Forex News

• USD/JPY trades cautiously as markets await Friday’s Bank of Japan rate decision.
• A 25-basis-point rate hike is almost fully priced in, shifting attention to inflation data and Governor Ueda’s guidance.
• Expectations of more Fed rate hikes keep the US-Japan interest rate gap wide and support the US Dollar.

USD/JPY trades cautiously on Thursday as attention shifts to the Bank of Japan’s (BoJ) monetary policy decision on Friday after the Federal Reserve (Fed) delivered a widely expected 25-basis-point rate hike on Wednesday. At the time of writing, the pair trades around 156 after touching an intraday low of 155.34.

Markets are almost fully pricing in a 25-basis-point increase from the BoJ, which would lift the policy rate from 1.00% to 1.25%, its highest level in around three decades. A Reuters poll conducted earlier this month showed that all but two of 68 economists, or 97%, expect the central bank to raise rates.

The focus will therefore be on BoJ Governor Kazuo Ueda’s guidance about the next policy move. In the same Reuters poll, 24 of 66 economists expected the central bank to follow with another increase to 1.50% in either October or December. Higher energy prices linked to the war in the Middle East, persistent domestic inflation and the Yen’s earlier weakness support the case for higher borrowing costs. Japan’s National Consumer Price Index (CPI) data is also due ahead of the decision.

A rate increase accompanied by a signal that another move could come in the next few months may strengthen the Japanese Yen (JPY). However, if the BoJ raises rates but Ueda avoids giving a clear timeline, the widely expected decision could trigger profit-taking in the Yen and allow the pair to rebound.

Strategists at Scotiabank note that markets have “moved quickly to price in a BoJ hike over the past few weeks,” underscoring what they describe as “a meaningful shift in the govt/BoJ approach to official currency management as officials moved from intervention to a more fundamentally-driven approach.” In their view, “the outlook for relative central bank policy remains JPY-supportive as markets move to price in a more aggressive tightening path for the BoJ.”

Against this backdrop, Scotiabank highlights that “for USD/JPY, we continue to highlight support at 153 and 152 and have shifted our upside focus to 158 following the latest break of 155,” reinforcing a constructive technical bias for the Yen as policy expectations evolve.

Meanwhile, prospects of additional Fed rate hikes could keep the US-Japan interest rate gap wide, favouring the higher-yielding US Dollar. The Fed unanimously raised its target range to 3.75%-4.00% on Wednesday, while the updated dot plot showed that 16 of 18 policymakers expect at least one more quarter-point increase by year-end. According to the CME FedWatch Tool, markets see around a 50% chance of another rate hike in October.

Following the Fed decision, the US Dollar Index surged to a seven-week high of 100.37. The index, which tracks the Greenback’s value against a basket of six major currencies, now trades around 100.21, hovering just below an intraday high of 100.24 after briefly pulling back toward the psychological 100.00 mark earlier in the day.

Rabobank's Senior Macro Strategist Bas van Geffen discusses the latest FOMC decision, noting a unanimous 25 bps hike in the Federal funds rate and a shift to a higher policy rate trajectory for similar inflation outcomes. He still expects this to be a one-and-done move, but now foresees fewer cuts, with the terminal rate assumption raised to 3.25-3.50%.

Fed reaction function and rate path

"The FOMC unanimously voted to increase the target range for the Federal funds rate by 25 basis points. And, as our US strategist notes, we got more than we bargained for. The Fed’s new set of economic projections essentially shows a new reaction function."

"The projections indicate that a much higher policy rate trajectory is required to reach a similar inflation outcome."

"Therefore, we still believe it is more likely that yesterday’s decision turns out to be a one-and-done hike and we think that the Fed may be forced to cut earlier next year than they expect."

"However, the new reaction function did force a rethink of that subsequent cutting cycle. We now only expect one cut in 2027 and one in 2028, as we shift our assumption for the terminal rate from 3.00-3.25% to 3.25-3.50%."

"Overall, the FOMC sent a clear message that it is committed to defend its monetary policy independence. In fact, their projections suggest that by the time President Trump leaves office, the policy rate may be higher than when Warsh took the helm at the central bank."

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

• USD/CHF pauses a six-day winning streak as the US Dollar’s post-Fed rally stalls.
• A widening Fed-SNB rate gap and the Franc’s growing funding role leave the currency vulnerable.
• The pair holds above its major daily SMAs, keeping the broader technical bias bullish.

