Forex News

• Qatar is launching a diplomatic process with Oman to organise talks between Iran, the Gulf states and Iraq on the future of the Strait of Hormuz.
• The Gulf states are expected to uphold the principle of free passage through this strategic waterway.
• Iran could propose new charges relating to security, navigation and environmental protection.

Discussions on the future of the Strait of Hormuz could soon gain momentum. According to Reuters, Qatar's Prime Minister is in Muscat on Wednesday to initiate, alongside Oman, a dialogue process involving Iran, the Gulf states and Iraq on the reopening and future operation of the strategic waterway.

According to a diplomat briefed on the talks, Gulf states are expected to push for fee-free transit through the strait. While tolls are reportedly not being considered at this stage, Iran is expected to propose charges related to security, navigation and environmental protection. Markets are closely monitoring the discussions given the Strait of Hormuz's critical role in global energy exports.

Key takeaways

Qatari PM in Muscat Wednesday to initiate process with Oman for Iran-GCC-Iraq talks on reopening and future operation of Hormuz Strait.
Gulf states expected to push for no fees to transit the strait.
Tolls not on the table but Iran is expected to propose environmental, navigation and security fee.
Iran-GCC-Iraq talks over Hormuz are separate from US-Iran peace talks and arrangements to de-mine the strait, and are focused on future operation of Hormuz.
Plans underway for separate regional reconciliation talks between Iran and Gulf states to be held in Riyadh.

Market reaction

Oil prices remain under pressure on Wednesday, with West Texas Intermediate (WTI) US Oil trading around $71.80 at the time of writing, down 1.49% on the day.

• NZD/USD depreciates 5.3% in the last six days and hits fresh seven-month highs below 0.5650.
• A selloff in stock markets and rising hopes of Fed rate hikes are boosting the US Dollar this week.
• The measured target of May's double top, at 0.5625, might provide some support for the Kiwi.

The New Zealand Dollar (NZD) is failing to find a bottom as rising hopes of monetary tightening by the US Federal Reserve (Fed) and dismal market mood are boosting the safe-haven US Dollar (USD) on Wednesday. The pair trades at seven-month lows at 0.5640 on Wednesday after a 3.2% sell-off in the last six days.

The risk-sensitive Kiwi remains under strong bearish pressure, weighed by the risk-off sentiment: Investors’ concerns about overspending in AI have triggered a sharp sell-off in tech shares, raising questions about the consequences of the AI bubble burst in a global economy still in shock amid the Middle East conflict.

Beyond that, the solid US macroeconomic figures and the stubbornly high inflation have prompted Fed policymakers to adopt a more hawkish rhetoric and traders to brace for upcoming rate hikes. All in all, an ideal background for the US Dollar, which has propelled the USD Index to 13-month highs.

Technical Analysis: Kiwi might find support above the 0.5600 line

NZD/USD trades at 0.5639, extending a clear bearish phase, yet with momentum indicators showing heavily oversold levels. The Relative Strength Index, around 14, and the Moving Average Convergence Divergence (MACD) line holding below zero with a flat, negative profile, suggest that scope for a corrective rebound is building.

Bears are nearing the measured target of May's double top at 0.5625 and the 0.5600 psychological level, where they might meet some support. In the current conditions, the next bearish target, at the November 2025 low of 0.5584, seems out of reach for today. Upside attempts, on the contrary, are likely to be tested at the previous support area near 0.5685, ahead of the trendline resistance, now around 0.5770.

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

• Germany’s stronger business sentiment supports the Euro, but fears of intervention from Japanese authorities are limiting the upside potential of the pair.
• European Central Bank officials continue to expect inflationary pressures to remain above the 2% target despite improving peace prospects in the Middle East.
• Markets remain focused on the Bank of Japan's signals and repeated warnings from Japanese officials regarding the weakness of the Japanese Yen.

EUR/JPY edges lower on Wednesday, trading around 183.55 at the time of writing, down 0.17%, as investors assess the impact of improving economic sentiment in Germany against rising intervention risks in Japan’s foreign exchange market.

