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ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that several indicators show the Dollar rally is stretched, with the currency overvalued against most G10 peers and positioning extended. However, they argue that without a clear macro or market catalyst, an imminent reversal is unlikely, as sticky Fed tightening expectations and global bond weakness continue to support demand for the Dollar.

Extended rally lacks reversal trigger

"The start of the week has brought more dollar strength. Firmer oil prices, following increased military activity in the Gulf, have helped keep the dollar on solid footing. Today’s calendar is unlikely to be particularly impactful, with the NFIB survey and home sales figures the main highlights."

"That said, several technical indicators point to an increasingly stretched USD rally. Our short-term valuation model shows the dollar overvalued against every G10 currency except GBP, where it’s at fair value. On an equally weighted basis, USD is 1.1% overvalued versus G10."

"Is this enough to call for a reversal in dollar momentum? We do not think so. In March 2025, it took a Sell-America shock to derail an overbought USD."

"A clear macro or market catalyst is needed for a reversal, and we do not see one. Fed tightening expectations remain stickier than those for most other central banks, limiting USD downside even if oil prices retreat. At the same time, weakness across global bond markets continues to support demand for a liquid defensive currency."

"Further ahead, US midterms may represent a somewhat underappreciated USD risk. However, markets have long priced in the possibility of Republicans losing control of Congress, and any precautionary, potentially USD-negative positioning ahead of the vote may not emerge until late October anyway."

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

• EUR/JPY declines by 0.21% on Tuesday, as the Japanese Yen benefits from expectations of further monetary tightening.
• German inflation accelerated to 3.3% in September, while elevated Oil prices raise stagflation concerns in the Eurozone.
• Political uncertainty in France weighs on the Euro, while speculation about a possible Japanese currency intervention supports the Yen.

EUR/JPY trades around 176.60 on Tuesday, down 0.21% on the day at the time of writing. The currency pair remains under pressure as the Japanese Yen (JPY) benefits from expectations of further monetary tightening by the Bank of Japan (BoJ), while the Euro (EUR) struggles amid political uncertainty in France and growing concerns about inflation across the Eurozone.

On the European side, the latest inflation figures from Germany reinforce concerns about persistent price pressures. Data released by the Federal Statistical Office (Destatis) on Tuesday confirmed that the Harmonized Index of Consumer Prices (HICP) rose by 3.3% YoY in September, in line with expectations and accelerating from 2.9% in August and 2.8% in July. On a monthly basis, consumer prices increased by 0.6%, compared with 0.2% previously.

Destatis President Ruth Brand highlighted that German inflation has exceeded the 3% threshold for the first time since December 2023, primarily driven by rising energy costs, particularly heating Oil and motor fuels.

These figures come as geopolitical tensions in the Middle East keep Oil prices elevated. Brent Crude Oil has retreated from its monthly highs above $105 per barrel but remains above $100, increasing costs for European businesses and households. Persistently high energy prices, combined with slowing economic activity, raise the risk of stagflation in the Eurozone.

This situation complicates the outlook for the European Central Bank (ECB), which faces the challenge of containing inflation without further weakening economic growth. The acceleration in German inflation could encourage policymakers to maintain a cautious monetary stance, potentially limiting further weakness in the Euro.

Meanwhile, political instability in France continues to undermine confidence in the single currency. Rising government debt and difficulties in securing parliamentary support for fiscal consolidation measures have pushed French borrowing costs toward levels not seen since the European sovereign debt crisis. Student protests demanding greater education funding add another layer of uncertainty to the country's already fragile political environment.

In Japan, the Japanese Yen receives support from expectations of additional interest rate increases by the BoJ, alongside speculation that Japanese authorities could intervene in foreign exchange markets to support the domestic currency.

Data released on Tuesday showed that Japan's Producer Price Index (PPI) increased by 6.8% YoY in September. Although the figure represents a slowdown from August, it indicates that inflationary pressures remain significant, supporting expectations of further monetary policy normalization.

Against this backdrop, EUR/JPY remains caught between persistent inflationary pressures in Europe and expectations of tighter monetary policy in Japan. While stronger German inflation could provide some support to the Euro through a more cautious ECB outlook, political risks in France and growing demand for the Japanese Yen continue to weigh on the currency cross.

Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $60.53 per troy ounce, up 0.35% from the $60.31 it cost on Monday.

Silver prices have decreased by 14.85% 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 69.17 on Tuesday, broadly unchanged from 69.17 on Monday.

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• XAU/USD edges up towards $4,200 after bouncing from the $4,140 area on Monday
• Precious metals reverse Monday's losses, favoured by a mild pullback in US Treasury yields and lower Oil prices.
• Gold bulls need to break $4,230 resistance to confirm a bullish reversal.

