Forex News
Scotiabank strategists Shaun Osborne and Eric Theoret highlight Canadian Dollar (CAD) strength as USD/CAD trades just below their fair value estimate around 1.3895, supported by tighter US–Canada 2-year spreads and firmer commodity FX. Large speculative short CAD positioning may be squeezed further. Technically, they see aligned bearish momentum, with a sustained break below 1.39 opening scope for a move toward 1.3817 and potentially the 1.35–1.37 range.
Spread compression and downside targets
"The CAD is catching a decent bid this morning, reflecting generally firmer commodity FX on the session."
"The risk backdrop is not especially compelling—stocks are flat to mildly positive while energy and metals prices are slightly firmer—but the NZD, NOK, SEK and CAD are all sitting at or near the top of the intraday performance table for G10 FX."
"Spread compression is a clear motivation for the CAD, with the 25bps narrowing in the US/Canada 2Y bond differential since the late July peak helping underpin CAD gains."
"Spot is sitting fractionally below our latest fair value estimate of 1.3895 this morning but that may not stop the CAD from the squeezing out a little more strength in the short run. Recall that the latest CFTC data reflected a still very significant net speculative short CAD position which might be feeling the squeeze from these CAD gains. "
"Bearish—USD/CAD’s failure to take advantage of the mid-week rebound and the quick return to pressure key retracement support (50% of the May/June move up in the USD) at 1.3899 sustains the bearish outlook for the USD."
"Trend momentum signals are aligning across short-, medium-, and (now) long-term oscillators now, supporting the prospect for a significant move lower to develop. A sustained break under the 1.39 area targets a drop to 1.3817 (61.8% retracement) and potentially a return to the 1.35/1.37 range. Resistance remains 1.3965/70 and (firm) 1.4000/25."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold rebounds from a fresh weekly low as the softer US Dollar lends support.
- Cooling inflation and weaker payrolls prompt traders to scale back Fed rate hike bets.
- XAU/USD struggles to clear the 100-day SMA, with the $4,386-$4,455 region forming a key resistance zone.
Gold (XAU/USD) rebounds on Friday after opening the day in negative territory and falling to a fresh weekly low of $4,311. At the time of writing, the precious metal trades around $4,381, supported by a softer US Dollar (USD) and fading expectations of an imminent Federal Reserve (Fed) interest rate hike. The metal, however, remains below the two-month high of $4,449 touched on Thursday.
Fresh US data released on Friday added to signs that economic momentum is losing steam. Retail Sales fell 0.6% MoM in July, missing expectations for a 0.1% increase and reversing the 0.2% gain recorded in June.
The weak spending figures follow this week's Consumer Price Index (CPI) and Producer Price Index (PPI) data, which showed that inflationary pressures are gradually easing.
However, preliminary data from the University of Michigan (UoM) showed that 1-year consumer inflation expectations edged up to 4.3% in August from 4.2%, while the 5-year measure held steady at 3.3%.
The softer run of US economic data pushes front-end Treasury yields sharply lower and weighs on the US Dollar as traders trim bets on a September Fed rate hike. The US Dollar Index (DXY) trades around 99.50, down 0.45% on the day.
According to the CME FedWatch Tool, traders are now pricing in around a 71% chance that the US central bank will keep borrowing costs unchanged next month.
This creates a supportive near-term backdrop for the non-yielding metal, but the inflation outlook is far from settled. Inflation is still running above the Fed’s 2% target, while the impact of the energy shock has not fully faded as uncertainty over the reopening of the Strait of Hormuz drags on.
According to TD Securities, "CTA net long positioning in gold is becoming more entrenched alongside renewed discretionary appetite." The bank adds that "a Fed likely to remain on hold amid weaker economic data, and despite upside in energy prices, is likely to see the yellow metal well-supported in the higher range."
Technical analysis: XAU/USD struggles to clear 100-day SMA
XAU/USD remains near recent highs but is struggling to secure a decisive break above the 100-day Simple Moving Average (SMA) at $4,386. The metal holds well above the 20-day SMA, which forms the Bollinger middle band at $4,173.
The Relative Strength Index (RSI) on the daily chart is around 62 and the Moving Average Convergence Divergence (MACD) indicator in positive territory suggests that bullish momentum is still firm enough to challenge the overhead barrier.
On the topside, the area between the 100-day SMA at $4,386 and the Bollinger upper band at $4,455 forms a strong resistance zone. A sustained break above this area could bring fresh bullish momentum.