Germany’s IFO Business Climate Index rose to 85.6 in June, in line with expectations, from a revised 85 in May. The Current Assessment Index increased to 87, above forecasts of 86.4, while the Expectations Index improved to 84.1 from a revised 83.9 previously, although it missed the 85 consensus estimate. The data confirms a gradual improvement in business confidence in the Eurozone’s largest economy.

The Euro (EUR) is also supported by the European Central Bank’s (ECB) still-cautious stance. ECB Chief Economist Philip Lane said on Tuesday that uncertainty remains elevated despite improving peace prospects in the Middle East and that inflation could stay above the 2% target into the first half of 2027. His comments reinforce expectations that restrictive monetary policy may remain in place for longer.

However, gains in the cross remain capped by developments in Japan. Traders remain on high alert following a discussion between Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent, which has fuelled speculation about potential coordination regarding foreign exchange markets. Japan’s Chief Cabinet Secretary Minoru Kihara also reiterated that authorities would take appropriate action if excessive currency moves occur.

According to Takeru Yamamoto, a trader at Sumitomo Mitsui Trust Bank in New York, the discussions between the United States (US) and Japan may have been intended to signal that the threshold for intervention remains relatively low. Meanwhile, the Bank of Japan’s (BoJ) Summary of Opinions from its June meeting showed that a majority of board members support raising interest rates, arguing that inflation risks are broadening and underlying inflation is moving sustainably toward the 2% target.

OCBC analysts Sim Moh Siong and Christopher Wong noted that USD/JPY’s move back above 160 remains constrained by intervention risks, while MUFG’s Lee Hardman believes that fears of official action and the prospect of a faster pace of monetary tightening from the BoJ are preventing a renewed sharp depreciation of the Japanese Yen (JPY). This combination continues to limit EUR/JPY upside despite a relatively supportive backdrop for the Euro.

Societe Generale analysts note AUD/USD remains under pressure, converging on the 0.69 area and the March–April trough near 0.6833, despite a sharp tightening in the 2‑year spread to 39bp. The pair lags bond spreads, while softer Australian inflation and structural selling from lower FX hedge ratios by superannuation funds keep the Australian Dollar vulnerable near term.

Spot lags spreads as risks build

"One footnote to the bullish dollar playbook is that tactical valuations are getting stretched. This usually occurs when currencies are not keeping up with bonds spread."

"It is less so for AUD/USD where the 2y spread tightened to 39bp, completing a whopping retracement of more than 80bp since March. Spot lags the 2y bond spread by a significant margin."

"The pullback in industrial metals (iron ore) doesn’t help and puts the AUD in jeopardy of testing the March–April trough at 0.6833. Inflation Down-under surprisingly slowed to 4.0% yoy in May from 4.2% according to data published overnight. Core however accelerated more than expected to 3.6% from 3.4%. "

"On more inflation print for June is due before the next RBA meeting in August but the hot core almost certainly guarantees another hawkish pause. The reaction in money markets was muted. The implied odds of another 25bp hike by year-end hangs in balance at around 55%. Employment data will be published tomorrow."

"One cannot overlook the structural headwinds from declining FX hedge ratios among Australian superannuation funds. APRA data show offshore equity hedging decreased by 0.4pp to 23.2% in Q1. A reduction in hedging reflects the view that investors are happy to stay unhedged to capture FX gains if the AUD weakens. Until Fed pricing turns less hawkish, flow dynamics could continue to weigh on the currency near term."

"AUD/USD has extended its phase of pullback after slipping below its 50-DMA (now at 0.7130) earlier this month. The pair is gradually drifting toward the March low around 0.6850/0.6830. While the decline appears somewhat stretched, it will be important to observe whether the pair finds support in this zone. Should a rebound materialize, the high achieved earlier this week near 0.7020 could act as a short-term resistance."

