Forex News

• GBP/JPY edges higher as falling Japanese bond yields weigh on the Yen.
• The wide UK-Japan yield gap supports the British Pound, although intervention and UK fiscal risks cap gains.
• The cross remains below all major daily SMAs, keeping the broader bias bearish.

GBP/JPY trades with a mild positive bias on Friday as the Japanese Yen (JPY) underperforms across the board. A pause in the global bond sell-off has pushed government bond yields lower, with Japanese yields falling more sharply than their UK counterparts. Japan’s relatively low interest rates and broader fiscal concerns also remain persistent headwinds for the Yen. At the time of writing, the cross trades around 209.16, up 0.14% on the day.

Japan’s benchmark 10-year government bond yield falls toward 3.00% after reaching 3.153% earlier this week, its highest level in around 30 years. Meanwhile, the UK 10-year gilt yield stands near 5.432%, below Thursday’s peak of 5.527%, its highest level since 2007. This leaves UK yields roughly 243 basis points above Japanese yields, helping the Pound hold firm against the Yen.

Expectations that the Bank of England (BoE) could raise interest rates before the end of the year also favour the British Pound (GBP), even as the Bank of Japan (BoJ) remains on a gradual tightening path.

BoE Governor Andrew Bailey said on Thursday, “Monetary policy needs an unwavering commitment to returning inflation to target.” Bailey added, “Evidence of pass-through of energy costs into broader inflation is currently quite subdued, but there are risks. Inflation risks rise the longer high energy prices persist.”

On the Japanese side, BoJ Governor Kazuo Ueda said on Tuesday, “We’re to keep raising rates in response to the economy and inflation.” However, Ueda added that the “pace and timing of future policy adjustment will be decided based on the likelihood of our baseline projections materialising, as well as risks.”

Meanwhile, traders remain cautious about building aggressive bullish positions. Intervention risks keep traders wary as USD/JPY holds around 158.00, not far from the 160.00 level. Concerns over the UK’s fiscal outlook ahead of the October 28 budget also limit demand for the British Pound, keeping GBP/JPY within the narrow range that has been in place since early September.

Technical analysis

On the daily chart, GBP/JPY remains trapped within the 207-210range. The cross trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which collectively cap the topside and keep the near-term bias bearish.

Momentum indicators offer mixed signals. The Relative Strength Index (RSI) stands near 46, slightly below the neutral 50 level, while the Moving Average Convergence Divergence (MACD) has turned positive, pointing to an attempt to stabilise rather than a clear bullish reversal.

On the downside, initial support is seen at 207, ahead of a deeper floor at 205 that would come into view on a renewed slide. On the topside, a daily close above 210 would be the first step to easing bearish pressure, though bulls would still need to reclaim the 50-day SMA at 211.92, followed by the 200-day SMA at 213.05 and the 100-day SMA at 213.77, before the broader picture turns more constructive, with the distant horizontal barrier at 217 marking a stronger resistance zone.

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

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that USD/JPY has been volatile around 157.86, with swings between 157.51 and 158.36 failing to establish a clear trend. For the coming sessions, the pair is expected to trade within 157.50–158.50 intraday, while the 1–3 week view favours consolidation in a narrower 157.00–158.70 band against a backdrop of longer-term downside momentum.

Dollar-Yen volatility but no clear direction

"24-HOUR VIEW: When USD was at 157.90 yesterday, we highlighted that “the bias is on the downside toward 157.40.” However, we pointed out that “it is unclear whether downward momentum can strengthen sufficiently for USD to break clearly below this level.” The subsequent price action did not unfold as expected. USD declined to 157.58, rebounded to 158.36, then fell back to 157.51 before recovering again to close at 157.86 (-0.13%). The outlook for today is unclear after the choppy price action. Today, USD could trade in a range of 157.50/158.50."

"1-3 WEEKS VIEW: In our most recent narrative from Monday (05 Oct, spot at 157.65), we highlighted that rather than continuing to pull back within the previously expected 156.00/158.70 range, USD “is likely to trade in a range between 156.35 and 158.70.” We continue to expect USD to trade in a range, but a narrower 157.00/158.70 range is likely to contain price movements for now."

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

Rabobank's Senior Economist Maartje Wijffelaars notes Oil prices climbed to around $105 per barrel as Iran struck tankers, before Brent eased after US comments on talks with Iran. Despite the pullback, Oil and diesel remain elevated, with Gasoil sharply higher since Tuesday. She highlights hurricane risks to US output and policy-driven diesel stockpile releases.

Crude and diesel stay elevated

"Oil prices rose again yesterday, reaching a session high of about $105 per barrel as Iran struck tankers – an outcome our energy analysts warned about if Iran appeared to be losing control over Hormuz."

"Reports that the US could strike Iran before the midterms and a hurricane hitting US output added pressure. Brent crude then fell after President Trump said talks with Iran were “productive” and that the US would not attack Iran before November’s midterm elections."

"Oil prices nevertheless remained higher on the day and week, currently at $103.3 per barrel. Diesel prices have veered back up even more."

"Gasoil has risen 12% since Tuesday’s dip and is well above the temporary dip after the EU and others announced diesel stockpile releases late last week to avert a US diesel ban."