On the downside, immediate support is seen at the Bollinger middle band around $4,173, ahead of the psychologically important $4,000 mark. A deeper slide would expose the lower Bollinger band near $3,891.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
ING’s Lynn Song expects China’s July data to show continued sluggish momentum, with only a modest rebound and weak Retail Sales at 1.7% year-on-year. Fixed Asset Investment is forecast to contract further, while Industrial Production remains relatively firm. Following the Politburo’s fiscal push, investment may recover in coming months, but Loan Prime Rates are expected to stay unchanged.
Sluggish data, steady loan prime rates
"China releases its key domestic activity data for July on Monday."
"We expect sluggish momentum to persist after the weak PMI readings earlier this month."
"We expect a modest rebound, but retail sales should remain weak at 1.7% year-on-year."
"Fixed asset investment is likely to slow further to -6.3% YoY ytd, while industrial production continues to outperform, moderating to 5.0% YoY."
"Following July’s Politburo meeting, which emphasised accelerating fiscal spending and the deployment of bond proceeds, investment activity could begin to recover in the coming months."
"On Thursday, China will announce its decision on loan prime rates."
"No change is expected, with the 1-year and 5-year rates remaining unchanged at 3.0% and 3.5%, respectively."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD rallies to a two-month high as softer US data weighs on the US Dollar.
- Markets price a 70% chance that the Fed will leave rates unchanged next month.
- Markets expect the ECB to deliver its second rate hike of the year in September.
EUR/USD rallies on Friday, erasing all the losses recorded earlier this week as broad-based weakness in the US Dollar (USD) lifts the Euro (EUR). At the time of writing, the pair trades around 1.1580 near its highest level since June 17.
The US Dollar weakens as the latest batch of US economic data tempers expectations of a near-term Federal Reserve (Fed) interest-rate hike. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 99.50, down 0.47% on the day.
US Retail Sales fell by 0.6% in July, missing expectations for a 0.1% increase and reversing the previous month’s 0.2% gain. Preliminary data from the University of Michigan (UoM) showed that the Consumer Sentiment Index fell to 51.0 in August from 55.2, while the Consumer Expectations Index dropped to 50.6 from 55.4.
The data follows this week’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which showed that price pressures eased for a second consecutive month, suggesting that the inflationary impact of the recent energy shock is fading.
According to the CME FedWatch Tool, markets now see around a 70% chance that the Fed will keep interest rates unchanged in September, a sharp shift from earlier expectations of an increase.
However, inflation risks remain tilted to the upside as uncertainty over the reopening of the Strait of Hormuz keeps Oil prices elevated. The Michigan survey’s one-year inflation expectation edged up to 4.3% from 4.2%, while the five-year measure held steady at 3.3%.
On the Euro side, markets widely expect the European Central Bank (ECB) to raise interest rates in September, which would mark its second hike this year.
Economists at Commerzbank expect the ECB’s September move to bring the deposit rate to 2.5%, noting that at this level “a level would be reached that Governing Council members view as the upper limit of the neutral interest rate—one that neither stimulates nor slows the economy and leads to medium-term inflation.”
Looking further ahead, Commerzbank argues that “toward the end of 2027, the ECB is likely to lower interest rates again,” as “inflation should gradually decline over the course of the coming year and come close to reaching the inflation target.”
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Commerzbank’s Carsten Fritsch notes Gold has rallied to its highest level since early June as markets scale back expectations for further Fed rate hikes. He highlights reduced implied tightening in Fed Funds futures, a lower probability of a September hike, and renewed ETF inflows, arguing that Gold retains upside potential even after a brief pullback.
Lower Fed expectations support bullion
"The gold price rose at times yesterday to USD 4,450 per troy ounce, its highest level since early June. Since the start of the month, the gold price has risen by up to 10%. This has been driven by a steady reversal of the excessive expectations regarding Fed interest rate hikes."
"At the end of July, Fed Funds futures were still pricing in a year-end Fed rate of 4%. The figure currently stands at 3.86%. This means that 14 basis points of previously expected rate hikes have been priced out of the market."
"As we expect the Fed not to raise interest rates, the gold price therefore still has further upside potential. The fact that this will not happen in a straight line is illustrated by the price fall since yesterday to USD 4,320 per troy ounce. Another positive factor for the price of gold is the renewed buying interest from ETF investors."
