Forex News

• USD/CAD slips below 1.4000, heading for a second consecutive weekly decline.
• Rising Oil prices and expectations of a BoC rate hike keep the pair under pressure.
• Traders look to next week’s Fed and BoC decisions for clues on interest rates.

USD/CAD slips below 1.4000 to its lowest level in a month on Friday, extending its losing streak to seven consecutive days as traders expect the Federal Reserve (Fed) and the Bank of Canada (BoC) to take different paths at next week’s meetings. This supports the Canadian Dollar (CAD), while higher Oil prices linked to Middle East tensions provide an additional tailwind. At the time of writing, the pair trades around 1.3975, on track for a second consecutive weekly decline.

USD/CAD has unwound roughly half of its September rally as expectations grow that the BoC could deliver its first rate hike of the year at its October 28 meeting amid heightened energy-driven inflation risks. Canada’s annual inflation rate rose to 3.1% in September, its highest level in four months.

Data released on Friday showed Canadian Retail Sales rose 1.2% in August after falling 0.8% in July. The increase was slightly below the 1.3% forecast. Excluding autos, sales grew 1.2%, beating expectations of 1.0% after a 0.8% decline.

According to TD Securities, an October move from the BoC would be “reckless. Not necessarily wrong. But a needless risk.” Their rates strategists therefore “look for the Bank of Canada to hold at 2.25% in October, before hiking 25bps in December,” followed by “an additional 25bp hike in January, bringing the overnight rate to the mid-point of the Bank's range of neutral rate estimates.”

Given what they describe as a “close call,” TD Securities cautions that they “would avoid any outright positions heading into the meeting.” They note that “recent Fedspeak has been emphasizing a more gradual path to hiking rates and lower urgency, while Macklem has surprised markets with the seemingly aggressive stance he has taken in recent communications.” In their view, “heading into the meeting, there is a more widely accepted expectation that the Fed holds, setting up for an asymmetry that favours CAD outperformance.”

Across the border, the US Dollar holds its ground after recent weakness driven by falling Treasury yields, as concerns over the sustainability of AI-related investments weighed on equities and pushed investors toward government bonds. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.70 after touching a three-week low of 101.45 on Thursday.

The Fed is widely expected to leave interest rates unchanged next week after raising them by 25 basis points in September. Traders will watch how policymakers balance energy-driven inflation pressures against concerns that a slowdown in AI-related investment could weigh on economic growth. Markets still price in 80% chance of a December hike, but a more cautious message from the Fed could put renewed pressure on the US Dollar.

OCBC strategists Christopher Wong and Sim Moh Siong say Indian Rupee's (INR) recent recovery has stalled as renewed gains in Oil prices highlight India’s external vulnerabilities. RBI measures and IPO inflows have helped stabilise the currency but not changed fundamentals, with elevated Oil sustaining structural Dollar demand. OCBC retains a cautious stance, expecting the next INR move to hinge on Oil, portfolio flows and USD direction.

Oil-driven vulnerabilities cap Rupee gains

"INR’s recent recovery stalled overnight as renewed gains in oil prices weighed on sentiment. The rebound had been supported by the RBI’s 10–12 October measures to ease USD demand pressures, alongside IPO-related inflows."

"However, these factors have somewhat help to stabilise the currency rather than altered its underlying fundamentals. Brent’s move above USD112/bbl served as a reminder that India’s external vulnerabilities remain intact, with elevated oil prices continuing to generate structural USD demand."

"We retain a cautious stance on INR’s outlook. RBI measures should help discourage speculative positioning and limit near-term depreciation pressure, but they are unlikely to sustain further gains if oil prices remain elevated."

"In our view, the recent gains in INR have been primarily policy- and flow-driven; the next move will depend more decisively on oil prices, portfolio flows and the broader direction of the USD."

"USD/INR last closed at 94.82 levels. Bearish momentum on daily chart intact but shows tentative signs of slowing while RSI rose from oversold conditions. Some rebound risks not ruled out in the near term."

