Forex News
- AUD/USD is seen consolidating on Friday as traders seem hesitant ahead of the US NFP report.
- Geopolitical uncertainties and Fed hike bets underpin the USD, capping the upside for the pair.
- Spot prices remain on track to end the week on a flattish note and look to the RBA next week.
The AUD/USD pair steadies around the 0.7030-0.7025 region during the Asian session on Friday as traders opt to wait for the release of the closely watched US monthly employment details before placing fresh directional bets. Nevertheless, spot prices, for now, seem to have stalled the previous day's retracement slide from the highest level since June 17 and seem poised to end the week on a flattish note amid mixed cues.
The optimism over a potential US-Iran peace deal seems to have faded amid reports Iran is reviewing a plan that would ban US and Israeli vessels from the Strait of Hormuz. According to the initial draft published by Iranian state news agency Fars on Thursday, other nations that have harmed Iran would not be allowed to transit until compensation is paid. This, in turn, prompts traders to price in the geopolitical risk premium, which supports the safe-haven US Dollar (USD) and caps the AUD/USD pair.
Meanwhile, Iran’s Houthi allies in Yemen struck a Saudi tanker in the Red Sea, fueling concerns about energy supply disruptions through another key route. This led to the overnight spike in crude oil prices and revives inflation fears, bolstering bets for a rate hike by the US Federal Reserve (Fed). The outlook remains supportive of elevated US Treasury bond yields, which is seen as another factor acting as a tailwind for the Greenback and keeping the AUD/USD pair depressed for the second consecutive day.
USD bulls, however, seem hesitant and look to the key US Nonfarm Payrolls (NFP) report for more cues about the Fed's future policy path. The crucial data will play a key role in influencing the near-term USD price dynamics and provide some impetus to the AUD/USD pair. The market attention will then shift to the Reserve Bank of Australia (RBA) policy meeting next week. Apart from this, further developments surrounding the Middle East crisis would help in determining the near-term trajectory for the pair.
Analysts at Standard Chartered expect the RBA to leave the cash rate unchanged at 4.35% at its 11 August meeting, noting that “Q2 trimmed mean inflation held steady at 0.8% q/q – as we had expected – and below the RBA’s prior forecast (0.9%).” They add that this outcome, “together with the recent retracement in oil prices, should take the pressure off the RBA to tighten policy further in the near term.”
Against that backdrop, Standard Chartered says “our base case remains that the RBA is done with rate hikes in the foreseeable future,” although it cautions that “the risk to our view is skewed towards another RBA rate hike in Q4, if the central bank remains unconvinced that demand is slowing sufficiently to contain underlying price pressures.”
AUD/USD daily chart
Technical Analysis
The AUD/USD pair is consolidating between its key moving averages, holding above the 200-day Simple Moving Average (SMA) at 0.6923 while remaining capped by the 100-day SMA at 0.7052. This keeps the near-term bias neutral and hints at a range-bound tone rather than a directional breakout.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- EUR/USD depreciates as rising geopolitical tensions in the Strait of Hormuz disrupt global markets.
- Market caution rises as Iran considers banning US and Israeli ships and penalizing hostile cargo until blockades lift.
- Rebounding oil prices threaten expectations that falling energy costs would ease pressure on the ECB to cut rates.
EUR/USD extends its losses for the second consecutive day, trading around 1.1520 during the Asian hours on Friday. The currency pair faces downward pressure as the US Dollar (USD) gains strength, propelled by renewed safe-haven demand among global investors.
Escalating tensions in the Strait of Hormuz have rattled market stability and created significant skepticism regarding the reopening of this critical shipping route. Market caution remains elevated as Iran's parliament evaluates a draft proposal that seeks to prohibit US and Israeli vessels, levy a 20% cargo penalty on hostile nations, and maintain restrictions on the corridor until the US blockade is removed.
Adding to the market volatility, rising US Treasury yields and a rebound in crude oil prices have stoked fears that the Federal Reserve might implement another interest rate hike next month. Despite these inflationary signals, the CME FedWatch Tool currently reflects a 54.5% probability of a 25-basis-point rate increase in September, down from 63.4% last week. Investors and traders are now closely eyeing the upcoming July Nonfarm Payrolls (NFP) report to gauge the health of the labor market and better anticipate the Fed's monetary policy path.