Gold (XAU/USD) retraces Monday’s losses on Tuesday, favoured by a softer US Dollar (USD) as US Yields ease from highs and Oil prices pull back, with investors awaiting key US inflation reports later in the week for a better assessment of the Federal Reserve’s (Fed) near-term policy. The XAU/USD pair has bounced up from the $4,150 area but remains below the top of the last two weeks' trading range, at $4,230.

The US Dollar Index (DXY), which measures the value of the USD against a basket of six majors, dropped 0.25% on Tuesday, amid a mild pullback in US Treasury yields and a moderate reversal in Oil prices. Correlation studies suggest that precious metals appreciate in these circumstances, although the frail market mood suggests that  US Dollar dips are likely to remain limited.

Investors might be trimming US Dollar longs ahead of the release of US Consumer Price Index (CPI) figures due on Wednesday, and the Producer Price Index on Thursday.

Cleveland Fed President (Fed) Beth Hammack reiterated her call for higher interest rates earlier on Tuesday, but with no relevant impact on US Dollar crosses or precious metals. Recent data has practically discarded a Fed rate hike in October, only a 20% chance, according to the FedWatch Tool, but hopes of a December hike are still alive. The market will analyse this week’s data to confirm that scenario.

Technical Analysis: Bulls need to break $4,230 resistance to confirm a trend shift

XAU/USD has returned to the $4,190 area after bouncing from the broken trendline at the $4.150 area on Monday. This is a bullish sign, but it needs confirmation with a successful break of the October top, around $4,230. Momentum indicators on 4-hour charts show a moderately constructive stance, with the Relative Strength Index (14) hovering in neutral-to-positive territory and the Moving Average Convergence Divergence (MACD) indicator stabilizing in mildly positive ground, but the pair seems to need additional impulse to break the overhead resistance.

Above $4,230, the next bullish targets are the September 25 high, at the $4,310 area, and the mid-September highs around $4,400. On the downside, a break of the mentioned trendline, now at $4,135, would give fresh hopes for bears to retest last week's lows, at $4,071, ahead of the support area around the $4,000 psychological level.

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

Commerzbank’s Tatha Ghose argues that the environment for the Zloty remains negative. He cites temporary fuel tax cuts that artificially lower inflation and may encourage the NBP to delay rate hikes, as well as warnings from Fitch that Poland’s large fiscal deficits and rising debt could threaten its sovereign rating, extending FX downside risks for PLN.

Monetary dovishness and rating concerns

"The government estimates that this could lower October CPI inflation by a full 1pp, potentially returning headline inflation to around 3%y/y (last reading 4%). One might imagine that falling inflation would be good for the zloty, but it is not. This is an artificially-created temporary fall, whereas NBP seemed to use such relief as an argument to delay rate hikes."

"Fuel prices are forecast to rise again already beginning this week because the cap still incorporates global price moves – and world energy prices are not relenting. The tax relief is scheduled to expire on 31 December anyway, which could produce another inflation jump early next year. Glapinski is banking on relief to be extended, but this is not guaranteed and can hardly be the basis for prudent monetary policy."

"The dovish signal from MPC last week made the zloty depreciate immediately against peers such as the Hungarian forint; this slippage is now extending."

"Meanwhile, rating agency Fitch warned that failure to reduce the fiscal deficit, further pre-election easing or weaker growth could trigger a rating downgrade. Fitch forecasts deficits of 7.3% of GDP in 2026 and 7.1% in 2027, with debt reaching 73.4% by 2028. The FX risk from such an unsustainable fiscal situation and its resultant rating risk is self-explanatory."

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

• German HICP jumped to a 2024 peak of 3.3% in September, driven by rising energy costs.
• The Euro gained ground against the Canadian Dollar, which faced pressure from falling global crude oil prices.
• Oil prices slid after US sanction waivers on Russian diesel exports promised to ease tight global markets.

EUR/CAD recovers its recent losses from the previous day, trading around 1.5950 during European hours on Tuesday. The currency cross appreciates as the Euro (EUR) gains support following the release of Harmonized Index of Consumer Prices (HICP) inflation data from Germany.

Germany’s Harmonized Index of Consumer Prices rose to 3.3% year-on-year in September, meeting expectations and marking a clear acceleration from 2.9% in August 2026 and 2.8% in July 2026. Destatis President Ruth Brand noted that inflation crossed the 3% mark to reach its highest level since December 2023, driven primarily by surging energy costs, particularly heating oil and motor fuels at filling stations. On a month-over-month basis, total consumer prices increased by 0.6%.

