Forex News
Societe Generale’s Kenneth Broux highlights AUD/USD trading near its 200-day moving average around 0.7024, a historically important support. The pair sits at the lower boundary of a descending channel with support at 0.6975 and resistance at 0.7090. With an RBA rate hike expected and seasonally weaker October for the Australian Dollar, a deeper retracement is possible.
Australian Dollar clings to 200dma
"AUD/USD has undergone a deeper pullback after carving out a lower peak at 0.7235 compared with the high of 0.7275 recorded in May."
"AUD/USD is now at the lower boundary of a descending channel at 0.7000/0.6975."
"Failure to hold above 0.6975 could deepen the pullback towards 0.6920 and the June lows near 0.6860."
"AUD/USD finds itself at an important inflection point, clinging to the 200dma at 0.7024."
"The currency has a record of successfully defending the support line but with seasonality turning bearish in October, a deeper retracement could be in the offing."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold remains under pressure as rising Fed rate hike expectations and elevated US Treasury yields weigh on the non-yielding metal.
- US-Iran tensions support safe-haven demand for the US Dollar, adding to the downside pressure on Gold.
- XAU/USD maintains a bearish technical bias below key moving averages, although oversold momentum indicators could limit the immediate downside.
Gold (XAU/USD) remains under heavy selling pressure at the start of the week, weighed down by rising expectations of further monetary tightening from the Federal Reserve (Fed). Higher Oil prices are fueling inflation concerns and keeping US Treasury yields elevated, reducing the appeal of the non-yielding precious metal.
Meanwhile, persistent tensions between the United States (US) and Iran are supporting safe-haven demand for the US Dollar (USD), adding further pressure on Gold. Markets are now pricing in around a 68% chance of another Fed rate hike in October, while upcoming comments from Fed officials and key US economic data are likely to remain important drivers for XAU/USD.
In the daily chart above, XAU/USD trades at $4,142.32, keeping a bearish near-term bias as it holds below the 100-day simple moving average (SMA) at $4,298.70 and the 200-day SMA at $4,540.39. The pair also remains under the descending trend-line reference near $4,305.00, suggesting that recent rebounds are still capped within a broader corrective phase. The Relative Strength Index (14) at 35.69 hovers just above oversold territory, hinting that downside momentum is softening but not yet reversed.
On the topside, immediate resistance is clustered around the 100-day SMA at $4,298.70 and the trend-line at $4,305.00, with a stronger barrier at the 200-day SMA near $4,540.39 before the horizontal resistance at $4,697.00. On the downside, the next notable support stands at the horizontal level of $3,941.00, where buyers would be expected to emerge to defend the broader uptrend, while a sustained break below the current area would likely extend the corrective slide toward that floor.
In the four-hour chart above, XAU/USD is extending its slide below the key simple moving averages and preserving a bearish near-term bias. The 100-period simple moving average (SMA) at $4,336.51 and the 200-period SMA at $4,410.85 both sit well above spot, suggesting the metal remains in a corrective phase under substantial overhead supply. The Relative Strength Index (14) has slipped to around 23, hinting at oversold conditions, but this momentum backdrop alone is not yet sufficient to overcome the prevailing downside pressure while price holds beneath the clustered moving-average barriers.
On the topside, initial resistance appears at the horizontal level near $4,250.00, ahead of the 100-period SMA at $4,336.51 and the 200-period SMA at $4,410.85, with a higher resistance marker seen at $4,697.00. On the downside, immediate support is aligned at $4,120.00, followed by a more robust structural floor around $4,000.00, where a stronger reaction could emerge if the current oversold readings start to attract dip-buying interest.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- USD/JPY could target the immediate barrier at the nine-day EMA of 157.12.
- The 14-day Relative Strength Index of 47 indicates neutral, consolidating momentum.
- The primary support lies at the symmetrical triangle bottom around 155.20.
USD/JPY extends its losses for the second consecutive day, trading around 156.90 during the European hours on Monday. The currency pair is moving forward within a symmetrical triangle, which indicates a period of market consolidation, where neither buyers nor sellers are in control.
The USD/JPY pair is maintaining a bearish near-term bias as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The alignment of short- and medium-term EMAs above price suggests rallies remain capped for now, while the 14-day Relative Strength Index (RSI) near 47 hints at consolidative momentum rather than oversold conditions. The recent easing in the FXS Fed Sentiment Index toward 147.72 reinforces a softer tone for the dollar against the Yen.