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

MUFG’s Lee Hardman notes that EUR/USD has broken below its long-held 1.1400–1.1800 range as diverging ECB and Fed policy expectations weigh on the Euro. Softer Euro-zone data and easing energy prices are reducing pressure on the ECB to hike further, while the Fed is priced for multiple hikes. MUFG still expects one final ECB rate increase in September.

Diverging ECB-Fed paths pressure Euro

"The US dollar’s upward momentum has continued at the start of this week resulting in EUR/USD falling to a low of 1.1361 overnight. The pair has now broken out of the 1.1400 to 1.1800 trading range that had been in place over the past year providing a bearish technical signal."

"The combination of weaker growth in the euro-zone and lower energy prices is helping to ease pressure on the ECB to hike rates further. President Lagarde stated at the start of this week that “we see no evidence yet of de-anchoring of inflation expectations or second-round effects that warrant a more forceful policy response at this stage”."

"We are still sticking to our forecast for one final ECB hike in September, although acknowledge that balance of risks has shifted recently in favour of less rather more hikes."

"Recent comments from ECB Chief Philip Lane have indicated that they want to keep the door open for at least one final hike. He warned yesterday that a “range of forward-looking signals point to inflationary pressures in the coming months” and that “in this environment, our focus remains clear: to ensure that inflation stabilizes at our 2% target in the medium-term”."

"The divergence in monetary policy expectations between the ECB and Fed is likely to continue to encourage a lower EUR/USD in the near-term, although we doubt it will be sustained if the Fed does not follow through with rate hikes this year."

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

• Silver remains on the defensive near $61.00, weighed by Fed hiking hopes and risk-off markets
• A rout in tech stocks has soured market sentiment further, increasing demand for the safe-haven US Dollar.
• XAG/USD is consolidating losses, with the bearish trend still in play.

Silver (XAG/USD) nurses marginal losses, trading a few cents above the $61.00 level on Wednesday’s European trading session. The pair remains on the defensive following a 5.3% sell-off on Tuesday, as investors brace for Federal Reserve (Fed) interest rate hikes and reports from the Middle East conflict cloud hopes of a durable peace deal.

Precious metals continue bleeding as traders position for higher interest rates in the US. Recent US data has shown a resilient economy with inflation steady well above the Fed’s target, and the central bank’s rhetoric pivoting towards the hawkish side. The CME’s Fed Watch Tool shows a 36% chance of a rate hike in July and 68% in September, up from 28% and 50%, respectively, last week, before the latest monetary policy meeting.

Apart from that, the US Dollar is drawing additional support from investors’ scepticism about the outcome of the US trade deal and a sell-off in stock markets. Investors are taking profits amid growing concerns about the massive spending in the sector.

Technical Analysis: Below $60.00, the next target is the $58.00 area

XAG/USD hit fresh 2026 lows at $60.74 earlier on the day, but so far it is failing to find acceptance below the $61.00 level. Momentum indicators are approaching oversold levels in most timeframes, which should act as a warning for sellers.

The Relative Strength Index (14) in 4-hour charts is hovering around 30, flirting with oversold territory, while the Moving Average Convergence Divergence (MACD) remains below zero, hinting that selling pressure still dominates despite the stretched conditions.

Below session lows at the mentioned $60.74 and the psychological level at $60.00, bears might be attracted by the 161.8% Fibonacci extension of last week's decline, at $58.25, before the December 4 low, at $56.47. Upside attempts remain shallow so far, with previous support at $63.31 and Monday's highs at the $67.00 area likely to pose a significant challenge for bulls.

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

Silver prices (XAG/USD) fell on Wednesday, according to FXStreet data. Silver trades at $61.15 per troy ounce, down 0.72% from the $61.60 it cost on Tuesday.

Silver prices have decreased by 13.97% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 66.58 on Wednesday, down from 66.74 on Tuesday.

(An automation tool was used in creating this post.)

OCBC’s Sim Moh Siong and Christopher Wong highlight that recent AI-related equity weakness has boosted safe-haven demand and supported the Dollar. They now forecast EUR/USD at 1.11 and USD/JPY at 163 by year-end, revising up their US Dollar (USD) outlook from rangebound to modest strength, with US Dollar Index (DXY) seen having 2–3% upside unless Oil or US growth surprise sharply.

