Forex News

• The British Pound recovers minor losses against the US Dollar after the DXY retreats from 101.50.
• Market experts see the US Dollar remaining firm due to hawkish Fed expectations.
• Investors keenly await the US JOLTS Job Openings data for August.

The British Pound (GBP) claws back some of its early losses, but is still 0.14% down at around 1.3235 against the US Dollar (USD) during the European trading session on Tuesday. The GBP/USD pair recovers slight gains as the US Dollar Index (DXY) retreats after revisiting its two-month high of 101.50 to near 101.35.

The outlook of the US Dollar remains as traders are increasingly confident that the Federal Reserve (Fed) will deliver more interest rate hikes this year.

Dollar support reinforced as Fed path and energy prices align

Analysts at MUFG/BTMU highlight that, after delivering their first hike this month, the US rate market now expects the Fed to deliver "almost another 100bps of rate hikes in the year ahead," a trajectory that is "reinforcing support for the US Dollar from the positive terms of trade shock for the US economy from higher energy prices." In their view, this combination of tighter Fed policy expectations and elevated energy costs means "the current backdrop is supportive of the US Dollar remaining stronger for longer."

During the day, investors will focus on the US JOLTS Job Openings data for August, which will be published at 14:00 GMT. The US Job Openings report will likely show that US employers posted 7.23 million fresh jobs, marginally lower than 7.271 million in July.

This week, the major trigger for the US Dollar will be the US Nonfarm Payrolls (NFP) data for September, which will be published on Friday. The data is expected to significantly influence Fed’s interest rate expectations.

Meanwhile, the British Pound struggles to gain ground despite hawkish Bank of England (BoE) repricing. Strategists at Brown Brothers Harriman (BBH) highlight that “the swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%.”

However, BBH argues that the “BoE may not need to tighten as much as markets expect,” given that “the UK economy is already operating below capacity,” the “Bank Rate at 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range.”

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3239, maintaining a bearish near-term bias as spot holds beneath the 20-period exponential moving average (EMA) at 1.3374. The pair’s inability to reclaim this EMA suggests ongoing topside pressure, while the Relative Strength Index (RSI) at 29.3 hovers near oversold territory, hinting that downside momentum could be stretched but not yet reversed.

On the topside, immediate resistance is located at the 20-period EMA at 1.3374, which acts as the first barrier that bulls would need to clear to alleviate the current bearish tone. With no nearby technical supports derived from the provided dataset, the focus remains on whether GBP/USD can stage a recovery toward this moving average or instead continue to drift lower while the RSI lingers near oversold levels.

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

• The New Zealand Dollar declines as US-Iran tensions continue to support demand for the US Dollar.
• Markets see around an 80% chance of a 25-basis-point interest rate hike in New Zealand in October.
• Investors monitor developments surrounding the Strait of Hormuz and upcoming US economic data.

NZD/USD declines to around 0.5650 at the time of writing on Tuesday, down 0.25% on the day, and remains close to its lowest level since late June. The New Zealand Dollar (NZD) remains under pressure against the US Dollar (USD) as persistent tensions between the United States (US) and Iran support demand for the Greenback, while expectations of another interest rate hike by the Reserve Bank of New Zealand (RBNZ) help limit the Kiwi's losses.

On the geopolitical front, Iranian Foreign Minister Abbas Araghchi said he met with Qatari mediators to discuss proposals that could be conveyed to the United States. According to Araghchi, any reopening of the Strait of Hormuz remains conditional on the implementation of requirements set out by Iran's Supreme Leader.

The discussions come after US President Donald Trump rejected an Iranian proposal on Sunday that would have allowed the Strait of Hormuz to reopen. Persistent tensions between Washington and Tehran are therefore maintaining some demand for safe-haven assets, including the US Dollar, and acting as a headwind for NZD/USD.

However, the prospect of further monetary tightening in New Zealand provides some support to the New Zealand Dollar. Markets now see around an 80% chance that the RBNZ will raise its Official Cash Rate (OCR) by 25 basis points to 3.00% at its October 28 meeting, compared with roughly a one-in-three chance immediately after the September rate hike.

Expectations have strengthened notably after RBNZ Governor Anna Breman warned that higher Crude Oil prices could push near-term inflation above the central bank's projections. Stronger-than-expected second-quarter growth data have also reinforced expectations of further monetary tightening.