The USD/JPY pair could rebound toward the immediate barrier at the nine-day EMA of 157.12, followed by the 50-day EMA of 158.03. Further resistance lies at the upper boundary of the symmetrical triangle around 159.10. A successful break above the triangle would cause a bullish revival and support the pair to explore the region around a nearly 40-year high of 163.99, which was reached on July 23.
On the downside, the USD/JPY pair may navigate the region around the lower boundary of the symmetrical triangle around 155.20. A sustained break below the triangle would expose the 11-month low of 152.10.
Hammack flags inflation mindset risk as Fed keeps policy firmly restrictive
Fed’s Hammack delivers a moderately hawkish message, with a FXS Speechtracker score of 7.2/10, slightly softer relative to the historical average of 7.5/10. The emphasis that “the biggest risk with inflation is the formation of an inflationary mindset,” alongside concerns about demand-driven pressures and capital expenditures keeping price pressures elevated, underscores a strong focus on preventing a de-anchoring of inflation expectations. Hammack’s insistence that policy must remain at a restrictive stance to lower inflation, even as growth and the job market hold up well, signals limited appetite for near-term easing in the United States Dollar policy outlook.
The FXS Fed Sentiment Index slipped by 0.34 points to 147.72, indicating a modest pullback in hawkish intensity following the speech. Despite the decline, the index remains well above the neutral 100 mark, confirming that Fed communication is still firmly in hawkish territory even as the tone cools slightly relative to the recent baseline tracked by the FXS Speechtracker.
BoJ tightening risks resurface as Rabobank highlights chance of historic back-to-back hike
Analysts at Rabobank note that while the BoJ is widely expected to wait until the end of October for its next policy move, market attention has sharpened following comments from former BoJ executive director Momma. He now sees “another 25bps hike --the first back-to-back hike since late-Cold War 1989-90 and the first monthly back-to-back since peak-Cold War March 1980 (when rates hit 9.0%)-- as a ‘real possibility’, albeit at just 20-30%.” Rabobank underscores that even a low-probability scenario of such a move would mark a historically significant shift in Japan’s rate trajectory.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.14% | -0.31% | -0.20% | 0.10% | 0.14% | -0.04% | 0.17% | |
| EUR | -0.14% | -0.29% | -0.30% | -0.02% | 0.03% | -0.04% | 0.04% | |
| GBP | 0.31% | 0.29% | -0.04% | 0.25% | 0.30% | 0.25% | 0.44% | |
| JPY | 0.20% | 0.30% | 0.04% | 0.28% | 0.32% | 0.26% | 0.48% | |
| CAD | -0.10% | 0.02% | -0.25% | -0.28% | 0.02% | -0.03% | 0.17% | |
| AUD | -0.14% | -0.03% | -0.30% | -0.32% | -0.02% | -0.08% | 0.13% | |
| NZD | 0.04% | 0.04% | -0.25% | -0.26% | 0.03% | 0.08% | 0.22% | |
| CHF | -0.17% | -0.04% | -0.44% | -0.48% | -0.17% | -0.13% | -0.22% |
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).
Rabobank’s RaboResearch Global Economics & Markets team flags potential historic tightening by the Bank of Japan (BOJ). Former BOJ director Momma sees another 25 basis point hike as a real possibility, which would be the first back-to-back move in decades. The report notes the initial hike left the Japanese Yen hanging and questions whether a second increase could pressure the Yen carry trade.
BOJ tightening could test carry trade
"The BOJ waits until the end of October, but its ex-executive director Momma today claims another 25bps hike --the first back-to-back hike since late-Cold War 1989-90and the first monthly back-to-back since peak-Cold war March 1980 (when rates hit 9.0%)-- as a “real possibility”, albeit at just 20-30%."
"Again, it’s history possibly being made around us in markets."
"The first 25bps hike left JPY hanging: would a second hang the Yen Carry Trade out to dry?"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Japan's top currency diplomat Atsushi Mimura said on that markets should take at face value the "very clear" message Tokyo and Washington delivered last week on the Yen, signalling his resolve to act against excessive falls in the currency, Reuters report.
When asked about market views funding constraints may limit Japan's ability to conduct yen-buying intervention, Japan’s Mimura said, “I have absolutely no such concern.”
Market reaction
No major reaction is seen in the Japanese Yen (JPY) following remarks from Japan's Mimura. During the day, the Yen has reflected strength with the USD/JPY pair trading 0.18% down to near 156.90.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- Gold kicks off the new week on a downbeat note amid rising October Fed rate hike bets.
- Oil-driven inflation risks keep US bond yields elevated, further undermining the commodity.