Across the Atlantic, economic indicators in the Euro Area present a challenging backdrop. Eurozone Retail Sales unexpectedly contracted by 0.3% month-on-month in June, missing market projections for a 0.1% growth and almost completely unwinding May's revised 0.4% gain. On an annual basis, Retail Sales rose by merely 0.7%, the weakest performance since July 2024, falling short of the expected 1.0% expansion and decelerating sharply from May's 1.9% increase.
Furthermore, the recovery in oil prices could dampen hopes that declining energy costs would alleviate pressure on central banks to keep policy tight. Following the European Central Bank's (ECB) decision to hold interest rates steady at its most recent meeting, markets expect only one more ECB rate hike by the end of the year, alongside a roughly 40% chance of a second increase.
Kocher flags autumn data focus as geopolitical risks cloud Euro inflation
ECB's Kocher scores 5.6/10 on FXS Speechtracker, below the historic average of 6.3/10, pointing to a slightly less forceful tone than usual. The emphasis on how quickly geopolitical developments can alter energy prices and the inflation outlook highlights upside risks to Euro-area prices, which leans modestly hawkish despite the softer score.
The commitment that in autumn the ECB Governing Council will base decisions on incoming data to bring Euro-area inflation back to 2% on a sustainable basis reinforces a data-dependent but vigilant stance. Overall, the speech suggests a cautious hawkish bias, with Kocher keeping the door open to renewed tightening or a slower easing path if energy-driven inflation pressures re-emerge.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CAD rises as uncertainty around Federal Reserve rate hikes tempers broader market sentiment.
- Shipping restrictions in the Strait of Hormuz continue to drive global energy prices higher.
- Rising crude prices increase dollar inflows into Canada, providing fundamental support to the Canadian Dollar.
USD/CAD extends its gains for the second successive day, trading around 1.4020 during the Asian hours on Friday. The pair continues to gain ground as the US Dollar (USD) benefits from revived safe-haven demand.
Tensions in the Strait of Hormuz have unsettled global markets and cast fresh doubt over efforts to fully reopen the vital shipping route. Market participants remain highly skeptical about the corridor's prospective opening, especially as Iran’s parliament reviews a draft agreement. The proposed draft would bar United States (US) and Israeli vessels, impose 20% cargo penalties on hostile nations, and keep the trade route restricted until the U.S. blockade is lifted.
Meanwhile, rising US Treasury yields and rebounding oil prices have reignited concerns that the Federal Reserve (Fed) could raise interest rates next month. Hawkish comments from Federal Open Market Committee (FOMC) members were reinforced by reports indicating that Fed Chair Warsh is prepared to hike rates if inflation accelerates further.
Musalem flags upside inflation risks while backing incremental Fed tightening
Fed’s Musalem delivered a moderately more hawkish tone, with a 7.4/10 FXS Speechtracker score relative to the historical average of 7/10, underscoring concern that inflation expectations risk losing anchor even as Musalem judges them currently stable and aligned with the 2% target. The emphasis on core inflation amid energy volatility, a preference for incremental rate hikes, and the view that inflation is more likely to stay above target, alongside the assertion that the Dollar’s reserve status remains secure and financial conditions are still highly accommodative, collectively point to a bias toward further tightening and a willingness for the central bank to occasionally surprise markets.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 138.69, signaling that despite the lack of incremental shift, Fed rhetoric remains firmly in hawkish territory. The combination of a slightly above-baseline FXS Speechtracker score and a high FXS Fed Sentiment Index level suggests that markets should continue to price a risk of additional rate hikes rather than an imminent pivot toward easing.
Nevertheless, the CME FedWatch Tool shows that markets are currently pricing in a 54.5% chance of a 25-basis-point rate hike in September, down from 63.4% a week ago. Traders now await the closely watched July Nonfarm Payrolls (NFP) report for key insights into labor market conditions and the Fed's future policy trajectory.
Despite these bullish factors for the Greenback, the upside for the USD/CAD pair may remain constrained. As one of the world's largest crude exporters, Canada earns substantial US Dollar inflows when energy prices climb, providing fundamental support to the commodity-linked Canadian Dollar (CAD).
