Forex News

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight ongoing Euro (EUR) weakness against the US Dollar (USD), with EUR/USD at fresh 17‑month lows. Intraday, further losses are possible but seen contained within 1.1145–1.1185. Over the next 1–3 weeks, the downtrend that began more than a month ago could extend gradually toward 1.1115 unless strong resistance at 1.1220 is broken.

Euro-Dollar slide not yet stabilised

"24-HOUR VIEW: We did not expect EUR to drop sharply to a low of 1.1151, as we had expected range-trading. Further EUR weakness is not ruled out, but given the oversold conditions, any decline should stay within a 1.1145/1.1185 range. In other words, a continued decline below 1.1145 is unlikely."

"1-3 WEEKS VIEW: Our most recent narrative was from last Thursday (08 Oct, spot at 1.1200), when we highlighted that “there is a chance for EUR to test 1.1145.” After trading in a range for a few days, EUR dropped sharply to a low of 1.1151 yesterday. Despite the decline, downward momentum has not increased much. However, the weakness in EUR that started more than a month ago has not quite stabilised, and EUR could decline gradually toward 1.1115. On the upside, a breach of the ‘strong resistance’ at 1.1220 (level was at 1.1255 yesterday) would mean that EUR is not declining further."

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

• USD/JPY pulls back below 158.30 after rejection at the 200-day SMA, at 158.56
• Softer-than-expected Japanese producer prices are keeping the JPY from appreciating further.
• The US Dollar treads water with investors awaiting key US inflation reports due later this week.

The US Dollar (USD) edges lower against the Japanese Yen (JPY) on Tuesday, although it maintains its broader bullish trend intact, favoured by a risk-averse market. USD/JPY bulls found resistance at the 200-day SMA, in the 158.50 area, again on Monday, and the pair pulled back during Tuesday's early trading to reach session lows sub-158.30.

Data from Japan released earlier on Tuesday showed an unexpected slowdown in factory inflation, as September's Producer Prices Index (PPI) contracted 0.3% for the second consecutive month against market expectations of a 0.5% increase. Year.-over-Year, Japan’s PPI rose at a 6.9% pace, also against expectations of a steady 7.6% rate, but still at levels pressuring the Bank of Japan (BoJ) to tighten its monetary policy further.

Later on, BoJ Governor Kazuho Ueda observed that underlying inflation is nearing 2% and reaffirmed the bank's commitment to keep it anchored at those levels, which leaves the door open to further interest rate hikes. The Yen, however, hardly moved on Ueda’s comments.

The US Dollar, on the other hand, has been trading on a moderately softer tone during the Asian session, with US markets returning after a partial close on Monday. Investors, however, are likely to look from the sidelines on Tuesday, awaiting US Consumer Price Index (CPI) and Producer Price Index (PPI) figures later in the week for further hints about the timing of the Federal Reserve’s (Fed) next rate hike.

Technical Analysis: The USD needs additional impulse to break the 200-day SMA

USD/JPY trades at 158.30, keeping the broader constructive tone intact so far, yet with rallies capped below the 200-day simple moving average (SMA) at 158.56. The Relative Strength Index (RSI) in the daily chart lies around 55, and the Moving Average Convergence Divergence (MACD) is slightly positive, but the pair seems to need fresh motivation to break the range top.

Immediate resistance is seen at the mentioned SMA at 158.56, which closes the path towards the September 24 high around 159.00 and the key 160.00 area. On the downside, the October 6 and 8 lows at the 157.50 area are likely to test bears ahead of the late September lows at 156.38 and the September 17 low at 155.34.

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

• The US Dollar drops as US bond yields fall after an extended weekend.
• Investors see strength in US Dollar due to strong US growth prospects, high inflation and hawkish Fed bets.
• The US CPI and PPI data for September is awaited.

The US Dollar (USD) trades lower against its major currency peers on Tuesday due to lower United States (US) Treasury Yields.