Revised year-end levels and DXY upside

"Hawkish Fed signals lift USD, shifts our view to modest strength from rangebound."

"New USD forecast: EUR/USD at 1.11 (previous: 1.18) and USD/JPY at 163 (previous: 155) by year-end. "

"DXY breakout targets 2 to 3 percent upside; 5 percent move requires oil surge or US overheating scenario. A firmer USD alongside widening rate differentials tends to weigh most on low-yielders such as CHF and JPY."

"Procyclical carry can still perform, but trade resilience will depend on selecting appropriate funding currencies"

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

• AUD/USD slumps to near 0.6900 due to the US Dollar’s outperformance.
• The Fed is expected to deliver at least one interest rate hike this year.
• Australia’s headline CPI growth cools down further to 4% in May.

The AUD/USD pair is down 0.28% to near 0.6900 during the European trading session on Wednesday, the lowest level seen in over two months. The Aussie pair continues to decline as the US Dollar (USD) outperforms due to firm expectations that the Federal Reserve (Fed) will deliver at least one interest rate hike this year.

During press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.17% higher to near 101.57.

The CME FedWatch tool shows that there is an almost 86% chance that the Fed will deliver atleast one interest rate hike by the year-end.

Hawkish Fed bets have accelerated as both headline and the core Consumer Price Index (CPI) have been accelerating in the past few months.

Meanwhile, the Australian Dollar (AUD) underperforms after the release of the mixed Australian CPI data for May. The headline CPI unexpectedly cools down to 4% Year-on-Year (YoY) from 4.2%, while it was expected to grow at a faster pace of 4.4%. The core CPI rose by 3.6% YoY, faster than 3.5% estimates and the previous reading of 3.4%.

AUD/USD technical analysis

AUD/USD trades lower at around 0.6900, maintaining a bearish near-term bias as spot holds beneath the 10-day exponential moving average (EMA) at 0.6993.

The pair continues to trade below this short-term trend gauge, suggesting rallies are likely to face selling interest while the Relative Strength Index (RSI) at 27 remains in oversold territory, hinting that downside pressure is strong but becoming stretched.

On the topside, initial resistance is located at the 10-day EMA around 0.6993, and a daily close above this level would be needed to ease the immediate bearish tone. Looking down, the pair could extend its decline to the March 30 low at 0.6833.

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

ING analysts Warren Patterson and Ewa Manthey note that Oil prices are grinding lower as flows from the Persian Gulf gradually recover, with ICE Brent down over 1%. They argue the sell-off looks overdone given a still-tightening market and limited recovery in Strait of Hormuz volumes. US inventory data show modest crude draws and product builds, while Russia’s potential diesel export ban supports middle distillates.

Brent pressured as Gulf flows rebuild

"Oil prices continue to grind lower, with ICE Brent settling a little over 1% lower yesterday. Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz. Vessel crossings increased in recent days, although they remain well below pre-war levels."

"Estimates suggest that roughly 6-7m b/d of oil moved through the strait in recent days, which is still far below pre-war flows of around 20m b/d. However, with pipeline diversions for Saudi Arabia and the UAE, we only need to see oil flows through the strait return to around 14m b/d for oil supply from the Persian Gulf to return to pre-war levels."

"We continue to believe that the oil sell-off is overdone, with the market still tightening. Clearly, price movements suggest the market expects a fairly rapid recovery in Persian Gulf oil supplies."

"The latest numbers from the American Petroleum Institute (API) show that US crude oil inventories fell by just 800k barrels over the last week. Crude stocks at the WTI delivery hub, Cushing, fell by 1m barrels."

"Refined product supply concerns in Russia continue to grow amid ongoing Ukrainian attacks on Russian energy infrastructure. Russia has already imposed export restrictions on gasoline and jet fuel, but there are reports that the government is considering a ban on diesel exports."

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