Forex News
- DJIA trades near 53,250, roughly 300 points lower, with the 53,500 shelf gone.
- One energy stock, 2.2% of the index, against more than a quarter in financials.
- September hike odds near 60%, up from 35% before Friday's keynote.
The Dow Jones Industrial Average (DJIA) trades near 53,250, roughly 300 points lower on the session on Monday, after American forces struck two Iranian rocket launchers on Larak Island and Tehran answered with attacks on bases in Jordan and assets in the United Arab Emirates. Crude Oil ran better than 2% higher through the $85.00 handle on the news, and Treasury yields rose alongside it rather than falling. A shock that lifts the barrel and the cost of money at once is not a risk-off event for this index. It is a tightening event.
The hedge that stopped working
The reflex on a Middle East escalation is to sell equities and buy government bonds, and Monday declined to follow it. Longer-dated Treasury yields pushed higher through the session, short-dated borrowing costs across Europe reached multi-year highs, and Japanese two-year paper touched a level last seen thirty-one years ago. Bonds sold on a war headline because this war is being priced as a cost story rather than a growth story.
The transmission is direct enough to trace. Disrupted traffic through the Strait of Hormuz raises the delivered cost of energy, energy runs straight into goods inflation, and the Federal Reserve chair used his first Jackson Hole keynote on Friday to say that better summer readings had not persuaded him that underlying trends were improving. The benchmark Gulf-to-Japan large tanker rate set a record above $107 per metric ton on August 27, which is a freight market pricing the risk rather than a headline market reacting to it.
Rate futures did the rest of the work. Pricing for a September increase sits near 60% against roughly 35% before Friday, a move that would take the target range to 3.75% to 4.00% and reverse the direction every equity model built over the past two years assumed. Nothing in Monday's headlines argues the other way, because the escalation and the inflation risk are the same trade.
One energy stock against a quarter of the index
Price weighting decides how that lands inside this particular average, and the arithmetic runs against it. Chevron (CVX) has been the only energy company in the index since ExxonMobil was removed in 2020, and at roughly 2.2% of index weight it is the whole of the hedge. Financials carry better than a quarter of the index across five names, with Goldman Sachs (GS) alone near 11.5% on a share price above $1,000.
The index is therefore structurally on the wrong side of its own geopolitical story, with barely two points of weight benefiting when a supply shock lifts the barrel and more than twelve times that much sitting in the block most exposed to a front end moving toward a hike. Alphabet (GOOGL) took Verizon's seat at the end of June, which stripped the last telecom ballast out of the average and replaced it with a name that trades on duration.
The same mechanism explains why August's technology rally largely passed the index by. Nvidia (NVDA) is worth roughly 2.4% here and Microsoft (MSFT) roughly 5.7%, so a month in which artificial intelligence names carried the broader benchmarks left this one on track for a fifth straight monthly advance and still some 3% beneath the record it set in the first week of August.
The numbers that carry the week
Friday's employment report is the advertised event, with August payrolls forecast at 58K after a 23K contraction, the unemployment rate held at 4.1%, and average hourly earnings accelerating to 0.3% MoM from 0.1%. The chair has already described the labour market as stable and consistent with full employment, and has said wage growth stopped being a reliable guide to future inflation a long time ago. Most of the policy content is drained out of that report before it prints.
The releases carrying an actual reaction function land earlier in the week. The Institute for Supply Management (ISM) manufacturing Purchasing Managers Index (PMI) arrives Tuesday at 14:00 GMT with the prices paid component forecast at 72 against 71.1 prior, and the services reading follows Thursday with its own prices paid line last at 70.3. Those two subindices are where an energy shock shows up first, and they measure the one variable the chair says has not improved.
Between them sit the private payroll estimate on Wednesday at 12:15 GMT, forecast at 47K against 44K, and the Beige Book at 18:00 GMT the same day. The decision lands September 16, and with three policymakers scheduled to speak before Friday, the tone that moved the front end last week has more room to be reinforced than walked back.
Levels to watch
Resistance: The 53,500 handle turned the session high back and now caps what it supported last week. Above it the band just above 53,800 has rejected every attempt since mid-month, with 54,000 and the record just short of 54,750 beyond.
Support: The session floor sits in the 53,100 area, with the 53,000 handle the next shelf beneath it. Below there the rising 50-day Exponential Moving Average (EMA) near 52,700 is the line the August advance was built on, and the 200-day EMA near 50,000 is nowhere near play.