USD/CHF trades slightly lower on Thursday as the Swiss Franc (CHF) regains some ground after falling for six straight days. The pullback comes as US Dollar (USD) buyers take a breather following the sharp rally triggered by the Federal Reserve’s (Fed) hawkish monetary policy announcement on Wednesday. At the time of writing, the pair trades around 0.8245, hovering near levels last seen in May 2025.

The Fed unanimously raised its benchmark rate by 25 basis points to 3.75%-4.00%, delivering its first increase since 2023. The updated dot plot showed that 16 of 18 policymakers expect at least one more quarter-point increase before the end of the year.

Prospects of more Fed rate hikes could widen the interest rate gap with Switzerland, where the Swiss National Bank (SNB) keeps its policy rate at zero. This difference may keep the Swiss Franc vulnerable to additional losses by making US Dollar-denominated assets more attractive.

At the same time, the Swiss Franc has become increasingly popular as a funding currency for carry trades, as expectations that the Bank of Japan (BoJ) could accelerate its rate-hike cycle make borrowing in Japanese Yen (JPY) less attractive.

Strategists at UOB Group note that the latest upswing in USD/CHF has exceeded their prior expectations. In their “most recent narrative from Tuesday (15 Sep, spot at 0.8175),” they had highlighted that the Dollar “must break and hold above 0.8205 before a move to 0.8245 can be expected.” They point out that “yesterday, USD broke above both levels as it surged to 0.8265,” confirming a strong short-term impulse higher.

However, UOB cautions that “while momentum remains strong, it is too early to tell whether it is sufficient for USD to break above 0.8300.” On the downside, they stress that “a breach of 0.8185 (‘strong support’ level was at 0.8145 yesterday) would mean that the upside momentum from late last week is easing,” marking 0.8185 as a pivotal level for assessing whether the recent bullish phase is starting to fade.

Technical Analysis

On the daily chart, USD/CHF extends its advance above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which now underpin a constructive near-term bias. The Relative Strength Index (RSI) at 68 suggests strong but nearly overbought momentum, and the Moving Average Convergence Divergence (MACD) remains positive, hinting that buyers still retain control despite a relatively weak trend backdrop signaled by the subdued Average Directional Index (ADX).

On the downside, initial support emerges at the horizontal level around 0.8200, ahead of the 50-day SMA near 0.8108, with deeper demand likely around the 100-day SMA at 0.8024 and the 200-day SMA at 0.7941.

On the topside, immediate resistance is located at 0.8300, with a further barrier at 0.8400, and a daily close above the former would open the door for a continuation of the bullish sequence while a failure to clear these hurdles could trigger a corrective pullback toward the nearby support cluster.

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

• DJIA rebounds above 51,800 after Wednesday's three-month low as Crude Oil falls.
• Six technology companies in the index carry 18.9% of it between them.
• Futures put no chance on the Fed's rate still being 3.75-4.00% after December 9.

The Dow Jones Industrial Average (DJIA) trades above 51,800 on Thursday, back over the 51,500 area it sold through on Wednesday, when the Federal Reserve (Fed) raised its rate for the first time in three years and the index fell to its lowest level in three months. Crude Oil is cheaper, the 10-year Treasury yield is back under 5%, and the index has recovered about half of Wednesday's fall. The buying is concentrated in the stocks this index owns the least of.

The Dow pays by the share price, not by the company

This index weights its 30 members by what a share costs rather than by the size of the business. Nvidia (NVDA) trades near $212 and carries 2.4% of the daily movement. Caterpillar (CAT) trades near $784 and carries 8.9%, so the same percentage move in the machinery maker is worth nearly four times that move in the most valuable company in the world. Goldman Sachs (GS) at about $977 a share carries 11.1% on its own, and the five most expensive shares control 34.3% of the daily movement between them.

That is why a rally in artificial intelligence reaches the S&P 500 and the Nasdaq Composite before it reaches this one. Those two weight by the size of the business, and six technology companies hold 18.9% of the Dow against 27.5% for five financial companies. The chipmakers that led the move are not in the index at all, and Intel (INTC) stopped being in it when Nvidia replaced it in 2024.

Saudi Arabia did more for the index than the Fed did

Crude Oil trades back under $100 a barrel and Brent near $102, both lower, after Saudi Arabia offered Asian refiners extra cargoes through ship-to-ship transfers off Oman's Sohar port. Chevron (CVX) has been the index's only energy company since 2020 and carries 2.5% of it, so a cheaper barrel costs the Dow one stock and pays the other 29 through fuel, freight and packaging. The transfers are a workaround rather than a peace, in the seventh month of a war that put Crude Oil above $100 in the first place.

