Forex News

Christopher Wong at OCBC explains that Asian FX performance is diverging following US midterms. Lower Oil prices and softer US Treasury yields are seen as supportive for THB, PHP and INR, while ongoing AI and tech equity weakness and foreign outflows may pressure KRW and TWD. Markets are watching US yields and payrolls for further direction.

Oil, yields and tech shape Asia FX

"Asian FX saw differentiated trades post-midterms. Lower oil prices and US Treasury yields could support recovery in THB, PHP and INR, while continued AI/tech selloff and foreign equity outflows may weigh on KRW and TWD. Focus remains on US Treasury yields and US payrolls tonight."

"The impact of the Democratic sweep in the US midterm elections on Asian FX is largely indirect but could drive further differentiation across regional currencies. Hopes that the election outcome could hasten a de-escalation of the US–Iran conflict and an earlier reopening of the Strait of Hormuz have contributed to the sharp decline in oil prices this week. While Brent has since rebounded somewhat from its lows, sustained lower oil prices should help ease imported inflation and external pressures, providing scope for recovery in oil-sensitive currencies such as THB, PHP and INR."

"US Treasury yields also fell amid expectations that a divided US government could constrain fiscal expansion, while concerns over tighter scrutiny of AI/data-centre investments have weighed on technology shares. The combination of lower oil prices, softer US Treasury yields and a weaker USD should provide some breathing room for Asian FX. However, the ongoing selloff in AI/tech shares could continue to weigh on tech-linked currencies such as KRW and TWD, particularly if foreign equity outflows persist."

"Much of the post-election repricing remains expectations-driven rather than reflecting actual policy changes. Near term, we continue to watch US Treasury yield developments, while US payrolls data tonight may provide further cues on Fed expectations and USD direction."

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

• Australian Dollar tumbles against the US Dollar to near 0.6862 as the latter outperforms.
• Global AI rout has improved the safe-haven demand of the US Dollar.
• Investors keenly await the US NFP data for September.

The Australian Dollar (AUD) faces intense selling pressure against the US Dollar (USD) on Friday. In the European trade, the AUD/USD pair posted a fresh seven-month low at 0.6862.

The Aussie pair falls sharply as the US Dollar outperforms due to an improvement in demand for safe-haven assets amid global sell-off in Artificial Intelligence (AI) infrastructure stocks.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.42% higher to near 102.00.

Dollar regains post-election losses as tightening US conditions raise downside risks

Analysts at MUFG observe that the “spillover impact from the AI-related equity market sell-off into the foreign exchange market has remained surprisingly modest so far.” Even so, they note that the episode “has resulted in the dollar index reversing all of its initial losses since the US mid-term election results were announced,” underscoring the currency’s resilience amid tighter US financial conditions.

The USD Index slumped to a fresh monthly low near 101.00 after the outcome of US midterm elections on Wednesday, in which Democrats won majority in both the House and the Senate.

MUFG points out that “US dollar strength this year has been supported by higher energy prices and record foreign demand for riskier US assets.” However, it cautioned that “if both these drivers continue to reverse, it would increase the likelihood of the US dollar weakening,” particularly if risk appetite for US assets fades further. In addition, the bank warns that “if financial conditions continue to tighten it could make it less likely that the Federal Reserve (Fed) will hike again in December as planned thereby adding to downside risks for the US Dollar.”

For fresh cues regarding the Fed’s monetary policy outlook, investors await the US Nonfarm Payrolls (NFP) data for October, which will be published at 13:30 GMT.

The US NFP report is expected to show that the economy created 65K new jobs, higher than 29K in September. The Unemployment Rate is seen as steady at 4.2%.

On the Aussie front, investors seek fresh cues regarding whether the Reserve Bank of Australia (RBA) will hike interest rates again this year. So far in 2026, the RBA has delivered five quarter-to-a-percent hikes, pushing the Official Cash Rate (OCR) to 4.85%.

This week, the RBA hiked rates, but the communication signaled hesitation on further tightening. “Voters favoring pause perceived greater downside risks,” RBA Governor Michele Bullock said. Bullock added, “Those favoring a hold wanted to wait longer for data.” She further added, “Not definitely hiking rates again, preserving options.”

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.6874, holding a bearish near-term bias as spot remains capped beneath the 20-period exponential moving average (EMA) at 0.6989 and below the former trend-line support turned barrier near 0.6913. Price action sits under these key overhead levels, keeping the pair under pressure, while the Relative Strength Index (14) at 34 suggests weak but not extreme bearish momentum, hinting that sellers still dominate despite the recent slowdown.

On the topside, initial resistance emerges at the broken upward trend line around 0.6913, followed by the 20-day EMA at 0.6989, which reinforces the broader bearish structure as long as it stays overhead. On the downside, nearby structural support is seen at the prior trend-line anchor around 0.6828; a decisive break below this floor would open the door to further losses, while holding above it would merely signal consolidation within an overall capped market.

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

Chris Turner at ING describes the Euro’s recent performance as unimpressive, with EUR/USD failing to benefit from the US tech sell-off. He argues that European investors are keeping cash in Dollars and that familiar safe-haven correlations with US Treasuries have returned. Barring a soft US jobs report, Turner expects EUR/USD to consolidate near 1.12, while ECB pricing for December hikes remains sticky.