In the early European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is down 0.17% to near 102.38. Still, the DXY is close to its fresh yearly high of 102.61 posted on Monday. 10-year US bond yields trade 0.85% lower to near 5.20% after an extended weekend. US bond markets were closed on Monday due to Columbus Day.

Market experts argue that the outlook of the US Dollar remains strong on the back of strong domestic growth, elevated inflationary pressures, and hawkish Federal Reserve (Fed) expectations.

Analysts at ING observe that FX markets are largely looking through recent noise and "preferring to concentrate on the cyclical story of decent US growth, above-target inflation and the prospect of the Fed hiking 75bp from current levels."

On the economic data front, investors await the US Consumer Price Index and the Producer Price Index (PPI) data for September, which will be released on Wednesday and Thursday, respectively. The data is expected to influence Fed’s interest rate expectations significantly. Fed officials have explicitly told that inflation concerns remain heightened and more interest rate hikes are needed to contain them.

Hammack leans hawkish as Fed rhetoric flags risk of entrenched inflation mindset

Fed’s Hammack delivers a notably more hawkish tone, with the 8.4/10 FXS Speechtracker score standing well above the 7.5/10 historical average, underscoring a stronger push for tighter policy relative to the established baseline. The emphasis on the need for higher interest rates, a restrictive stance to achieve 2% inflation, and concern over an emerging inflationary mindset—amid neutral financial conditions and broad, demand-driven price pressures including from AI—signals a preference for swift, smaller rate moves to prevent inflation expectations from drifting. Hammack’s focus on clarifying the reaction function and warning that firms are planning price hikes beyond input costs reinforces the message that the Fed should act proactively to avoid inflation becoming ingrained.

The FXS Fed Sentiment Index rose by 0.59 points to 138.92, firmly in hawkish territory and consistent with the elevated FXS Speechtracker score. This move higher reflects a clear shift toward tighter policy rhetoric, reinforcing expectations that the Fed will prioritize containing inflation over supporting growth in the near term.

US Dollar Index Technical Analysis

In the daily chart, Dollar Index Spot trades at 102.38. Price holds above the 20-day exponential moving average (EMA) at 101.48, keeping the near-term bias bullish as the index extends its recovery from the sub-100 area. The Relative Strength Index (14) stands around 69, flirting with overbought territory and hinting that upside momentum is strong but increasingly stretched.

On the downside, the 20-day EMA near 101.48, where buyers are likely to defend the prevailing uptrend on any pullback. Looking up, the asset could rise to the 103.00 if it decisively breaks above the fresh yearly high at 102.61.

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

• EUR/USD gathers strength to around 1.1175 in Tuesday’s early European session.
• The pair keeps a bearish vibe under 100-day SMA, but temporary rebound cannot be ruled out amid oversold conditions.
• The first upside target to watch is 1.1243; the initial support level is seen at 1.1105.

The EUR/USD pair holds positive ground near 1.1175 during the early European trading hours on Tuesday. Nonetheless, hawkish Federal Reserve (Fed) expectations and higher US Treasury bond yields could underpin the US Dollar (USD) and act as a headwind for the major pair.

Cleveland Fed President Beth Hammack said on Monday that tighter monetary policy may be needed to contain inflation in order to prevent an inflationary mindset from becoming entrenched in the economy.

Traders put the probability of rates remaining unchanged at the next meeting at more than 80.6%, while the chance of an increase at the December policy meeting was nearly 84.7%, the CME FedWatch Tool showed.

The key US inflation reports will be the highlight later this week, as they could provide further direction on the Fed’s policy path. The US Consumer Price Index (CPI) inflation report will be published on Wednesday, followed by Producer Price Index (PPI) and Retail Sales data on Thursday.

The headline CPI is expected to show a rise of 3.7% YoY in September, versus 3.4% prior. The core CPI is projected to show an increase of 2.5% YoY in September, compared to 2.4% in August. Any signs of hotter inflation in the US could reinforce the US central bank's decision to maintain a restrictive monetary policy stance to contain persistent price pressures.