The 10-year Treasury yield is back under 5%, a level it had climbed above again on Wednesday after the decision. So the Fed raised the rate banks charge each other overnight, and the rate that prices a mortgage went down instead. Home Depot (HD) and Sherwin-Williams (SHW) carry 7.2% of the index between them, more than Nvidia and Amazon (AMZN) combined, and they sell into whatever the 10-year does next.

The data made the second increase easier

First-time claims for unemployment benefits came in at 196K against a 208K forecast and a previous 206K. The Philadelphia Fed's factory survey came in at 37.8 against a 30.5 forecast. Neither number describes an economy that one rate increase has already slowed, and Fed Chair Warsh said after the decision that inflation is too high and has been so for too long. Sixteen of the 18 officials who submit rate forecasts expect another increase this year, and four of them expect two.

Housing went the other way. Starts came in at 1.275 million against a 1.31 million forecast, building permits at 1.394 million against 1.41 million, and both were below July. Pending home sales rose 0.3% against a 2% forecast. Housing is the part of the economy that higher rates have already reached, and it arrives here through the two companies that sell the paint and the lumber.

One session after the first increase in three years, futures put no chance at all on the Fed's rate still being 3.75-4.00% after the December 9 meeting, and slightly better than even odds that the next one lands on October 28. The path they price runs to 4.50-4.75% by the middle of 2027, three more increases on top of Wednesday's. Caterpillar lends its customers the money to buy its machines through its own finance arm, so a rate walking that far reaches the index's second-heaviest stock twice.

Industrial production is released Friday at 13:15 GMT, forecast at 0.3% against 0.2% in July, and Honeywell (HON) and 3M (MMM) are where that number lands in this index. Fed Governor Bowman speaks at 07:30 GMT.

Levels and bias

Resistance: The session high just above 52,100 is where the bounce stopped, and the 50-day Exponential Moving Average (EMA) near 52,600 is the cap above it. The index has not been above that average since early September and the average has turned down.

Support: The session low near 51,600 is the first floor. Beneath it, 51,500 is the shelf that gave way on Wednesday, and Wednesday's low near 51,200 is the three-month low the bounce started from.

Bias: Bearish while the 50-day average near 52,600 caps the recovery. The first objective is 51,500 and the second is Wednesday's low near 51,200. The daily Stochastic Relative Strength Index (Stoch RSI), a momentum gauge, is near 28 and still falling, so the bounce has not turned the trend. A daily close above 52,600 ends the bearish case.

Dow Jones daily chart

• Gold rebounds as the US Dollar and Treasury yields pull back following the Fed’s hawkish rate hike.
• The Fed’s dot plot signals more tightening ahead, which could keep XAU/USD’s recovery in check.
• Technically, XAU/USD tests the 100-day SMA after finding support near the 50-day SMA.

Gold (XAU/USD) holds near its daily high on Thursday after rebounding sharply earlier in the day as the US Dollar trims some of its post-Fed gains. A cooldown in the Oil rally also pulls US Treasury yields away from their recent highs, lending additional support to the precious metal. The prospect of further rate hikes by the Fed keeps the upside capped. At the time of writing, XAU/USD trades around $4,370, up 2.50% on the day.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 100.15 after retreating from 100.37, its highest level since July 31. Meanwhile, the benchmark 10-year US Treasury yield holds near 4.94%, below the 5.04% level touched earlier this week, its highest since 2007.

West Texas Intermediate (WTI) Oil falls nearly 2% to around $95.50 as Saudi Arabia reroutes crude exports through Oman and works to restore its damaged East-West pipeline following last week’s drone attacks.

The US central bank delivered its first interest rate hike since 2023 on Wednesday, unanimously lifting the federal funds target range by 25 basis points (bps) to 3.75%-4.00%.

Following the decision, Gold reversed its intraday gains as the US Dollar and Treasury yields moved higher. Selling pressure increased as traders digested the updated interest rate projections and comments from Fed Chairman Kevin Warsh, pushing XAU/USD to $4,235, its lowest level since August 7.

The updated dot plot showed that 16 of 18 Fed policymakers expect at least one more quarter-point increase by the end of the year, while the median projection points to a policy rate of 4.1%. Warsh also struck a hawkish tone, saying inflation is too high and describing the hike as removing “a dose of accommodation,” as financial conditions showed little sign of being restrictive. He added that this view is “widely shared across the Committee,” suggesting that the Fed may be prepared to raise rates again in the coming months.

As a result, selling pressure on the US Dollar could remain limited, keeping Gold’s recovery in check. Higher interest rates usually weigh on the non-yielding metal by making interest-bearing assets more attractive. Weekly US labour market data released earlier also offered some support to the Greenback. US Initial Jobless Claims came in at 196K, below the 208K expected and the previous reading of 206K.