Bias: Bearish while 53,500 caps, with objectives at the 53,000 handle and then 52,700. The daily Stochastic Relative Strength Index (Stoch RSI) near 35 is falling through the lower half of its range with no divergence to argue against it. Invalidation on a daily close above 53,800.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
- USD/JPY retreats to 159.80 on Monday after briefly moving above the psychological 160.00 level.
- Scott Bessent expects Japanese authorities to take measures that will lead to a stronger Japanese Yen.
- Investors now turn to US manufacturing activity and labor market data for fresh direction.
USD/JPY declines 0.21% on Monday and trades around 159.80 at the time of writing, after briefly moving above the psychological 160.00 level. The Japanese Yen (JPY) attracts fresh buying as comments from US Treasury Secretary Scott Bessent reinforce expectations that authorities could support the Japanese currency.
Bessent said on Monday that he believes the Japanese government and the Bank of Japan (BoJ) will take measures that will lead to a stronger Japanese Yen. His comments come as the weakness of the Japanese currency remains in focus following the recent surge in USD/JPY toward levels that have previously prompted authorities to intervene in the foreign exchange market.
Concerns over another intervention remain elevated following USD/JPY's move above 160.00. Data from Japan's Ministry of Finance released on Friday showed that Japan spent a record ¥15.4 trillion between July 30 and August 26 to support its currency after the pair reached a multi-decade high near 164.00.
Expectations surrounding Japanese monetary policy also provide some support to the Japanese Yen. Investors anticipate a more restrictive stance from the Bank of Japan, although the country's expansionary fiscal policy, high level of government debt and still relatively low interest rates continue to limit the currency's appreciation potential.
Meanwhile, the US Dollar (USD) trades lower, adding further downside pressure to USD/JPY. Investors now turn to a series of US economic releases that could influence expectations surrounding the interest rate outlook.
The Institute for Supply Management (ISM) is scheduled to release its Manufacturing Purchasing Managers Index (PMI) for August on Tuesday, while the July Job Openings and Labor Turnover Survey (JOLTS) will provide fresh clues about the health of the US labor market. These releases could determine whether the current weakness in the US Dollar persists and, consequently, whether USD/JPY can extend its decline below 160.00.
USD/JPY technical analysis
In the one-hour chart, USD/JPY trades at 159.74, holding a mildly bullish near‑term bias as it remains above the 100-hour simple moving average (SMA) at 159.47 and the 200-hour SMA at 159.17, as well as the rising trend-line support around 159.55. The Relative Strength Index (RSI) at 47.82 sits just below the neutral 50 mark, hinting at consolidative rather than impulsive momentum after the recent pullback from the 160.20 horizontal cap.
On the topside, initial resistance is seen at the horizontal barrier near 159.92, ahead of the recent swing high at 160.20, where buying interest has so far stalled. On the downside, immediate support is provided by the trend-line zone around 159.55, followed by the 100-hour SMA at 159.47 and the deeper 200-hour SMA near 159.17, where a break would weaken the current constructive tone and expose a broader corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- Gold finds some stability after falling to its lowest level since August 19.
- Higher-for-longer interest-rate expectations remain the main hurdle for the non-yielding metal.
- XAU/USD needs to reclaim the 200-day SMA to ease the latest bearish pressure.
Gold (XAU/USD) fluctuates between gains and losses on Monday after opening the week lower and briefly falling below $4,400, its lowest level since August 19, during Asian trading hours. The metal retains a near-term bearish bias as hawkish Federal Reserve (Fed) expectations keep buyers cautious. At the time of writing, XAU/USD trades around $4,435, after reaching a more than three-month high of $4,697 last week.
The Yellow metal fell about 3.20% on Friday following Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium. Markets viewed Warsh’s remarks as hawkish, reviving expectations that the central bank could raise interest rates as soon as September and pushing the US Dollar (USD) and short-term US Treasury yields sharply higher.
Analysts at Rabobank point out that Warsh made clear that he is “open to further rate hikes unless underlying inflation began to improve convincingly,” underscoring that “we must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do.”
According to the CME FedWatch tool, markets are now pricing in around a 66% chance of a September rate hike, up from roughly 38% before Warsh’s speech. A higher interest-rate environment reduces the attractiveness of Gold because the metal offers no yield.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.41, easing from 99.72, its highest level since August 14. The modest pullback in the Greenback lends some support to Gold, although US Treasury yields remain elevated near recent highs, with the benchmark 10-year yield climbing to around 4.75%, its highest level since January 2025.