- The US-Iran standoff acts as a tailwind for the safe-haven USD, favouring XAU/USD bears.
Gold (XAU/USD) maintains its heavily offered tone through the first half of the European session on Monday, trading just below $4,150, or the lowest since August 5, amid a bearish fundamental backdrop. The US Federal Reserve's (Fed) hawkish stance earlier this month, along with oil-driven inflation fears, keeps US bond yields pinned near multi-year highs. This, in turn, is seen as a key factor driving flows away from the non-yielding bullion.
The Fed raised its benchmark interest rate in mid-September 2026—its first rate increase in three years—and signaled that another hike is likely before the end of this year. Moreover, Fed speakers are leaning toward potential further policy tightening amid inflation risks stemming from rising energy prices. According to CME Group's FedWatch Tool, traders are currently pricing in around a 68% chance that the US central bank will raise borrowing costs in October.
USD supported as Fed hawks keep tightening risks in focus
Strategists at OCBC note that “resilient US economic data, elevated energy prices and persistent inflation concerns continue to drive Treasury yields higher,” a backdrop that is “underpinning the USD while weighing on rate-sensitive and carry-oriented assets.” They add that “recent Fed rhetoric has also remained hawkish,” pointing to comments from New York Fed President Williams and Cleveland Fed President Hammack, who “warned that inflation risks remain skewed to the upside,” while Philadelphia Fed President Paulson cautioned that “modest further tightening may still be warranted if inflation fails to moderate.” In their view, this is reflected in current market pricing, which “implies around a 70% probability of another 25bp rate hike in October, highlighting the market's growing conviction that the Fed's inflation fight is not yet over.”
Adding to this, geopolitical uncertainties could act as a tailwind for the US Dollar (USD), keeping XAU/USD bulls on the back foot. In the latest developments surrounding the Middle East crisis, US President Donald Trump on Saturday rejected an Iranian proposal to reopen the Strait of Hormuz immediately on meeting their terms and end fighting. Trump added on Sunday that additional military strikes on Iran were possible before the midterm elections in the US.
Furthermore, Houthis continued their attacks on Saudi Arabia, while Yemen’s government forces intensified attacks against the Iran-backed group, conducting multiple air and ground operations. This adds to worries about a broader regional conflict, prompting traders to again price in the geopolitical risk premium. This, in turn, supports oil prices and underpins the safe-haven Greenback, which backs the case for a further depreciating move for the Gold price.
Traders now look forward to speeches from FOMC members, which, along with the incoming geopolitical headlines, will drive the USD and the XAU/USD pair. Traders this week will further confront the release of the US Personal Consumption Expenditures (PCE) Price Index and the final Q2 GDP print on Wednesday, ahead of the popularly known US Nonfarm Payrolls (NFP) report on Friday, which will influence Fed hike expectations and provide a fresh impetus.
XAU/USD daily chart
Technical Analysis
The XAU/USD pair confirms a fresh breakdown below the 61.8% Fibonacci retracement level of the June-August upswing following the recent repeated failures near the 100-period Exponential Moving Average (EMA). Moreover, the Moving Average Convergence Divergence (MACD) indicator remains negative with a declining profile, while the Relative Strength Index (RSI) has slipped toward 38, hinting at persistent selling pressure.
Meanwhile, any further slide could find some support at the 78.6% retracement at $4,099, ahead of a more substantial structural floor at the prior swing low near $3,939, where sellers may begin to hesitate. On the topside, initial resistance is seen at the 61.8% Fibo. retracement at $4,226, followed by the 50.0% retracement at $4,314 and the 100-period EMA at $4,352, with higher hurdles at $4,403 and $4,513.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- Euro is sharply down to near 178.40 against the Japanese Yen amid fears of another US-Japan intervention.
- Japan's Mimura said that markets should take at face value the "very clear" message Tokyo and Washington.
- Investors keenly await the inflation data from both Japan and the Eurozone.
The Japanese Yen (JPY) trades higher against its major currency peers in the European trade on Monday, with the EUR/JPY pair declining 0.4% to near 178.40. The Asia-Pacific currency continues to draw support from verbal warnings of Japan’s intervention to support the currency.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | -0.33% | -0.34% | 0.12% | 0.09% | -0.09% | 0.22% | |
| EUR | -0.12% | -0.29% | -0.43% | 0.00% | 0.02% | -0.06% | 0.11% | |
| GBP | 0.33% | 0.29% | -0.12% | 0.29% | 0.30% | 0.23% | 0.52% | |
| JPY | 0.34% | 0.43% | 0.12% | 0.43% | 0.41% | 0.35% | 0.67% | |
| CAD | -0.12% | -0.00% | -0.29% | -0.43% | -0.04% | -0.10% | 0.21% | |
| AUD | -0.09% | -0.02% | -0.30% | -0.41% | 0.04% | -0.07% | 0.24% | |
| NZD | 0.09% | 0.06% | -0.23% | -0.35% | 0.10% | 0.07% | 0.33% | |
| CHF | -0.22% | -0.11% | -0.52% | -0.67% | -0.21% | -0.24% | -0.33% |
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).