The upcoming New Zealand Consumer Price Index (CPI), scheduled for October 21, will therefore be closely watched, coming one week before the monetary policy decision. Persistent inflation could reinforce expectations of another rate hike, even though the RBNZ's latest projections initially pointed to a pause in October before another increase in December.

In the United States, attention now turns to upcoming economic data and comments from Federal Reserve (Fed) officials. Investors will notably monitor Personal Consumption Expenditures (PCE) inflation data, the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) and the Nonfarm Payrolls (NFP) report later this week. Strong US data could provide additional support to the US Dollar, while signs of a cooling labor market could reduce its advantage over the Kiwi.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5651, holding a bearish near-term bias as it remains below the 100-hour simple moving average (SMA) at 0.5667 and the 200-hour SMA at 0.5696. The pair is capped by a nearby horizontal resistance at 0.5686, while the Relative Strength Index (14) at 42 suggests subdued downside momentum rather than aggressive selling pressure.

On the topside, initial resistance emerges at the 100-hour SMA at 0.5667, followed by the horizontal barrier at 0.5686 and the 200-hour SMA at 0.5696, with a stronger hurdle at 0.5735. On the downside, immediate support sits at 0.5649, ahead of a lower horizontal floor near 0.5626, where sellers would need to push through to extend the current bearish sequence.

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

• EUR/USD extends lows below 1.3340 and nears year-to-date lows at 1.1324.
• Mixed Eurozone sentiment data has failed to lift the Euro on Tuesday.
• The US Dollar appreciates across the board, amid bright US data, high yields, and Fed tightening hopes.

The Euro (EUR) keeps heading lower on Tuesday as a mix of high US Treasury yields, strong US macroeconomic data, and hopes of further Federal Reserve (Fed) rate hikes underpins speculative support for the US Dollar. The EUR/USD pair trades at 1.1338, a few pips above Year-to-Date (YTD) lows at 1.1324, and on track for a 2.4% monthly decline in September.

Eurozone data released earlier in the day has failed to provide any significant support to the common currency. The Conference Board’s Consumer Confidence Index confirmed preliminary data showing a deterioration to -16.5 in September from -15.5 in August, with the Economic sentiment easing to 97.9, from 98.4 in August. Industrial Confidence improved to -3.8 from -5 in the previous month, and the Services sentiment ticked up to 6.1 from 5.6 in August.

Beyond that, the European Central Bank board member and President of the National Bank of Slovakia (NBS), Peter Kazimir, affirmed that September’s rate hike was unavoidable but asked for more flexibility and pointed to January for ECB's monetary policy repricing.

Fed tightening hopes, US yields keep fuelling US Dollar’s rally

The US Dollar, on the other hand, is outperforming its peers, buoyed by a mix of strong fundamentals, high US Treasury yields and rising bets that the Federal Reserve will tighten its monetary policy further at least one more time before the end of the year.

Strategists at OCBC highlight that recent US jobless claims “have continued to trend lower,” indicating that labour market conditions remain firm and raising “the risk of an upside payrolls surprise.”

They argue that a stronger-than-expected employment report would “reinforce expectations of further Fed tightening, keep Treasury yields elevated and provide additional support for the USD.” Against this backdrop, OCBC foresees “a moderate USD rally into year-end,” even as they caution that markets are currently “pricing almost four Fed rate hikes over the next year,” a path they deem “overly aggressive unless demand-driven inflation re-emerges as the dominant force behind price pressures.”

Brown Brothers Harriman’s Elias Haddad notes the Dollar is edging higher against major currencies, with the DXY index approaching its June 24 high near 101.80. He argues tightening by other central banks may limit policy divergence with the Federal Reserve, yet US growth outperformance and strong foreign demand for US securities could still support the Dollar into the coming months.

DXY nears key resistance zone

"USD is edging higher against most major currencies, with the DXY index closing in on its June 24 high at 101.80. Tightening by other major central banks limits policy divergence with the Fed and suggests DXY could struggle to sustain an overshoot of that level. However, US economic growth outperformance and strong foreign appetite for US securities can override that upside USD constraint."

"August Job Openings and Labor Turnover Survey (JOLTS) and September Conference Board Consumer Confidence index are today’s data highlights (both at 3:00pm London, 10:00am New York). The JOLTS print should echo the solid labor demand signaled by the August Nonfarm Payrolls report and confirm that layoffs remain low. In parallel, the consumer confidence report will test whether the improvement in job availability (“Jobs plentiful” minus “jobs hard to get”) has continued."