Meanwhile, renewed US-Iran hostilities keep Oil prices elevated, adding upside risks to inflation. Iran said it attacked US bases in Jordan after US strikes on Larak Island. US President Donald Trump told Fox News that Washington would respond to Iran’s attack on US forces. US Treasury Secretary Scott Bessent said, “Operation Outcast will make Iran want to make a deal,” adding that “the goal is to create a condition where they want to come to the table.”
In the near term, expectations that the Fed's interest rates will stay higher for longer remain a key hurdle for Gold’s recovery, even as central-bank buying and geopolitical tensions provide underlying support. Gold is still on track to gain around 10% in August, largely driven by the US Treasury’s announcement that it would double liquidity-support buybacks of longer-dated government bonds.
Upcoming US economic data will be closely watched for fresh clues about the Fed’s monetary policy path, with the ISM Purchasing Managers Index (PMI) surveys and Nonfarm Payrolls (NFP) report among the key risk events this week.
Technical analysis: Momentum weakens after rejection near $4,700
XAU/USD maintains a slightly bearish near-term bias following the latest leg lower, with the metal falling back below the 200-day Simple Moving Average (SMA) at $4,528. The Relative Strength Index (RSI) on the daily chart has eased from overbought territory to around 52, pointing to fading bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) has slipped marginally below its signal line, adding to signs of weakening upside pressure.
On the downside, initial support is located at the 100-day SMA at $4,370, followed by the 50-day SMA at $4,211. A sustained break below these levels could expose the horizontal floor near $4,000. On the upside, the 200-day SMA at $4,528 acts as immediate resistance, followed by the horizontal barrier at $4,700.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
BNY’s Wee Khoon Chong highlights that China’s factory slump is easing, with manufacturing PMI edging higher and export orders returning to expansion, while services and construction remain weak. Authorities announced property market reforms to strengthen homebuyer protections, shift toward completed‑home sales and extend mortgage terms, alongside efforts to broaden financing channels for viable developers.
PMI stabilization and housing overhaul
"Chinese factory slump eases, but weak services signal uneven recovery."
"China’s August PMI release showed a modest improvement in factory activity, while non-manufacturing remained weak. The manufacturing PMI rose to 49.8% in August (49.2% in July), with large firms returning to expansion at 50.6%."
"China has announced property market reforms aimed at strengthening homebuyer protections and accelerating the shift to a new housing development model. The measures tighten presale rules, promote completed-home sales and require more safeguards for buyer funds through regulated accounts and “handover with certificate” practices."
"For homes sold after completion, mortgage disbursement will only occur after sales registration; for presold projects, funding will be delayed until formal completion registration. Authorities also extended the maximum term of individual home loans to 40 years from 30 years."
"In parallel, regulators said developers’ reasonable financing needs should be better met, with a greater focus on project viability, and financing channels will be broadened through equities, bonds, asset-backed securities and REITs. The package is designed to reduce delivery risks, improve transparency, raise housing quality and support safer transactions."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Scott Bessent, the US Treasury Secretary, crossed the wires in an interview with CNBC, saying Oil prices will come down and that US President Donald Trump has been saying that Iran is not ready for a deal.
He added he believes the Bank of Japan and the Japanese government will do things that will lead to a strong Yen. Bessent added that he will meet with his Canadian counterpart, assuring that “we are not in war with Canada."
Key highlights:
OPERATION OUTCAST WILL MAKE IRAN WANT TO MAKE A DEAL. THE GOAL IS TO CREATE A CONDITION THAT THEY'D WANT TO COME TO THE TABLE
WE HAVE MORE IN COMMON WITH CHINA ON IRAN THAN WE DISAGREE ON
FED'S CHAIR WARSH AND I ARE ON THE SAME PAGE ON BONDS
I AM NOT GOING TO SPECULATE ON WHAT THE FED MAY DO OR NOT
TRADITIONALLY, YOU DON'T RAISE RATES INTO A SUPPLY SHOCK
CORE INFLATION HAS REMAINED VERY RESTRAINED
MY BELIEF IS THAT JAPANESE GOVERNMENT AND BOJ WILL DO THINGS THAT WILL LEAD TO A STRONGER YEN
MEETING WITH CANADIAN COUNTERPART
WE ARE NOT IN WAR WITH CANADA
CARNEY NOT DOING WHAT'S BEST FOR CANADIAN PEOPLE
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.27% | -0.11% | -0.21% | -0.27% | 0.05% | 0.00% | -0.19% | |
| EUR | 0.27% | 0.13% | 0.06% | -0.00% | 0.27% | 0.29% | 0.09% | |
| GBP | 0.11% | -0.13% | -0.06% | -0.14% | 0.12% | 0.14% | -0.03% | |
| JPY | 0.21% | -0.06% | 0.06% | -0.07% | 0.25% | 0.23% | 0.05% | |
| CAD | 0.27% | 0.00% | 0.14% | 0.07% | 0.32% | 0.31% | 0.10% | |
| AUD | -0.05% | -0.27% | -0.12% | -0.25% | -0.32% | 0.00% | -0.16% | |
| NZD | -0.01% | -0.29% | -0.14% | -0.23% | -0.31% | -0.00% | -0.18% | |
| CHF | 0.19% | -0.09% | 0.03% | -0.05% | -0.10% | 0.16% | 0.18% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- USD/CHF retreats as the US Dollar Index eases from a more than one-week high.