"Resistance at 95 levels, 95.20 (38.2% fibo retracement of Apr low to May high) and 95,50 (50, 100 DMAs). Support at 94.20/30 levels (61.8% fibo, recent lows). Bias to lean against strength."

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

Chris Turner at ING highlights that the Mexican Peso has been the weakest emerging market currency since early September, hurt by dovish Banxico rhetoric and narrowing policy spreads versus the Federal Reserve. Without a hawkish surprise at the 5 November meeting, he expects MXN to remain vulnerable, with IMF-flagged US tech exposure adding pressure and USD/MXN seen heading toward the 19.00–19.10 area in coming weeks.

Policy spread compression weighs on Peso

"Since US rates exploded higher at the start of September, the Mexican peso is by far the worst-performing EM currency. It is close to 8% weaker versus the dollar. The next worst currency is the Romanian leu at around 4%."

"The peso has been hit hard by dovish Banxico rhetoric, outlining that it did not plan to mechanically track the Fed with rate hikes. Should Banxico fail to match a presumed rate hike from the Fed in December, the Banxico-Fed policy rate spread will reach the narrowest on record and leave the peso exposed at a difficult time for risk assets."

"Barring a hawkish surprise from Banxico at its 5 November meeting, we expect the peso to remain vulnerable."

"We note that in the IMF financial stability report, Mexico was seen to have the near entirety of its foreign portfolio investments in US securities, which the IMF saw as AI-chasing behaviour."

"Unrest in the tech sector may therefore be weighing on the peso. 19.00/19.10 looks to be the trajectory for USD/MXN over the coming weeks. Banxico has done a number on the peso."

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

TD Securities strategists note that FX markets remain meaningfully long the US Dollar (USD) ahead of the October FOMC, with data showing the Fed faces the strongest G10 hiking pressures. They expect the USD to stay firm near term, but see scope for a post‑midterms relief selloff and year‑end seasonal weakness against G10 majors.

Long positioning and post‑midterms risks

"FX market remains meaningfully long USD going into the FOMC despite the rate hold pricing. We expect the USD to stay resilient in the near-term and see a post-midterms election relief selloff as more likely."

"The USD has gradually retraced lower from the peak last week, but FX market continues to hold meaningful aggregate long USD positions (+1 z-score vs history) going into next week's FOMC meeting. Although the Fed is likely to keep rates on hold at its upcoming meeting, data suggests the Fed has the highest rate hike pressures in G10."

"We see more room for the USD to selloff after the midterms election. The USD has rallied into the midterms election along rising odds of a "Blue Wave" like it did in 2018."

"A relief selloff after the event risk, coinciding with bearish USD year-end seasonality could be at play. Potential US equity underperformance vs RoW on AI growth concerns and a decline in US real yields after US Treasury bottomed out are additional catalysts that could allow the USD to retrace its strength from the past month vs the G10 majors."

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

• Silver extends losses as investors favor government bonds over precious metals.
• XAG/USD remains vulnerable to further losses as bearish momentum persists.
• RSI approaches oversold territory as sellers eye the psychological $50 mark.

Silver (XAG/USD) slides to fresh yearly lows on Friday after plunging 5.8% on Thursday as concerns over AI-related investments weighed on equities, but failed to spark safe-haven demand for Silver as investors favour government bonds. Some traders may also be selling precious metals to offset losses in stocks. At the time of writing, Silver trades around $53.89, on track for a second consecutive weekly decline.

The white metal is now down roughly 55% from its January peak near $121. The decline has largely been driven by rising energy costs linked to the Middle East war, which began in late February, adding to inflation pressures and prompting major central banks, particularly the Federal Reserve (Fed), to raise interest rates. Higher borrowing costs increase the opportunity cost of holding non-yielding assets such as Silver.