Euro under pressure as French budget standoff keeps EUR/USD bias bearish

Analysts at ING highlight that the French government’s latest budget proposal, which includes “€43bn in new savings,” is due to be debated in parliament this week, but they note that “consensus seems to expect that this will make little progress.” ING adds that the government may ultimately have to “pass this budget by decree,” with parliamentary protagonists likely to “avoid trying to bring down the government, which would make the French debt crisis worse than it already is.” The bank cautions that “this is hardly a euro positive, however.”

Against this backdrop, ING points out that “speculators and the FX options market remain quite bearish on EUR/USD currently, although positioning is starting to get a little stretched.” In their view, “barring a big US policy misstep, which again questions investors' long dollar exposure, the macro story remains EUR/USD bearish,” and for the near term “a further dip towards 1.1100/1120 looks more likely.”

Hammack leans hawkish as Fed rhetoric flags risk of inflationary mindset

Fed’s Hammack delivers a notably more hawkish tone, with the 8.4/10 FXS Speechtracker score standing well above the 7.5/10 historical average, underscoring a stronger bias toward tighter policy relative to the established baseline. The emphasis on the need for higher interest rates, a restrictive stance to achieve 2% inflation, and concern that an inflationary mindset is becoming ingrained—amid broad, demand-driven price pressures and “neutral” financial conditions—signals a preference for swift, smaller rate moves to reinforce tight monetary policy. Hammack’s focus on clarifying the Fed reaction function and warning that firms are planning price hikes beyond cost increases highlights a deliberate effort to re-anchor expectations and keep the Dollar supported by a higher-for-longer rate narrative.

The FXS Fed Sentiment Index rose by 0.59 points to 138.92, reinforcing that Fed communication remains firmly in hawkish territory well above the neutral 100 mark. This incremental uptick, aligned with the elevated FXS Speechtracker score, suggests that markets should continue to price a bias toward tighter policy, which is typically supportive for the Dollar against the Euro and Yen.

Technical Analysis: EUR/USD retains a negative bias amid oversold conditions

In the daily chart, EUR/USD keeps a bearish near-term bias as spot holds below the 100-day simple moving average (SMA) and the Bollinger middle band. Price is consolidating closer to the lower Bollinger band support than to overhead levels, while the Relative Strength Index (14) at 25.5 sits in oversold territory, hinting that downside pressure persists but that the sell-off is becoming stretched.

On the topside, initial resistance is located at the October 9 high of 1.1243, en route to the Bollinger middle band near 1.1325, and then  the 100-day SMA at 1.1485. A stronger cap emerges at the upper boundary of Bollinger band around 1.1540. 

On the downside, the lower Bollinger band at 1.1105 serves as the next key support level. A desicive break below this level would expose further weakness toward the May 21, 2025 low of 1.1050, followed by the 1.1000 psychological level. Any follow-through selling below the mentioned level could expose the May 12, 2025 low of 1.0951. 

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

• The British Pound is marginally down at around 209.25 against the Japanese Yen.
• BoE’s Greene said that the central bank should act quickly to diminish fears of second-round inflation effects.
• The BoJ is unlikely to deliver back-to-back interest rate hikes.

The British Pound (GBP) trades marginally lower against the Japanese Yen (JPY) at around 209.25 during the late Asian trade on Tuesday. The cross faces mild selling pressure even as Bank of England (BoE) policymaker Megan Greene has argued in favor that the central bank should act now to contain inflationary pressures before it gets too late and it starts spreading to wages and broad consumer prices.

So far this year, the BoE has kept interest rates steady at 3.75%. Meanwhile, market experts see the BoE raising interest rates in the November meeting on the back improved economic outlook.

Analysts at Commerzbank highlight that the UK economy has “remained relatively resilient so far this year,” noting that “following growth of 0.6% q/q in the first quarter, second-quarter GDP was revised up to 0.5% in the final release.” They add that “monthly GDP data for July, showing a 0.4% m/m increase, also point to a solid start to the third quarter,” reinforcing the picture of firmer underlying momentum.