- Markets raise Fed interest rate hike bets following Warsh’s Jackson Hole speech.
- Swiss bankers expect the SNB to keep interest rates unchanged through 2026.
USD/CHF trades with a downside bias on Monday as the US Dollar (USD) struggles to gain traction despite rising Federal Reserve (Fed) interest rate hike expectations and Middle East tensions. At the time of writing, the pair trades around 0.8080, down roughly 0.15% on the day.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.41, easing from last week’s high of 99.72.
The Greenback climbed to its highest level in more than a week on Friday following hawkish remarks from Fed Chair Kevin Warsh at the Jackson Hole Symposium. Strategists at Scotiabank note that Kevin Warsh used his Jackson Hole appearance to “correct the impression of evasiveness and opacity” that had characterized his remarks following the July FOMC. In their view, he “effectively removed ambiguity around the Fed’s inflation target” and delivered a clear warning that unless inflation makes progress towards the 2% objective “with speed.”
Meanwhile, renewed hostilities between the United States (US) and Iran are keeping Oil prices elevated, which could make it harder for inflation to return to the Fed’s 2% target and strengthen the case for tighter monetary policy.
According to the CME FedWatch tool, traders are pricing in around a 65% chance of a rate hike next month. This week’s US ISM Purchasing Managers Index (PMI) surveys and Nonfarm Payrolls (NFP) report could influence expectations for the Fed’s September decision.
On the Swiss side, Reuters reported on Monday that a Swiss Bankers Association survey showed all participating bankers expect the Swiss National Bank (SNB) to keep its policy rate unchanged at 0% for the rest of 2026. Around 60% also expect the central bank to leave rates unchanged throughout 2027.
Looking ahead, Swiss Retail Sales data are due on Tuesday, followed by the Consumer Price Index (CPI) and second-quarter Gross Domestic Product (GDP) figures on Thursday.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.27% | -0.12% | -0.21% | -0.27% | 0.04% | 0.00% | -0.17% | |
| EUR | 0.27% | 0.12% | 0.06% | -0.01% | 0.25% | 0.29% | 0.09% | |
| GBP | 0.12% | -0.12% | -0.06% | -0.13% | 0.12% | 0.16% | -0.01% | |
| JPY | 0.21% | -0.06% | 0.06% | -0.08% | 0.23% | 0.23% | 0.05% | |
| CAD | 0.27% | 0.00% | 0.13% | 0.08% | 0.32% | 0.31% | 0.11% | |
| AUD | -0.04% | -0.25% | -0.12% | -0.23% | -0.32% | 0.00% | -0.15% | |
| NZD | -0.01% | -0.29% | -0.16% | -0.23% | -0.31% | -0.01% | -0.17% | |
| CHF | 0.17% | -0.09% | 0.01% | -0.05% | -0.11% | 0.15% | 0.17% |
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).
- USD/CAD falls 0.24% on Monday, supported by strength in the Canadian currency.
- Rising Oil prices underpin the Canadian currency amid escalating tensions in the Middle East.
- Expectations of a US interest rate hike in September, however, limit the pair’s downside.
USD/CAD falls 0.24% on Monday and trades around 1.3870 at the time of writing, after reaching its highest level in more than two weeks earlier. The pair comes under pressure from both a stronger Canadian Dollar (CAD), supported by rising Oil prices, and a modest pullback in the US Dollar (USD).
Oil prices advance as tensions between the United States (US) and Iran intensify. US forces struck two rocket launchers on Iran’s Larak Island in the Strait of Hormuz on Sunday, prompting Tehran to retaliate with ballistic missiles targeting two US bases in Jordan.