Positioning shifts as Dollar longs meet heavy Euro, Yen and Canadian Dollar shorts
Societe Generale points out that recent positioning has been heavily skewed, noting that “just as the market was long USD, so it was short other currencies – notably, the Euro, the Yen and Canadian Dollar.” This highlights a broader pattern of investors crowding into Dollar strength while simultaneously building sizeable short exposure in key counterparts, including the Euro, Yen and Canadian Dollar.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
On Friday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7904 compared to the previous day's fix of 6.7895 and 6.7548 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- USD/JPY preserves its weekly recovery gains and draws support from a combination of factors.
- Japan’s weak spending data clouds the BoJ rate path and undermines the JPY amid fiscal concerns.
- Geopolitical risks and Fed hike bets support the USD and spot prices ahead of the US NFP report.
The USD/JPY pair is seen consolidating this week's solid recovery gains from the 155.25-155.20 region, the lowest since May, touched in the aftermath of a joint US-Japan intervention, and holds steady near the weekly top. Spot prices currently trade around mid-158.00s, nearly unchanged for the day, as investors opt to wait for the crucial US monthly employment details before placing fresh directional bets.
The popularly known Nonfarm Payrolls (NFP) report will influence market expectations about the US Federal Reserve's (Fed) future policy path. This, in turn, would drive the US Dollar (USD) demand and provide fresh impetus to the USD/JPY pair. In the meantime, persistent geopolitical risks, inflation risks stemming from rebounding oil prices, and Fed rate hike bets act as a tailwind for the safe-haven buck.
In the latest developments surrounding the Middle East crisis, Saudi Arabia said that an intelligence report indicates Iraqi militias, coordinating with the Houthis in Yemen, are planning an imminent attack on the kingdom. Furthermore, Iranian state news reported that a framework agreement over the management of the Strait of Hormuz would prohibit passage of US, Israeli, and hostile vessels until compensation was paid.
This could jeopardize efforts for a diplomatic resolution to end a five-month-old US-Iran war, prompting traders to price in the geopolitical risk premium and leading to the overnight rise in crude oil prices. Investors remain worried that elevated energy prices would rekindle inflationary pressure and force major central banks, including the Fed, to adopt a more hawkish stance and lift borrowing costs.
The hawkish outlook, in turn, remains supportive of rising US Treasury bond yields, which further underpins the USD. The Japanese Yen (JPY), on the other hand, is weighed down by concerns about Japan's worsening fiscal condition and worries that the economy will remain under strain due to the Middle East crisis. Moreover, an unexpected fall in Japan's Household Spending weighs on the JPY.
In fact, data from the internal affairs ministry showed that consumer spending fell 3.3% year-on-year in June, defying market expectations for a rise and marking the seventh straight month of contraction. This underscores persistent weakness in domestic demand and weakens the case for a Bank of Japan (BoJ) rate hike in September, which favors JPY bears and should support the USD/JPY pair.
Economic Indicator
Overall Household Spending (YoY)
The Overall Household Spending released by the Ministry of Internal Affairs and Communications is an indicator that measures the total expenditure by households. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth. A high reading is positive (or Bullish) for the JPY, while a low reading is negative (or bearish).
Read more.Last release: Thu Aug 06, 2026 23:30
Frequency: Monthly
Actual: -3.3%
Consensus: 1%
Previous: -0.4%
Source: Ministry of Economy, Trade and Industry of Japan
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.32% | 0.86% | 0.04% | 0.14% | 0.56% | 0.75% | |
| EUR | -0.24% | 0.09% | 0.62% | -0.20% | 0.00% | 0.32% | 0.52% | |
| GBP | -0.32% | -0.09% | 0.19% | -0.29% | -0.09% | 0.23% | 0.42% | |
| JPY | -0.86% | -0.62% | -0.19% | -0.74% | -0.56% | -0.18% | -0.01% | |
| CAD | -0.04% | 0.20% | 0.29% | 0.74% | 0.19% | 0.57% | 0.72% | |
| AUD | -0.14% | -0.00% | 0.09% | 0.56% | -0.19% | 0.31% | 0.50% | |
| NZD | -0.56% | -0.32% | -0.23% | 0.18% | -0.57% | -0.31% | 0.19% | |
| CHF | -0.75% | -0.52% | -0.42% | 0.00% | -0.72% | -0.50% | -0.19% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
- WTI steadies as Iranian strikes near Qeshm Island disrupt Strait of Hormuz shipping reopening plans.