"Pump prices for diesel have surged to near-record highs."

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

• EUR/USD treads water around 1.1200 after bouncing from 16-month lows at the 1.1150 area.
• High Oil prices and France's complex debt scenario are keeping Euro bulls in check.
• Fed's Musalem has warned thst the bank will have to tighten rates further to bring inflation to target.

The Euro (EUR) is failing to capitalise on the moderate US Dollar (USD) weakness witnessed on Friday as the high Oil prices and the ongoing concerns about France’s public debt offset investors’ optimism about lower global yields. The EUR/USD pair treads water above 1.1200 ahead of the US session opening, halfway through the weekly trading range.

The US Dollar Index retreated on Thursday as a successful auction of US 30-year bonds eased concerns about government debt and sent long-term yields lower from multi-decade highs. The Euro, however, faces weaknesses of its own, as Brent prices remain above $100, threatening to tip Eurozone economies into stagflation, with French debt at historic highs and social unrest spreading across the country.

Earlier on Friday, St. Louis Fed President Alberto Musalem provided some support to the US Dollar, affirming that “more monetary policy will be needed” to bring inflation to the 2% target. Later on the day, the US Michigan Consumer Sentiment Index report might have some impact on US Dollar crosses, although the main focus remains on next week’s US Consumer Price Index (CPI) and Producer Price Index (PPI) figures, which might help to determine the timing of the Fed's next move.

Technical Indicators: Bearish momentum fades, but bulls do not show up

EUR/USD trades at 1.1214, keeping a bearish tone, on track to complete a 3.5% sell-off in a five-week losing streak. The 4-hour Relative Strength Index (14) remains capped below the 50 midline, while Moving Average Convergence Divergence (MACD) is marginally positive. These readings hint at stabilizing pressure, with bullish pressure still too weak to contemplate a bullish shift.

Price action is hovering halfway through the weekly horizontal channel, with immediate resistance at the October 2 and 8 highs around 1.1275. Further up, the next target emerges in the area between the late June lows at 1.1337 and the 38.2% Fibonacci retracement of the September-October downtrend, near 1.1350.

On the downside, immediate support emerges at the October 2 low, near 1.1160. Below here, the late May 2025 lows in the 1.1050 area emerge as a plausible target before the psychological 1.1000 level.

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

• The Indian Rupee rebounds against the US Dollar as US bond yields cool down.
• US President Trump pushes back fears of military aggression against Iran before Midterm elections.
• Investors shift their focus to the India’s CPI data.

The Indian Rupee (INR) trades slightly higher against the US Dollar (USD) on Friday. The USD/INR pair corrects to near 96.55, but is still close to its all-time high of 97.00. The Indian currency gets a much-needed reprieve from a corrective move in United States (US) Treasury Yields.

At press time, 10-year US Treasury Yields are up 0.17% to near 5.24%. However, yields on US-backed securities have corrected after failing to extend the rally above the two-decade-high at 5.36%.

Theoretically, the scenario of a pause in US bond yields improves the appeal of riskier assets, such as the Indian Rupee, unless the broader trend resumes.

Meanwhile, the Reserve Bank of India (RBI) is also expected to have intervened at the open. According to a Reuters report, the Indian central bank likely sold US Dollars to support rupee near record-low levels.

What led to sharp correction in US Treasury Yields?

US bond Yields came under pressure on Thursday after oil prices cut some advance, following remarks from President Donald Trump pointing to optimism on US-Iran diplomacy.

We [US] will not be attacking Iran at any time prior to the Midterm Elections to be held in the United States on November 3^rd,” US President Trump said through a post on Truth Social, adding, “We are having productive discussions with the Islamic Republic of Iran.”

Is rally in US bond yields over?

A pause in the ongoing rally in US bond Yields has brought some relief for risk-sensitive assets. However, the broader trend in the US Treasury Yields will likely last long, as significant investment from hyperscalers remain intact and the Federal Reserve is highly anticipated to deliver more interest rate hikes in the near term.

Analysts at Danske Bank said in a note this week that US bond yields are in a longer-term uptrend not only because of the supply of Treasuries, but also from higher bond issuance by hyperscalers. Against this setting, the bank cautions that “we do see the risk of 10Y and 30Y Treasuries hitting 6% as investors demand a higher premium for the long end,” underscoring concerns that term premia may need to rise further to clear upcoming issuance.

On the domestic front, the RBI hiked its key policy rate by 25 basis points (bps) this week, and changed its monetary policy stance from “neutral” to “calibrated tightening”, signaling that rate cuts are off the table in the near term. Meanwhile, investors await India’s Consumer Price Index (CPI) data for September, which will be released on Monday.

What to expect from India’s CPI report?

According to Societe Generale, India’s inflation backdrop is set to deteriorate markedly in September 2026, with the bank projecting that “headline CPI inflation [will] rise sharply to 5.6% yoy, from 4.8% in August, led by food inflation which likely rose to around 7.5% yoy.” Societe Generale adds that the move is not confined to volatile components, noting that “we also expect core CPI inflation to approach 4.5% yoy, indicating that underlying price pressures are strengthening despite relatively subdued mass-market demand.”