Next week’s Fed meeting could help determine whether Silver extends its decline or stages a recovery. The US central bank is widely expected to leave interest rates unchanged after raising them by 25 basis points (bps) in September. However, policymakers’ commitment to returning inflation to the 2% target could keep another rate hike before year-end on the table. Markets price in an 80% chance of a December increase, according to the CME FedWatch Tool.

Technical analysis

On the daily chart, XAG/USD extends its decline below the descending channel floor and remaining well under the 100-day Simple Moving Average (SMA) and the 200-day SMA, which together underline a firmly bearish near-term bias.

Momentum reinforces this tone as the Relative Strength Index (RSI) hovers near oversold at 31, while the Moving Average Convergence Divergence (MACD) indicator stays below zero with a negative reading and a weakly trending backdrop highlighted by the Average Directional Index at 30.

On the topside, initial resistance appears at $55, closely followed by the broken channel lower boundary near $56.50, before the $60 horizontal cap, with the upper edge of the bearish channel and the 100-day SMA at $62 forming a dense barrier ahead of the $67 swing high and ultimately the 200-day SMA at $71.

On the downside, meaningful support is only seen at the $50 horizontal level, leaving XAG/USD vulnerable to further declines while price holds beneath the stacked overhead resistances.

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

Commerzbank economists, led by Dr. Jörg Krämer and colleagues, expect the Fed and ECB to keep rates unchanged in October but deliver 25 bps hikes in December, with policy then staying slightly restrictive as inflation trends lower into 2027. Their forecasts show EUR/USD drifting higher from 1.12 to 1.18 by end‑2027 as Dollar support erodes.

Euro gains as Dollar softens

"The EUR/USD exchange rate is likely to continue drifting higher in the coming quarters because the dollar is suffering as a result of Trump curtailing the Fed’s independence and taking aggressive action against many countries, prompting them to seek alternatives to the dollar."

"The Fed and the ECB thus have good reasons to pause in October, not least to gain more clarity on the economic and geopolitical conditions. In December, however, both central banks are likely to respond to persistently high inflation and raise interest rates—as priced in by the futures markets—by 25 basis points. However, the forecast for the ECB is contingent on the situation in the French government bond market not escalating."

"Due to the expected decline in oil prices, our forecast indicates that the ECB’s and the Fed’s inflation targets should come within reach again toward the end of 2027. In the U.S., core inflation is also expected to decline steadily. In the eurozone, this will likely not be the case until mid-2027, but the significant decline in headline inflation should convince the ECB that this is merely a temporary phenomenon that does not warrant further interest rate hikes."

"We continue to assume that, due to these constraints, the central banks will pursue a monetary policy that is on the loose side. The decline in inflation next year could therefore be only a temporary phenomenon."

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

OCBC strategists Christopher Wong and Sim Moh Siong highlight renewed weakness in Gold despite falling US Treasury yields and rising geopolitical risks. They note that surging Oil prices are reviving inflation concerns and expectations of prolonged restrictive Fed policy, weighing on Gold. They remains cautious, saying easing Oil prices, lower real yields and a better price response are needed for Gold to regain traction near term.

Safe haven struggles despite lower yields

"Gold came under renewed selling pressure overnight, falling more than 2.5%. Brent’s sharp rise amid renewed Middle East supply concerns added to inflation worries and expectations that the Fed may need to keep rates restrictive for longer. What was notable was that gold continued to weaken even as US Treasury yields fell sharply amid the global tech selloff."

"Neither lower yields nor heightened geopolitical uncertainty has been sufficient to support gold, suggesting that near-term sentiment remains fragile."

"We remained cautious in the near term, particularly as gold has struggled to respond positively to the recent decline in yields."

"An easing in oil prices and further decline in real yields could help gold stabilise, but we would want to see a better price response before turning more constructive in the near-term."

"Support at 4000, 3943 levels (recent low). Resistance at 4080, 4156 (21 DMA)."

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