nearly four-week low and undermine the commodity-linked Loonie, which, in turn, is seen supporting the USD/CAD pair. Meanwhile, weaker oil prices ease inflation fears and temper US Federal Reserve (Fed) rate hike expectations. Adding to this, receding geopolitical tensions weigh on the safe-haven US Dollar (USD) and cap the upside for the currency pair.
In the latest developments surrounding the Middle East crisis, Axios reported that the US, Iran, and Oman are closing in on an agreement to reopen the Strait of Hormuz. This comes on top of US Treasury Secretary Scott Bessent's comments that the US could reach a deal with Iran to reopen the strategic waterway by Wednesday and move toward a more normalized position in this conflict. The remarks fueled optimism over a diplomatic resolution to end the US-Iran war.
Traders, however, are still pricing in a greater chance that the US central bank will raise borrowing costs by the end of this year amid signs that the US labor market is beginning to find its footing and looming inflation risks. Adding to this, Kansas City Fed President Jeff Schmid and Philadelphia Fed President Anna Paulson backed the case for higher interest rates to fight inflation. This should limit deeper USD losses and support prospects for further USD/CAD appreciation.
Traders now look to Wednesday's US economic docket – featuring the release of the ADP report on private-sector employment and ISM Services PMI. Apart from this, the incoming geopolitical headlines and speeches from influential FOMC members would drive the USD demand. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair. The focus, however, remains glued to the crucial monthly jobs report from the US and Canada, due on Friday.
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.
- EUR/JPY declines to near 181.70 in Wednesday’s early European session.
- The cross keeps a negative tone, with bearish RSI momentum.
- The first upside barrier emerges at 184.90, the initial support level to watch is 181.15.
The EUR/JPY cross trades in negative territory around 181.70 during the early European trading hours on Wednesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) as traders remain on alerts for further intervention from Japanese authorities following the coordinated intervention between the United States (US) and Japan.
Traders will closely monitor the developments surrounding US-Iran talks. Axios reported that the US, Iran, and Oman are closing in on an interim deal to reopen the Strait of Hormuz, with Washington aiming for a Wednesday announcement.
The source added that the agreement under discussion sets up a 60-day temporary arrangement between Oman and Iran in the critical waterway. Fresh optimism over the Middle East could improve risk sentiment and provide some support to the riskier asset, such as the EUR against the JPY.
Yen outlook seen hinging on growth rather than faster BoJ hikes
Societe Generale argues that the policy rate path alone is unlikely to deliver a sustained recovery in the Yen. Analysts there stress that “more, or faster BoJ rate hikes won’t solve the problem either, unless the Japanese growth outlook makes them appear realistic,” underscoring their view that a credible improvement in Japan’s growth prospects is a prerequisite for any meaningful policy tightening to support the currency.
Technical Analysis: Negative outlook of EUR/JPY remains intact
In the daily chart, EUR/JPY keeps a bearish near-term tone as spot holds below the 20-day simple moving average (SMA) from the Bollinger Bands and the 100-day SMA, which now act as a tight resistance cluster overhead. Price is sliding toward the lower Bollinger Band while the Relative Strength Index (14) at 34.77 stays close to oversold territory, hinting that downside pressure persists but may be approaching a fatigue zone.
On the topside, initial resistance is aligned at the Bollinger mid-line/20-day SMA near 184.90, followed by the 100-day SMA at 185.10. A decisive daily close above this level would be needed to ease the current downside bias, with the upper Bollinger Band up at 188.65 as a more distant barrier.
On the downside, the lower Bollinger Band around 181.15 offers the first notable support, and a clear break beneath it would expose the February 12 low of 180.81, en route to the 180.00 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
US President Donald Trump said that he had very productive talks with Iran, Fox News reported on Wednesday.
Key quotes
Moving along very nicely.
We're having very good discussions with Iran.
They had an all-day negotiation today.
Negotiations were good.
Meanwhile, the Iranian state media, citing an informed source, noted that the Strait of Hormuz agreement with Oman will be delayed as long as the US continues to threaten Iran.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.65% on the day at $73.87.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Silver price jumps to near $60.95 as oil prices fall sharply.
- Investors are uncertain regarding the freedom of navigation through the Hormuz Strait.
- US ADP Employment Change and NFP data for July are awaited.
Silver price (XAG/USD) trades 1.8% higher at around $60.95 during the Asian trading session on Wednesday. The white metal attracts significant bids as oil prices face a sharp sell-off amid hopes of a resolution in conflicts between the United States (US) and Iran regarding the Strait of Hormuz, a critical chokepoint to almost one-fifth of global energy supply and Tehran’s nuclear ambitions.
As of writing, the WTI Oil price trades 0.8% lower at around $73.80.
Global inflation expectations get anchored by lower oil prices, which diminish fears of interest rate hikes by central banks. Such a scenario bodes well for non-yielding assets, like Silver.