Technical Analysis: USD/INR stays firmly above 20-day EMA

In the daily chart, USD/INR trades at 96.55, maintaining a bullish near-term bias as spot holds above the 20-day exponential moving average (EMA) at 96.12.

The positioning over this short-term trend gauge suggests underlying demand remains in place, while the Relative Strength Index (14) at 65.14 stays in positive territory but shy of overbought, hinting that bullish momentum is constructive yet not extreme.

On the downside, immediate support is seen at the 20-day EMA at 96.12, where a daily close below would signal fading upside pressure and expose a deeper corrective phase. On the upside, the all-time high near 97.00 would remain the major barrier.

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

• Japanese Yen weakens ahead of likely meeting between officials from Japan and the US next week.
• The US Dollar Index recovers its early losses and flattens at around 102.14.
• Strategists at BBH are upbeat on the US Dollar outlook amid strong demand for US securities.

The Japanese Yen (JPY) trades lower against its major currency peers on Friday. In the European trade, the USD/JPY pair is up 0.3% to near 158.25. The Asia-pacific currency is under pressure ahead of likely meeting between Japan and the United States (US) at the sidelines of the International Monetary Fund (IMF) during the October 12-18 period.

US Treasury Secretary Scott Bessent and Japanese Finance Minister (FM) Satsuki Katayama have confirmed to visit the meeting. Both officials could likely talk about intervening again to support the Japanese Yen.

In late July, Japan Ministry of Finance (MoF) confirmed joint intervention by Tokyo and Washington to counter excessive volatile moves in the Asia-Pacific currency.

Meanwhile, the recovery move in the US Dollar after a weak performance in the opening trade has also lend strength to the USD/JPY pair.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, turns flat at around 102.14 after clawing back early losses. The DXY traded weakly due to a pullback in US Treasury Yields.

Market experts had also anticipated the US Dollar’s correction to be temporary. Strategists at Brown Brothers Harriman (BBH) observe that the recent “modest pullback in energy prices eased the global bond sell-off and took some steam out of the USD rally.” However, they caution that “US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside,” suggesting that the latest consolidation in the Dollar may prove temporary rather than signaling a durable shift in trend.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 158.25, retaining a bullish near-term bias as spot holds above the 20-day exponential moving average (EMA) at 157.58. Price action hovering over this dynamic floor suggests buyers remain in control, while the Relative Strength Index (RSI) at 55.39 stays in positive territory, hinting at mildly constructive momentum rather than overbought conditions.

On the downside, initial support is reinforced by the 20-day EMA at 157.58, where a daily close below would signal waning bullish pressure and open the way for a deeper corrective move. With no nearby technical resistance levels in the dataset, further upside appears guided primarily by momentum, and the pair could continue to grind higher as long as it defends the EMA support zone on pullbacks.

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

Brown Brothers Harriman highlights that USD/CAD is consolidating just above 1.4200 after touching fresh cyclical highs near 1.4300. Canada’s September labor force survey is the key release, with modest job gains and a higher unemployment rate expected. The bank argues that nearly 100 bps of Bank of Canada rate hikes priced over the next year looks too aggressive, leaving the Canadian Dollar vulnerable to dovish repricing.

CAD vulnerable to dovish repricing of BoC expectations

"USD/CAD is consolidating just above 1.4200, after reaching fresh cyclical highs near 1.4300 earlier this week. Canada’s September labor force survey is today’s highlight (1:30pm London, 8:30am New York)."

"The economy is expected to add +10.0k jobs after losing -41.7k jobs in August. The unemployment rate is seen rising 0.1ppt to 6.5% on an unchanged participation rate of 65.0%, pointing to weak labor demand."

"Nearly 100bps of BOC rate hikes priced over the next twelve months looks too aggressive and leaves CAD vulnerable to a dovish repricing. Canada core inflation is near the banks’ 2% target and indicators point to continued excess supply in the economy."

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

Francesco Pesole at ING observes that EUR/USD has moved back above 1.120 on Dollar softness, but the Euro still struggles against other European currencies as markets keep pricing a French fiscal premium. He argues that French political and bond-market risks may persist, and ING still sees scope for EUR/USD to test the 1.110/1.112 area in the near term.

French risk caps Euro gains

"Dollar drops may continue to prove short-lived and quite small in size as bond markets remain fragile and the Fed narrative hawkish. French premium isn’t likely to leave the euro very soon, and risks remain of a test of 1.110 in the near term."

"EUR/USD has made its way back above 1.120 on the back of broader dollar softness, but the common currency isn’t showing any signs of recovery against other European currencies (the Swiss Franc, Pound sterling, and Swedish krona)."

"It’s a sign that FX markets aren’t ready to scale back the French fiscal premium. The bond market is giving a similar message, with the 10yr OAT-Bund spread oscillating but closing at 140bp yesterday."

"We still think 1.110/1.112 can be tested in the near term."

"We don’t feel Marine Le Pen’s huge fiscal tightening promise is enough to turn the tide for French bonds, and the euro may keep suffering from the French situation for longer."

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