- Iran proposes strict Strait restrictions, demanding cargo penalties and excluding US and Israeli vessels.
- Regional energy risks mount following Iranian threats to Gulf infrastructure and Houthi strikes on Saudi positions.
West Texas Intermediate (WTI) oil price remains steady after registering modest gains in the previous day, trading around $77.50 per barrel during the Asian hours on Friday. Crude oil prices hold firm as renewed tensions in the Strait of Hormuz unsettled global markets, casting fresh doubt over efforts to fully reopen the vital shipping route. The latest volatility follows reports that Iran struck what it described as “hostile targets” in the strait after explosions were reported near Qeshm Island.
Tensions are further heightened by a proposed Iran-Oman agreement governing the strategic waterway. Under the draft proposal currently under review by the Iranian parliament, Tehran seeks to prohibit United States (US) and Israeli vessels from transiting the strait and require countries deemed hostile to pay compensation before being granted passage. The proposed framework outlines significantly stricter conditions for commercial shipping than markets had anticipated, including penalties equal to 20% of a vessel’s cargo value for violations, and maintains that the waterway will only fully reopen once the US maritime blockade is lifted.
Simultaneously, Tehran is working to raise the potential cost of military action by threatening Washington's closest regional allies. According to five sources, Iran has explicitly warned neighboring Gulf states that any new US attack on its territory would trigger retaliatory strikes against critical energy infrastructure across the region.
Adding to the regional instability, Yemen's Houthis announced that they carried out missile and drone attacks on Saudi deployments in Marib and Hadramout. The group claimed the strikes killed or wounded hundreds of Saudi-aligned fighters while destroying military camps, weapons depots, and armored vehicles.
Strategists at BNY highlighted that “oil prices have steadied as traders digested Iran’s claim that it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz.” They note that the headline has helped calm immediate fears of supply disruption, even as market participants continue to monitor developments in the region closely.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
United Overseas Bank (UOB) analysts Quek Ser Leang and Lee Sue Ann note that USD/CNH is trading with a soft underlying tone, with scope for the Dollar to test support levels near 6.7420 in the short term, while a sustained break lower is seen as unlikely. Over the 1–3 week horizon, they still expect gradual downside toward 6.7300, provided resistance at 6.7640 holds. On a 1–3 month view, they see tentative upward momentum that would require a break above the 21‑week EMA at 6.8430 to confirm a sustained recovery.
Short-term tests, gradual downside bias
"24-HOUR VIEW: While we indicated yesterday that USD “could test last week’s low, near 6.7420,” we held the view that “a continued decline below this level is unlikely.” Our view did materialise as USD traded within a tight range of 6.7450/6.7500, closing largely unchanged at 6.7482 (+0.01%). Despite the quiet price action, the underlying tone appears to be soft, and there is a chance for USD to test 6.7420. However, a continued decline below this level still appears unlikely. On the upside, resistance is at 6.7550."
"1-3 WEEKS VIEW: In our most recent narrative from Monday (03 Aug, spot at 6.7490), we highlighted that while USD edged lower last week, “there has been no clear increase in downward momentum.” However, we were of the view that USD “could continue to edge lower toward 6.7300 as long as 6.7640 (‘strong resistance’ level) is not breached.” Our view remains unchanged."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING economists Deepali Bhargava and Lynn Song highlight a sharp 8% drop in USD/KRW earlier in the second quarter, driven by temporary flows such as Hynix ADR repatriation and National Pension Service hedging adjustments, alongside a hawkish Bank of Korea (BoK) hike. Strong chip exports and AI-related investment are seen keeping inflation above target. They expect further BoK tightening and see supportive factors for the Korean Won (KRW).
Chip exports and hawkish BoK aid KRW
"The won had a very strong start to the second quarter, with USD/KRW dropping 8%."
"There were probably some temporary factors at play, like Hynix repatriating some of its $16bn ADR receipts or the National Pension Service adjusting hedging ratios, but the Bank of Korea’s hawkish hike in July was important too."
"Here surging chip exports and the investment going into that industry is stoking domestic demand and likely to keep inflation above target for a ‘considerable time’. The market now prices another 50bp of hikes by year-end."
"USD/KRW continues to trade on a very high 12% p.a. volatility, but a stable Fed, hawkish BoK and ongoing AI demand can help KRW."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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