Middle East developments remain in focus. US President Donald Trump told reporters Washington is “hopefully” nearing the end of the Iran war and claimed Tehran wants to reach a deal. However, tensions across the region remain elevated as Saudi Arabia and the Iran-backed Houthis trade strikes.

Technical analysis: XAU/USD faces resistance at 100-day SMA

On the daily chart, XAU/USD is hovering between its key moving averages and keeping the near-term tone neutral to slightly bearish. Spot holds above the 50-day Simple Moving Average (SMA) at $4,284 and is attempting to reclaim the 100-day SMA at $4,323, suggesting a market caught in short-term consolidation below medium-term trend resistance.

The Relative Strength Index (RSI) around 50 hints at neutral momentum, while the Moving Average Convergence Divergence (MACD) stays in negative territory, with the line below zero and the histogram still depressed, reinforcing a lack of bullish conviction.

On the topside, immediate resistance is defined by the 100-day SMA at $4,323, followed by the 200-day SMA at $4,540, before a more distant horizontal barrier emerges near $4,700.

On the downside, initial support is seen at the 50-day SMA at $4,284, ahead of a more structural floor at $4,150 and then $4,000. While price trades in a relatively tight band between the nearby 50-day and 100-day averages, a sustained break on either side of this corridor would likely set the next directional leg for Gold.

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

• The New Zealand Dollar strengthens after the domestic economy expands more than expected in the second quarter.
• The US Dollar remains supported by the prospect of further monetary policy tightening in the United States.
• Geopolitical tensions limit risk appetite and prevent NZD/USD from extending its rebound.

NZD/USD rebounds on Thursday, trading around 0.5730 at the time of writing, up 0.35% on the day. The New Zealand Dollar (NZD) benefits from stronger-than-expected domestic growth data, allowing the pair to recover from the two-month low reached on Wednesday.

Statistics New Zealand reported that Gross Domestic Product (GDP) expanded by 0.2% QoQ in the second quarter, exceeding market expectations for 0.1% growth, although slowing sharply from the 0.9% expansion recorded in the first quarter. On an annual basis, the New Zealand economy grew by 2.6%, accelerating from a revised 1.7% previously.

The stronger GDP figures provide some relief for the New Zealand Dollar by suggesting that economic activity remains resilient despite the slowdown from the previous quarter. However, NZD/USD struggles to extend its recovery as the US Dollar (USD) remains supported by the Federal Reserve's (Fed) hawkish monetary policy outlook.

The Fed raised its benchmark interest rate by 25 basis points (bps) on Wednesday, bringing the target range to 3.75%-4% and delivering its first rate increase since 2023. Fed Chair Kevin Warsh justified the decision by saying that inflation has remained too high for too long, while leaving the door open to further monetary tightening.

Expectations of another Fed move continue to support the Greenback. According to the CME FedWatch tool, markets currently assign around a 87% chance to at least another interest rate increase this year.

The prospect of higher US interest rates for longer could continue to limit the upside potential of NZD/USD, as wider yield differentials tend to favor the US Dollar against lower-yielding currencies.

Meanwhile, geopolitical tensions in the Middle East provide an additional source of support for the safe-haven US Dollar. The resulting cautious market environment limits demand for risk-sensitive currencies such as the New Zealand Dollar, tempering the positive impact of New Zealand's stronger GDP figures.

• BoE holds at 3.75% with three policymakers backing a hike.
• Fed’s first hike in three years strengthens US Dollar policy advantage.
• UK Retail Sales take center stage after central-bank doubleheader.

The Pound Sterling (GBP) extends its losses on Thursday after the Bank of England's (BoE) decision to hold rates unchanged in a 6-3 vote, while leaving the door open for a potential hike. This, along with Wednesday Federal Reserve's (Fed) raise, capped the GBP/USD advance, with the pair trading at 1.3381, down over 0.23%.

Sterling weakens as BoE holds while Fed signals more tightening

As expected, the BoE maintained the Bank Rate unchanged at 3.75%, with three dissenters opting for a 25-basis-point rate hike, as seen at the previous meeting. BoE’s Greene, Mann and the Chief Economist Pill. In the same meeting, the BoE also decided to reduce UK bond (Gilt) purchases and to plan annual Gilt sales of up to £20 billion.

In the statement, the BoE said it is ready to act to ensure inflation reaches its target, that inflation risks are tilted to the upside, and that the required monetary policy will depend on the duration of the energy shock.