Against this backdrop, Commerzbank argues that “the improved growth outlook should make it easier for the BoE to raise rates further in order to lean against inflation.” The bank acknowledges that “until now, we had not expected the BoE to hike rates again,” but says “recent developments… have led us to conclude that a November rate hike is now more likely than not.” Moreover, Commerzbank “do[es] not expect it to be a one-off move,” and now “anticipate[s] another hike in February, taking Bank Rate to 4.25%.”

For fresh cues regarding the UK economic strength, investors await monthly Gross Domestic Product (GDP) data for August, which is scheduled for Thursday. According to estimates, the UK economy contracted 0.1% in August after a 0.4% expansion in July.

Meanwhile, the Japanese Yen outperforms its major peers despite market experts arguing against back-to-back interest rate hikes from the Bank of Japan (BoJ).

BoJ seen shifting to inflation stabilisation but not yet ready for rapid hikes

Analysts at Rabobank argue that the Bank of Japan has reached an important inflection point, noting that “it now appears to have reached the point when it can instead shift its focus to stabilising price pressures around the target level.” However, they caution that this does not herald an aggressive tightening cycle, stressing that “even so, the Bank is still not widely viewed as being in a position in which back-to-back rate rises are appropriate.”

• Bank Indonesia Governor confirmed full policy independence despite closer coordination with the government.
• Future BI interest rate hikes remain data-dependent, supported by $146.3 billion in foreign exchange reserves.
• Bilateral local currency trade deals surged to $49.42 billion, significantly reducing US dollar reliance.

USD/IDR depreciates after registering modest gains in the previous day, trading around 17,950 during Asian hours on Tuesday. The Indonesian Rupiah (IDR) gained support against the US Dollar (USD) following comments from Bank Indonesia’s (BI) new chief, Destry Damayanti.

In an interview on Monday, Damayanti emphasized that while the central bank is working in closer synergy with the government to ensure fiscal and monetary policy alignment, BI retains full autonomy over its policy interest rates. She clarified that although government officials attend parts of BI's monthly reviews and she meets with President Prabowo Subianto, the government has no say in monetary decisions, which remain strictly data-dependent, per Reuters.

Addressing market concerns over political interference that have made the rupiah Asia's worst-performing currency, Damayanti reaffirmed BI's absolute authority to adjust interest rates or implement other incentives when needed.

To stabilize the Rupiah after it hit an all-time low in June, BI raised interest rates by a total of 100 basis points across May and June. Rates have since remained unchanged, but BI introduced an innovative discount on foreign exchange hedging instruments—a move that adds up to 40 basis points to foreign investor returns without requiring further rate hikes. Damayanti stated that future tightening remains possible depending on economic data, and noted that Indonesia’s foreign exchange reserves stood at an adequate $146.3 billion at the end of September to maintain currency stability.

In a broader effort to reduce reliance on the US Dollar, BI has actively expanded Local Currency Settlement (LCS) agreements with key trade partners, including China, Japan, South Korea, and Singapore, with a similar deal with India currently in the pipeline. These bilateral agreements have driven exponential growth in local currency transactions, which surged to $49.42 billion by August of this year, nearly double the $25.74 billion recorded in all of last year. Chinese yuan transactions accounted for roughly three-quarters of this total, signaling a significant shift toward regional currency integration.

The USD/IDR pair depreciated as the US Dollar (USD) pulled back from an 18-month high. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, pulled back to around 102.40 after briefly touching a peak of 102.61. Investors are now looking ahead to crucial economic data, including Wednesday’s US Consumer Price Index (CPI) and Thursday’s Producer Price Index (PPI), to gain clearer insight into the Federal Reserve's rate path. According to the CME FedWatch Tool, pricing suggests roughly an 80% likelihood that the Fed will leave interest rates unchanged at its upcoming meeting, alongside an 88% chance of a rate hike in December.