US Treasury Secretary Scott Bessent also said that new secondary sanctions could be announced on a weekly basis to increase pressure on Iran. The geopolitical escalation fuels concerns over energy supplies and supports Oil prices, benefiting the Canadian Dollar given Canada’s role as a major Oil producer and exporter.
Meanwhile, the US Dollar gives back some of Friday’s strong gains, adding downward pressure on USD/CAD. However, the Greenback’s decline remains limited by renewed expectations of monetary tightening from the Federal Reserve (Fed).
Fed Chair Kevin Warsh said at the central bank’s annual symposium in Jackson Hole that interest rates may need to rise if progress in easing inflationary pressures remains insufficient. Higher energy prices also add to inflation risks and reinforce expectations of a potential rate hike as soon as September, providing some support to the US Dollar.
On the Canadian side, intensifying trade tensions between the United States and Canada could nevertheless limit the Canadian Dollar’s appreciation and prevent a more pronounced decline in USD/CAD.
Investors now turn their attention to the Bank of Canada (BoC) monetary policy decision on Wednesday. The monthly employment reports from the US and Canada, due on Friday, should then provide further clues about the economic and monetary policy outlook in both countries.
Canadian Dollar holds near fair value as BoC and jobs data come into focus
Strategists at Scotiabank note that the Canadian Dollar is steady, with the CAD “little changed on the session” and spot having “spent the past week trading at or a little below our estimated fair value.” They add that the currency “continues to outperform, if only modestly, against that benchmark this morning.”
Scotiabank reports that “our fundamental equilibrium estimate has nudged a little higher since Friday to 1.3920, reflecting wider front-end US/Canada swap spreads in the main.” In their view, “CAD resilience in the face of volatile Fed expectations and the latest round of trade uncertainty is impressive and reaffirms our view that there is limited downside potential in the CAD currently.” However, they caution that “equally, however, scope for gains is curtailed by the wide rate gap.”
Looking ahead, the bank highlights that “the Canadian calendar is relatively busy this week.” They expect Wednesday’s BoC policy decision “is not expected to reflect any change in policy or indeed in the Bank’s cautious view of the outlook,” while Friday’s jobs report “is expected to reflect a moderate gain in employment (15k) after the solid July report.”
USD/CAD technical analysis
In the one-hour chart, USD/CAD trades at 1.3871, holding a mildly bullish intraday bias as it remains above the 100-period simple moving average (SMA) at 1.3869 and the 200-period SMA at 1.3838. The pair is consolidating after failing to extend gains through nearby horizontal resistance at 1.3910, while the Relative Strength Index (RSI) around 38 suggests fading bullish momentum and warns that the upside impulse is losing strength.
On the topside, initial resistance is located at 1.3910, with a subsequent barrier at 1.3958, where further buying could stall. On the downside, immediate support is found at the 100-period SMA at 1.3869, followed by the horizontal floor at 1.3845 and then the 200-period SMA at 1.3838, which together define the key area that bulls would need to defend to prevent a deeper corrective slide.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Standard Chartered’s Tommy Wu raises Taiwan’s GDP growth forecasts, projecting 11.5% in 2026 and 6.5% in 2027, both slightly above government estimates. The upgrade is driven by AI-related export strength and recovering domestic demand. The bank expects the AI supercycle to persist, with spillovers into consumer spending, while keeping CPI forecasts and its path of two 12.5bp CBC rate hikes unchanged.
AI exports and domestic demand support
"We raise our GDP growth forecasts to 11.5% (from 9.5% prior) in 2026 and to 6.5% (from 5.0%) in 2027 K-shaped divergence may become less pronounced as the tech boom spills over to consumer spending Signs of strengthening domestic demand point to rising (but not excessive) risk of demand-pull inflation We maintain our view of two more 12.5bp rate hikes, in December 2026 and March 2027 each Taiwan’s edge in high-end chipmaking means any potential new US tariffs should have a limited impact."
"Our upgrade largely reflects faster-than-expected Q2 growth, fuelled by AI-driven demand and a recovery in domestic demand, though we expect the y/y pace to drop sharply from Q4 onwards as high base effects weigh on exports and GDP."
"We increase our 2027 growth forecast to 6.5% (5.0% prior), versus the government’s 6.04%, as we expect the AI supercycle to be sustained."
"We maintain our forecast of two 12.5bp hikes by Taiwan’s central bank (CBC) in December 2026 and March next year, to take the discount rate to 2.25% (from 2.00% currently)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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