Following the BoE’s decision, money markets price in a 64% chance of a rate hike at the November 5 meeting. Now eyes turn to UK August Retail Sales on Friday, forecast to improve following a -0.5% MoM contraction in July.

On Wednesday, the Federal Reserve raised rates for the first time in three years, to 3.75%-4%, and recognized that the US economy remains solid and the labor market strong.

According to the Fed’s Summary of Economic Projections (SEP) dot plot, policymakers see another rate hike by the end of the year, meaning that the Fed funds rate is poised to end above the 4% threshold.

Officials expected the PCE to stay at 3.7% this year and to converge toward the Fed’s goal of 2% until 2028.

Data-wise, the US economic docket revealed that jobless claims for the week ending September 12 dipped sharply from 206K to 196K, well below the 208K forecast.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3343, maintaining a bearish near-term bias as spot holds below the triple simple moving average (SMA) cluster now around 1.3482 and beneath multiple broken trend-line supports that have turned into resistance. The Relative Strength Index (RSI) at 30 suggests downside momentum is flirting with oversold territory, yet price location under the key moving averages and the descending resistance lines still hints that rallies are likely to be capped rather than sustained.

On the topside, immediate resistance emerges at the former downtrend barrier around the break of the longer resistance line near 1.3347, followed by the more established descending trend-line from 1.3653, whose break level sits around 1.3457. Above there, the triple SMA cluster near 1.3482 aligns with the broken rising trend-line off 1.3140 at 1.3484, reinforcing a dense supply zone before the higher former support trend-line break around 1.3697. With no clear structural support levels defined below the market in this dataset, the pair appears vulnerable to further slippage until new demand emerges on fresh price action.

(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 USD/JPY surged above 156.30 to a high of 156.41, with momentum still modest but supportive of further gains. Intraday, the pair could test 156.50 while holding above support at 155.40. Over the next 1-3 weeks, they expect USD/JPY to edge higher toward 157.30, provided it stays above strong support at 154.80.

Dollar-Yen extends gains toward upper band

"24-HOUR VIEW: USD rose above 155.00 as we expected two days ago. When it was at 155.15 yesterday, we highlighted the following: “The increase in upward momentum remains modest, but today, USD could rise above 155.50. The next resistance at 156.30 is unlikely to come into view. On the downside, a break below 154.40 (minor support is at 154.80) would indicate that USD has likely entered a range-trading phase.” During the NY session, USD briefly dipped to 154.86 and then soared above 156.30, reaching a high of 156.41. Despite the sharp rise, momentum has not increased significantly. That said, USD could test 156.50 before levelling off. The next resistance at 157.30 is unlikely to come under threat. Support is at 155.70, followed by 155.40."

"1-3 WEEKS VIEW: In our most recent narrative from Tuesday (15 Sep, spot at 154.45), we highlighted that USD “could edge higher, but based on the prevailing momentum, any advance is likely to stay within a 153.30/156.30 range.” Yesterday, USD rose above 156.30 with a high of 156.41. Upward momentum is building, but it is not that strong for now. From here, USD could edge higher to 157.30. To sustain the momentum buildup, USD must hold above the ‘strong support’ level, now at 154.80."

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

Scotiabank strategists Shaun Osborne and Eric Theoret say EUR/USD is stabilizing after Wednesday’s Fed decision, as improving Germany-US 2-year yield spreads and a hawkish ECB stance support the euro. With euro area inflation offering little surprise and markets pricing further ECB tightening, the pair is finding support in the mid-1.14s and near 1.1400, while resistance remains limited ahead of 1.1550.

Yield spreads back Euro recovery

"The EUR is entering Thursday’s NA session with a marginal 0.1% gain and showing signs of stabilization in the aftermath of Wednesday’s Fed. The outlook for relative central bank policy remains supportive of EUR strength and yield spreads are once again moving in the EUR’s favor, with a notable 7bpt jump in the 2Y Germany-US yield spread."

"The final euro area CPI release offered little in terms of surprise, with headline inflation remaining in the low 3% area and core hovering in the mid-2% range. Messaging from the ECB remains hawkish, and markets are pricing just over 50% chance of a hike in October with a cumulative 36bpts of tightening by December."

"Bearish/neutral – the EUR’s latest decline has been relatively sharp, dragging the RSI to oversold levels just above the threshold at 30. Short term price action is leaning toward stabilization however, with clear support observed in the mid-1.14s."

"The sharp nature of Wednesday’s decline offers little in terms of near-term resistance ahead of 1.1550, while further support is expected closer to 1.1400. "

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