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

Societe Generale’s Latam strategy notes the Mexican Peso (MXN) is heading for its worst month since August 2024, with losses nearing 5% versus the Dollar as higher US yields weigh on risk sentiment. USD/MXN has broken above 17.00, reclaimed its 200-day moving average and is now near the bank’s revised year-end forecast at 18.00, where consolidation around this psychological level is anticipated.

Peso slide approaches key psychological level

"USD/MXN recently crossed a multi-month descending trend line and reclaimed the 200-DMA (17.40/17.35)."

"USD/MXN is now heading towards the peak of March near 18.16, which could be an interim hurdle."

"Beyond 18.16, the next potential objectives could be located at projections around 18.55 and 18.80."

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

Standard Chartered Global Research discusses the Reserve Bank of Australia’s decision to raise the cash rate to 4.60% in a unanimous move, noting a dovish tone from Governor Bullock.

RBA hike but dovish forward guidance

"The Reserve Bank of Australia (RBA) raised the cash rate to 4.60% at the 29 September meeting, as we had expected in a unanimous decision."

"The statement cited the materialisation of upside risks to inflation but acknowledged slowing economic growth, easing labour-market conditions and falling housing prices while keeping the door open for more hikes “if needed”."

"Conversely, we picked up a more dovish slant from Governor Bullock at the press conference, who indicated that a rate hike and a hold were discussed in the meeting."

"She did not talk up the possibility of another rate hike in Q4, and emphasised the lags of monetary policy transmission from the rate hikes so far."

"Our takeaway remains that the central bank is probably done with rate hikes."

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

• AUD/USD tumbles below 0.7000 as the Australian Dollar underperforms after the RBA’s policy announcement.
• The RBA hikes its OCR by 25 bps to 4.6% and leaves the door open for further monetary tightening.
• Firm US Treasury Yields have strengthened the US Dollar.

The Australian Dollar (AUD) underperforms its major currency peers during the European trading session on Tuesday. The antipodean is down almost 0.4% below 0.7000 against the US Dollar (USD).

The Australian currency is under pressure even as Reserve Bank of Australia (RBA) Governor Michele Bullock has delivered hawkish remarks after the central bank decided to raise its Official Cash Rate (OCR) one more time this year.

Analysts at MUFG note that the Australian Dollar “has softened overnight falling back below the 0.7000-level against the US Dollar,” even as the currency’s yield appeal remains intact. They highlight that the Aussie’s position “as one of the highest yielding G10 currencies was supported overnight by the RBA’s decision to hike rates for the fourth time this year lifting the policy rate up to 4.60%.”

MUFG points out that the RBA reiterated it will “continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed,” underlining its willingness to tighten further if required. However, they add that Governor Bullock struck a more cautious note in the press conference, saying she hopes that “four hikes are restrictive enough to slow inflation, but she doesn’t know,” a remark that has tempered expectations for additional near-term tightening and contributed to the softer tone in AUD.

Meanwhile, the US Dollar outperforms due to firm United States (US) Treasury Yields. In the European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, revisits the two-month high at 101.50. 10-year US Treasury Yields trade close to its 19-year high of 5.27% posted on Monday.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades around 0.6991, keeping a bearish near-term bias as spot holds below the 20-period exponential moving average (EMA) at 0.7090 and a dense cluster of Fibonacci retracements overhead. The pair has slipped under the key 61.8% retracement at 0.7010, leaving recent rebounds capped and reinforcing a downside tone, while the Relative Strength Index (14) near 31 hints at emerging oversold conditions that could slow, but not yet reverse, the current decline.

On the topside, initial resistance appears at the 61.8% Fibonacci retracement at 0.7010, followed by the 50.0% level at 0.7054, with the 20-period EMA at 0.7090 and the 38.2% retracement at 0.7097 forming a broader supply zone before the 23.6% level at 0.7152 and the 0.7240 cycle high. On the downside, support is seen first at the 78.6% retracement at 0.6947, ahead of the structural floor around 0.6867, where a deeper pullback could attempt to stabilize.

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

TD Securities' Macro Research maintains a negative stance on the Australian Dollar relative to the New Zealand Dollar following the Reserve Bank of Australia’s September decision. With the cash rate at 4.60% and no further hikes expected this year, they see AUD underperformance persisting.

AUD seen lagging NZD performance

"At the same time, the Board acknowledged that consumption, housing, and labour conditions were easing broadly as expected. The takeaway message for us was while capacity pressures remain, the Board did not emphasize domestic pressures to be overheating."