Moreover, the EUR/CAD cross currency pair remained firm, supported by weakness in the commodity-linked Canadian Dollar (CAD) as global crude oil prices declined. Oil markets faced downward pressure as traders weighed potential new Russian fuel supplies against ongoing geopolitical risks.

The drop in crude oil followed an announcement by US President Donald Trump that Russia had agreed to supply diesel to global markets. In response, the US administration temporarily eased sanctions on Russian fuel, measures originally implemented to limit Moscow's revenue during its war in Ukraine, in an effort to relieve tight global market conditions and curb rising energy prices.

Brent shrugs off ceasefire headlines as supply risks keep prices elevated

Strategists at ING observe that the recent pullback in crude following President Trump’s announcement of an energy ceasefire between Russia and Ukraine proved fleeting, with “the weakness in the oil market…short-lived.” They add that “that goes, too, for the US-Russia diesel export deal,” as traders quickly refocused on broader supply risks. Reflecting this resilience, ING notes that “ICE Brent settled 1.8% higher, just shy of $107/bbl yesterday — the highest close since mid-September,” underscoring that Middle East and Persian Gulf supply concerns continue to dominate price action despite the ceasefire headlines.

• NZD/USD attracts some buyers on Tuesday amid a modest USD pullback from an 18-month top.
• A hawkish Fed and Mideast jitters could limit deeper USD losses, capping the upside for the pair.
• The bearish technical setup suggests that the path of least resistance remains to the downside.

The NZD/USD pair stages a modest recovery from the 0.5580 area, or its lowest level since April 2025, touched earlier this Tuesday, reversing a major part of the previous day's losses. Spot prices stick to intraday gains above the 0.5600 mark through the first half of the European session and draw support from a broadly weaker US Dollar (USD).

A fresh leg down in crude oil prices eases inflationary concerns and drags US bond yields further away from multi-year highs, prompting USD bulls to take some profits off the table following the recent strong rise to an 18-month peak. However, the US Federal Reserve's (Fed) hawkish outlook, along with persistent geopolitical uncertainties stemming from escalating Middle East conflicts, could limit losses for the safe-haven buck and cap the NZD/USD pair.

From a technical perspective, the recent range-bound price action witnessed since the beginning of this month might be categorized as a bearish consolidation phase against the backdrop of a decline from the August monthly swing high. Moreover, spot prices hold a capped tone below the 100-period Simple Moving Average (MA) on the 4-hour chart. This, along with mixed oscillators on the said chart, suggests only tentative consolidation rather than a convincing bullish reversal.

In fact, the Moving Average Convergence Divergence (MACD) indicator stays marginally in negative territory while the Relative Strength Index (RSI) hovers near the 50 line. Hence, any subsequent move up could face initial resistance at the top boundary of the trading range, around the 0.5630 region. This is followed by the 100-period MA at 0.5641, which needs to be reclaimed to ease bearish pressure and open the way for a more sustained recovery in the near term.

On the downside, the 0.5580 region remains a key pivotal point for bearish traders, which, if broken decisively, would leave the NZD/USD pair vulnerable to fresh downside extension. Nevertheless, the broader setup keeps short-term risks skewed to the downside, suggesting that any further recovery is more likely to be sold into and remain capped.

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

NZD/USD 4-hour chart

MUFG's Lee Hardman says the Australian Dollar remains supported by the RBA's 4.60% policy rate and resilient global growth. September meeting minutes signal scope for further tightening, although housing weakness remains a concern. Strong commodity prices and the IMF's upgraded 2026 global growth forecast provide additional support, despite persistent geopolitical risks.

Aussie benefits from rates and commodities

"The main release overnight was the minutes from the latest RBA policy meeting in September when they raised the policy rate by 0.25 point to 4.60%. The minutes reinforced the message from the policy meeting that the RBA is prepared to hike rates further if required even though they have already lifted the policy rate by 100bps this year. It is currently the highest policy rate amongst G10 central banks which helped the Australian dollar to outperform in 2026 alongside the Norwegian krone."

"RBA officials displayed concern that the Australian dollar could weaken going forward if overseas central banks played catch up by increasingly moving to raise rates which could add to upside risks in Australia. The RBA also noted that they were also wary of the risk that falling house prices could have a larger effect on household spending than assumed which could strength the case for keeping rates on hold in Australia."

"The outperformance of the Australian dollar also reflects the resilience of the global growth to the energy price shock. Tighter supplies and resilient demand have contributed to Bloomberg’s commodity price index trading close to year-to-date highs having increased by just over 30% so far this year."

"The still favourable external backdrop for the Aussie was highlighted by the IMF’s updated World Economic Outlook report released overnight which revealed another upward revision to global growth for this year by 0.1ppt to 3.1%."

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