Earlier in the day, Japan's top currency diplomat Atsushi Mimura said on that markets should take at face value the "very clear" message Tokyo and Washington delivered last week on the Yen, signalling his resolve to act against excessive falls in the currency, Reuters report.
Last week, Japanese Finance Minister (FM) Satsuki Katayama said that United States (US) President Donald Trump expressed concern over the Yen's weakness during his meeting with Prime Minister (PM) Sanae Takaichi in New York in regard to US-Japan joint intervention that took place on July 31. Katayama added, "The principles since the previous joint intervention remain alive."
On the economic data front, investors keenly await the Tokyo Consumer Price Index (CPI) data for September, which will be published on Friday. The CPI report is expected to show that inflation ex. Fresh Food accelerated to 2.4% Year-on-Year (YoY) from the previous reading of 1.8%.
Meanwhile, the Euro (EUR) underperforms at the start of the week, with investors shifting their focus on the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for September releasing on Wednesday and Friday, respectively. In both regions, price pressures are expected to have grown at a faster pace.
Economic Indicator
Tokyo CPI ex Fresh Food (YoY)
The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region excluding fresh food, whose prices often fluctuate depending on the weather. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.
Read more.Next release: Thu Oct 01, 2026 23:30
Frequency: Monthly
Consensus: 2.4%
Previous: 1.8%
Source: Statistics Bureau of Japan
- GBP/JPY struggles to capitalize on its modest intraday uptick amid a pickup in JPY demand.
- Rising BoJ rate hike bets and intervention fears boost the JPY, exerting pressure on spot prices.
- A weak USD and the hawkish BoE underpin GBP, warranting caution aggressive bearish traders.
The GBP/JPY cross attracts fresh sellers following an intraday uptick to the 209.00 neighborhood and drops to a two-week low during the first half of the European session on Monday. Spot prices currently trade near the 207.80-207.70 region, down around 0.30% for the day, and seem vulnerable amid a pickup in demand for the Japanese Yen (JPY).
Minutes from the Bank of Japan's (BoJ) July monetary policy meeting, released earlier today, that policymakers debated the need for faster interest rate hikes amid growing concern over mounting inflation risks. This, in turn, lifted expectations that the BoJ will hike again as soon as October or December. Apart from this, looming intervention fears boost the JPY, which, in turn, is seen as a key factor exerting downward pressure on the GBP/JPY cross.
Japan's Finance Minister Satsuki Katayama affirmed that US President Donald Trump conveyed his concerns about the JPY's depreciation to Prime Minister Sanae Takaichi on the sidelines of the United Nations General Assembly last week. This fueled speculations of potential further joint currency interventions, favoring JPY bulls. However, a modest US Dollar (USD) weakness benefits the British Pound (GBP), which should limit losses for the GBP/JPY cross.
Meanwhile, Bank of England (BoE) Governor Andrew Bailey said on Friday that persistently high energy prices would make it harder for the central bank to leave interest rates on hold. This reinforces the recent shift in tone towards higher borrowing costs, which, in turn, could lend some support to the GBP and the GBP/JPY cross, warranting some caution before placing fresh bearish bets and positioning for an extension of the decline from the August swing high.
Bailey flags AI upside but warns energy risks could still lift Pound rates
FXS Speechtracker shows Bailey’s speech at 8.2, notably above the historic 6.3 average, signalling a more hawkish tilt than usual. The warning that prolonged high energy prices would make it harder to maintain a no-hike stance points to upside risks for the Bank Rate and supports a firmer Pound bias.