Euro struggles despite US tech rout

"It has been a rather unimpressive performance from the euro. We know that the European buy-side is running low hedge ratios on its US investments. Yet a large US tech sell-off is still not enough to prompt much EUR/USD buying at all."

"It seems that global investors are more than happy to leave their cash in dollars for the time being. In other words, we are seeing a rotation into cash and not out of the dollar. Helping that story is the return to more familiar correlations, where US Treasuries are now performing their safe haven role."

"Barring a soft US jobs report today, expect EUR/USD to consolidate not far from 1.12."

"The market still prices 18bp of ECB hikes in December and that should remain sticky unless we see a much deeper equity correction."

"EUR/GBP has overshot rate differentials down at these low 0.83 levels, but there seems to be no reason to expect an upside correction just yet."

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

• EUR/JPY loses 0.13% on Friday as European economic data paints a mixed picture.
• Eurozone Retail Sales declined 0.7% in September, significantly worse than the expected 0.1% drop.
• The Japanese Yen benefits from expectations of a December interest rate hike in Japan and broader risk aversion.

EUR/JPY trades lower on Friday, losing 0.13% on the day to hover around 176.80 at the time of writing. The pair faces pressure from mixed economic data in the Eurozone, while the Japanese Yen (JPY) benefits from expectations of further interest rate hikes by the Bank of Japan (BoJ) and broader risk-off sentiment.

On the European front, economic data released on Friday points to weakening consumer demand. According to Eurostat, Eurozone Retail Sales fell 0.7% MoM in September, following a revised 2% drop in August. The reading came in significantly below market expectations of a more moderate 0.1% decline. On an annual basis, Retail Sales growth also slowed to 0.4% in September, down from 1.3% in the previous month and missing the market consensus of 0.6%. These figures suggest persistent weakness in European household demand, potentially weighing on the region's economic growth outlook and limiting the recovery potential of the Euro (EUR).

Released earlier in the day, German Industrial Production increased 0.7% MoM in September, beating expectations of a flat reading and decreasing from August's revised 1% growth. The improvement was mainly driven by strong performances in the automotive and pharmaceutical sectors, while construction and machinery and equipment manufacturing recorded declines.

On the monetary policy front, European Central Bank (ECB) Chief Economist Philip Lane said on Friday that energy inflation could influence wage negotiations and price-setting across the economy. He stressed that monetary policy must contain the spillover effects of inflationary pressures while reaffirming the need to bring inflation back to the ECB's target within one to two years.

Lane also noted that financial conditions had tightened and that fiscal policy, which had been more expansionary than expected, was likely to become more restrictive from next year. Regarding upcoming ECB decisions, he adopted a cautious stance, emphasizing the need to gather more information ahead of the December meeting.

In Japan, monetary policy expectations continue to support the Japanese Yen. The minutes of the BoJ's September meeting, released on Thursday, showed that policymakers agreed on the need to continue gradually raising interest rates and adjusting the degree of monetary accommodation.

Some members even advocated a faster pace of monetary tightening, reinforcing market expectations of another potential interest rate hike as early as December. This outlook supports the Japanese currency, particularly against the Euro, as investors assess the diverging monetary policy paths of the two central banks.

Meanwhile, broader risk-off sentiment continues to favor demand for the Japanese Yen, traditionally considered a safe-haven currency. This combination of monetary policy expectations and defensive flows keeps EUR/JPY under pressure.

• EUR/USD extends losses to levels near 1.1170, from highs near 1.1270 on the previous day, hit by risk aversion.
• Eurozone Retail Sales dropped beyond expectations in September, adding bearish pressure on the Euro.
• Higher demand for safe assets amid the sell-off in equities and solid US data are keeping the US Dollar buoyed.

The Euro (EUR) accelerates its reversal on Friday, as Eurozone Retail Sales disappoint, while risk-aversion and market expectations of a strong US Nonfarm Payrolls report later in the day are supporting the US Dollar’s (USD) recovery. The EUR/USD pair trades near 1.1170 at the time of writing, down from highs near 1.1270 on Thursday, on track for a minor weekly gain

Retail consumption in the Euro Area dropped by 0.7% in September, according to data released by Eurostat on Friday, exceeding market expectations of a more moderate 0.1% decline, and following a 0.1% uptick in August. Year-over-year, Eurozone Retail Sales growth halved to 0.4% from August’s 0.8% growth, below the 0.6% consensus.

Before that, German data revealed that factory output grew 0.7% in September, beating market expectations of a flat reading and above August’s 0.1% growth. The Euro, however, failed to draw any significant support from these figures.

USD shines amid risk-off markets and positive US data

The safe-haven US Dollar has drawn support from the selloff in equity markets led by growing concerns about the AI sector. Chipmaker shares have plunged in the US and Asia, crushed by investors' fears that the Democratic sweep in the United States will result in tougher regulatory requests and cancellations in data-centre construction plans.

Strategists at OCBC argue that the broader environment, with “US growth still solid, inflation sticky and the Fed on track for further tightening (...) remains broadly USD supportive.”  

Against this background, the market has its eyes set on October’s Nonfarm Payrolls (NFP) report, due later on Friday. Previous labour data beat expectations this week; Jobless Claims fell to their lowest level in nearly four months last week, ADP employment increased well beyond consensus in October, and the JOLT report showed sharply higher job openings in September. If the NFP follows this trend, it might provide additional support to the USD.