Hopes for US-Iran conflict resolution are backed by comments from US officials that a deal would be reached soon. On Tuesday, US Treasury Secretary Scott Bessent said in a CNBC interview that a deal with Iran to reopen the critical chokepoint could be reached “as soon as Tuesday or Wednesday”.
However, financial markets are uncertain regarding whether ongoing talks would restore freedom of navigation through the critical chokepoint. So far, Iran has just confirmed that it is in talks with Oman over the charge of the Hormuz Strait.
Meanwhile, investors await the US Nonfarm Payrolls (NFP) data for July to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook. In Wednesday’s session, investors will focus on the ADP Employment Change data for July, which will be published at 12:15 GMT.
Deutsche Bank looks for modest pickup in US July payrolls
Economists at Deutsche Bank expect a slightly firmer US labour market print on Friday, projecting that the July payrolls report will show employment growth of “+65k, modestly above June’s +57k reading,” with “private payrolls … also expected to rise by +65k after +49k previously.” Set alongside their projections for a 4.2% unemployment rate, with risks skewed toward 4.3% on higher participation, and average hourly earnings rising 0.3% month-on-month, the bank’s forecasts point to a still‑moderate pace of job creation consistent with nominal income growth running at around 4.4% year‑on‑year.
Silver technical analysis
XAG/USD trades higher at around $60.95, holding above the 20-period exponential moving average (EMA) at $59.05, which now underpins a constructive near-term bias. The EMA offers underlying trend support as price advances away from the recent lows, while the Relative Strength Index (RSI) at 53.23 sits in neutral-to-positive territory, hinting that bullish momentum is building but not yet overstretched.
On the downside, immediate support is located at the 20-day EMA at $59.05, where a pullback could find buyers to preserve the short-term uptrend. Below that, the July 17 low at $54.77 is the key support level. Looking up, the Silver price could extend the advance towards the July 6 high at $63.28 if it manages to stabilize above $61.00
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- US-Iran talks advance on an interim agreement to reopen the critical oil transit route.
- Iran reviews mine-clearing proposals, while Saudi Arabia holds mediated talks with Houthi rebels.
- US crude stockpiles rose by 2.69 million barrels, defying expectations of a drawdown.
West Texas Intermediate (WTI) oil price falls after paring its daily gains, trading around $73.80 per barrel during the Asian hours on Wednesday. Crude oil prices have declined as supply concerns ease, driven by building diplomatic momentum surrounding a potential agreement to reopen the Strait of Hormuz.
On Tuesday, Qatari officials announced that an interim proposal had been drafted, with both Washington and Tehran signaling tangible progress toward restoring access to the critical maritime transit route. This diplomatic breakthrough follows US President Donald Trump’s decision to suspend planned military strikes against Iran, choosing instead to give negotiations space while maintaining his call for the immediate reopening of the waterway.
Meanwhile, broader regional efforts are underway to secure key shipping lanes. Iran is currently reviewing a framework that would permit European nations to clear naval mines from the strait, alongside advancing discussions with Oman to safeguard trade routes. Concurrently, Saudi Arabia is engaging in mediated talks with Yemen's Houthi rebels via Omani channels, aiming to prevent further escalation in the adjacent Red Sea corridor.
US crude oil inventories rose by 2.69 million barrels for the week ending July 31, defying market expectations of a 2 million-barrel draw and following an increase of 3.3 million barrels the prior week. Excluding the Strategic Petroleum Reserve (SPR), commercial crude inventories have fallen by more than 58 million barrels over the past 16 weeks and are down 7.2 million barrels year-to-date. Meanwhile, the SPR declined by another 2.9 million barrels to 304.8 million, approaching its estimated operational minimum of 250 to 300 million barrels.
Oil supply resilience underpins Saudi output assurances
BNY’s Geoff Yu highlights that Saudi Aramco has been able to maintain operations despite recent disruptions in the region, noting that “alternative pipelines, storage and export terminals have preserved business continuity despite the disruption around the Strait of Hormuz.” This infrastructure flexibility has allowed the company to safeguard output and exports even as geopolitical risks around key shipping lanes remain elevated.
According to a report from Axios, the United States (US), Iran, and Oman are closing in on an interim agreement to reopen the Strait of Hormuz, with the U.S. aiming for a Wednesday announcement, sources said. The report also stated that the deal under discussion sets up a 60-day temporary arrangement between Oman and Iran in the Hormuz Strait, a critical chokepoint to almost 20% of global energy supply, which could be extended.
Investors would be keen to know whether Iran has been allowed to execute a toll-based system near the Hormuz. Such a scenario would dampen freedom of transport through the chokepoint that migh force ships to choose a different route.
Market reaction
The WTI Oil price has faced selling pressure after the news release. At press time, the WTI Oil price trades a little over 1% down at around $73.60.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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