Comments on currently subdued pass-through of energy prices suggest some near-term caution, but the emphasis is on the risk of future tightening if pressures persist. The view that AI could be a positive shock in an era of negative supply shocks adds a medium-term constructive angle, yet the explicit consideration of rising mortgage rates underscores that any Pound-supportive hawkishness will be balanced by financial stability concerns.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | -0.32% | -0.33% | 0.10% | 0.06% | -0.11% | 0.21% | |
| EUR | -0.12% | -0.28% | -0.45% | -0.01% | -0.04% | -0.10% | 0.10% | |
| GBP | 0.32% | 0.28% | -0.15% | 0.27% | 0.22% | 0.19% | 0.49% | |
| JPY | 0.33% | 0.45% | 0.15% | 0.41% | 0.37% | 0.33% | 0.66% | |
| CAD | -0.10% | 0.00% | -0.27% | -0.41% | -0.06% | -0.11% | 0.21% | |
| AUD | -0.06% | 0.04% | -0.22% | -0.37% | 0.06% | -0.06% | 0.27% | |
| NZD | 0.11% | 0.10% | -0.19% | -0.33% | 0.11% | 0.06% | 0.34% | |
| CHF | -0.21% | -0.10% | -0.49% | -0.66% | -0.21% | -0.27% | -0.34% |
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).
Societe Generale analysts note Gold has failed to sustain gains above its 200-day moving average, reinforcing downward momentum. A short-term pullback is underway, with key resistance at the recent pivot high near $4,315. Supports are projected around $4,095 and in the June/July trough zone at $3,960/$3,940, which is described as crucial for the metal.
Precious metal faces key supports
"Gold has struggled to establish itself above the 200-DMA during its recent rebound attempt, highlighting the persistence of downward momentum."
"If Gold fails to reclaim the recent pivot high near $4,315, the decline may extend."
"The next supports are located around the projection of $4,095 and the June/July troughs at $3,960/$3,940, which is a crucial zone."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- US Dollar Index rose as Fed officials warn against elevated prices, pushing the October rate hike probability above 70%.
- Markets focus on upcoming employment reports and preferred inflation metrics to gauge policy direction.
- US rejects Iran’s Strait proposal, maintaining Middle East tensions alongside potential pre-election military actions.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, inched lower after opening at a bullish gap, remaining in the positive territory and trading around 101.10 during European hours on Monday.
The Greenback gains strength from hawkish comments made by Federal Reserve (Fed) officials. Financial market participants are focusing on upcoming economic data, including key US employment reports and the Fed's preferred inflation measures.
Cleveland Fed President Beth Hammack cautioned against allowing the public to normalize elevated prices, while Philadelphia Fed President Anna Paulson suggested further rate increases might be warranted. Reflecting these shifts, the CME FedWatch Tool now indicates a greater than 70% probability of a rate hike at the October Federal Reserve meeting, up from 57.6% last week and 17.7% a month ago.
US President Donald Trump rejected Iran’s proposal to reopen the Strait of Hormuz, maintaining that Tehran overplayed its hand, though negotiations are slated to resume this week. Additionally, President Trump signaled confidence that the conflict would conclude soon while keeping open the possibility of further military actions before the midterm elections.
Technical Analysis:
In the daily chart, Dollar Index Spot trades at 101.10. The near-term bias is bullish as price holds above both the nine- and 50-period Exponential Moving Averages (EMAs), suggesting a constructive uptrend structure. The 14-day Relative Strength Index (RSI) at 68.14 hovers just below overbought territory, hinting at strong but stretched upside momentum, while the elevated FXS Fed Sentiment Index at 147.72 reinforces the supportive backdrop for the dollar.
On the downside, immediate support is seen at the nine-period EMA at 100.66, with deeper demand expected at the 50-period EMA near 99.97 if a corrective pullback unfolds. As long as Dollar Index Spot remains above these moving average supports, the bulls are likely to defend the recent gains, keeping the focus on further upside extension once any overbought pressures are worked off.
Hammack flags inflation mindset risk as Fed keeps policy bias firmly hawkish
Fed’s Hammack delivered a moderately hawkish message with a FXS Speechtracker score of 7.2/10, slightly softer relative to the historical average of 7.5/10 but still clearly focused on inflation risks. The emphasis on the “biggest risk” being the formation of an inflationary mindset, alongside comments that growth is holding up and the job market is stable, underscores concern that persistent above-target inflation and ongoing demand and capital expenditure pressures could entrench expectations. Hammack’s insistence that policy must remain at a restrictive stance to ensure further disinflation reinforces a bias toward keeping rates elevated for longer rather than signaling imminent easing.
The FXS Fed Sentiment Index slipped by 0.34 points to 147.72, indicating a modest pullback in perceived hawkishness following the speech. However, with the index still well above the neutral 100 mark, the Fed’s overall stance remains firmly in hawkish territory despite the slight softening in tone captured by the FXS Speechtracker.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Forex Market News
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