"As such, the longer the RBA leaves the decision to hike, the more likely the Bank will be more comfortable keeping the cash rate on hold against a likely weakening in domestic activity."

"ANZ's 2y consumer inflation expectations were updated today, revealing that expectations peaked 3 weeks ago. Also, household spending data for August showed broad-based declines across 6 of 9 categories. Even with the 2.3% m/m gain on spending for transport, headline spending was flat m/m. Excluding transport, household spending was -0.4% m/m."

"Our bias remains for front end x-mkt outperformance and for AUD underperformance, particularly vs the NZD."

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

• USD/JPY trades around 157.40 on Tuesday, virtually unchanged on the day.
• Japanese authorities step up warnings over Japanese Yen weakness, keeping the risk of intervention alive.
• Expectations of further interest-rate hikes from the Federal Reserve provide support to the US Dollar.

USD/JPY trades around 157.40 on Tuesday at the time of writing, virtually unchanged on the day. The pair remains caught between support for the US Dollar (USD) from expectations of further monetary tightening in the United States (US) and investor caution over the risk of Japanese authorities intervening to support the Japanese Yen (JPY).

Japanese Finance Minister Satsuki Katayama stepped up Tokyo's warnings over the currency's performance on Tuesday. She said that an undervalued Japanese Yen generally poses problems and indicated that she agreed with US Treasury Secretary Scott Bessent to strengthen cooperation between the two countries during their September 25 talks.

Katayama also said that Japan will continue to communicate closely with the US Treasury to ensure orderly conditions in the foreign exchange market. Her comments reinforce investor caution following a series of recent warnings from Japanese authorities over the weakness of their currency.

Japan's top currency diplomat, Atsushi Mimura, had already said on Monday that markets should take seriously the "very clear" message from Tokyo and Washington regarding Japanese Yen depreciation. The prospect of coordinated action between the two countries is therefore helping to limit gains in USD/JPY.

Markets are also awaiting data from Japan's Ministry of Finance, due on Wednesday, which will reveal the amount of any currency intervention conducted between August 27 and September 28. The figures could notably indicate whether the rate check reported on September 18 was followed by actual Japanese Yen purchases.

On the monetary policy front, the JPY is also benefiting from the tightening cycle initiated by the Bank of Japan (BoJ), which raised its policy rate to 1.25% on September 18. Investors now turn their attention to upcoming Japanese data, including the Tankan survey and Tokyo Consumer Price Index (CPI), for further clues about the possibility of additional rate hikes.

However, USD/JPY remains supported by elevated US yields and expectations of further interest-rate increases from the Federal Reserve (Fed). According to the CME FedWatch tool, markets see around a 70% chance of a 25-basis-point rate hike at the October meeting, following the rate increase delivered in September.

The tug of war between pressure from Japanese authorities to curb Japanese Yen weakness and support for the US Dollar from expectations of elevated US interest rates therefore keeps USD/JPY relatively stable around 157.40 on Tuesday.

Japan signals readiness to defend Yen as BoJ hike pace accelerates

Analysts at MUFG note that recent rhetoric from policymakers has grown more forceful, with comments at the start of this week continuing to send “a strong signal that Japan is prepared to intervene … to support the yen.” They add that officials are “encouraging speculation that Japan will also make other policy adjustments to provide more support for the yen such [as] speeding up the pace of BoJ rate hikes under pressure from the US.”

MUFG highlights that “the BoJ has already sped up the pace of hikes this month (every three months) and signalled that a faster pace of hikes is likely to continue heading into year end.” The bank expects “the next hike to be delivered in December,” while noting that “the Japanese rate market is attaching a higher-than-normal probability (~36%) to a back-to-back hike next month.” According to MUFG, these latest developments are “helping to cap further upside for USD/JPY even as the US Dollar strengthens broadly.”

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 157.38, retaining a mildly bearish near-term bias as it holds beneath both the 200-period simple moving average (SMA) at 157.43 and the 100-period SMA at 157.89. The pair remains capped by this layered moving-average supply, while the Relative Strength Index (14) around 48.46 is close to neutral, hinting at a consolidative tone rather than impulsive selling for now.

On the topside, initial resistance is located at the 200-period SMA at 157.43, followed by the 100-period SMA at 157.89 and the horizontal barrier at 158.00, with a stronger cap at 159.00 if gains extend. On the downside, immediate support emerges at 156.50, ahead of a deeper structural floor at 155.50, where buyers would be expected to defend the broader uptrend if the current pullback accelerates.

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