"According to Bloomberg data, these investors have been buying gold over the past six trading days. This is the longest period of uninterrupted ETF inflows since April. The inflows total almost 21 tons."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Nordea analysts Ole Håkon Eek-Nielsen and Jan von Gerich argue that the Federal Reserve is likely to deliver three more rate hikes over coming quarters to bring inflation back to target. They highlight falling unemployment, constrained labour supply and rising core PCE and service price inflation as key drivers. The authors stress that wage pressures and higher goods prices could justify additional policy firming.
Fed path tied to labour and inflation
"But at the end of the day, the interest rate decision will come down to unemployment and inflation."
"Perhaps even more tellingly from the June-meeting minutes; in the case of a stable labour market and still-elevated inflation, “almost all of these participants indicated that some policy firming would likely be warranted”."
"If government employment turns around, job growth could easily become more than sufficient to push unemployment lower, especially given the weak growth in the labour supply."
"All in all, we see reason to expect the stable — if not strengthening — labour market that FOMC members had in mind in their scenario."
"We could even be heading for higher wage pressure and stronger service price inflation."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities’ Julie Ioffe expects UK headline CPI to rise to 2.9% year-on-year in July, largely due to the Ofgem energy price cap adjustment. Services inflation is forecast to ease to 3.4%, while core goods rise to 1.0%, keeping core CPI at 2.6%. The bank highlights upside risks from food, airfares and core goods that could challenge the recent disinflation trend.
Ofgem-driven rise and upside risks
"We expect headline inflation to move up to 2.9% y/y in July (mkt: 2.9%, BoE: 2.8%, prior: 2.6%), explained largely by the Ofgem price cap adjustment in the energy component. Stripping out energy, we expect services inflation to temporarily dip to 3.4% y/y (mkt: 3.3%; BoE: 3.4%; prior: 3.6%), but core goods inflation picking up to 1.0% y/y (BoE: 1.0%) should largely offset this effect, leaving the core inflation number steady at 2.6% y/y (mkt: 2.5%)."
"The inflation outlook over the coming months may prove less benign than recent data (energy aside) suggests. Food prices are vulnerable to a pickup as fertiliser costs and adverse weather conditions feed through to production costs. Airfare inflation could also re-accelerate with airlines already suggesting that they will seek to recover higher fuel expenses through post-summer ticket prices."
"Meanwhile, core goods inflation is showing signs of turning higher, with electronics price increases and renewed supply chain pressures reducing the scope for discounting. These risk factors suggest downside progress in some inflation components could become increasingly difficult to sustain in late 2026."
"Beyond that, concerns shift to whether wages respond to the slightly higher path for headline inflation. There, we see less of an obvious impact given the loosening of the labour market and reduced bargaining power of the worker. Should these remain at bay, the BoE is more likely to remain on a prolonged hold at its already-restrictive level of Bank Rate, rather than elect to hike further."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The Canadian Dollar is among Friday's top performers, pushing USD/CAD to a fresh two-month low near 1.3860.
- US Retail Sales fell 0.6% in July against forecasts for a small gain, weighing broadly on the Greenback.
- DXY falls to a weekly low after the downbeat data release.
The Canadian Dollar (CAD) is among the best performers on Friday, trading near a fresh two-month low against the US Dollar (USD) near the 1.3860s mark. The move coincides with a weak US Retail Sales report that pulled the Greenback lower across the board, but it preceded that data release.
Retail Sales fell 0.6% in July, well short of the 0.1% gain markets expected and down from a 0.2% rise the month before. The Control Group, which feeds into GDP, fell 0.4% compared with a 0.4% revised gain the month prior. The numbers point to a US consumer pulling back, and they land as one of the year's softer readings.
The US Dollar lost ground after the release with the Dollar Index (DXY) sliding close to the 99.50s. This weak print adds to the case for the Federal Reserve (Fed) to hold interest rates unchanged rather than hiking, and traders leaned that way straight after the data. With the Greenback on the back foot, USD/CAD had little to hold it up.
Short-term technical analysis:
On the 4-hour chart, USD/CAD trades at 1.3870, retaining a bearish near-term bias as it holds below both the 20-period Simple Moving Average (SMA) at 1.3925 and the 100-period SMA at 1.4019. The pair has slipped into oversold territory, with the Relative Strength Index (RSI) around 25, which hints at stretched downside conditions but does not yet challenge the prevailing downside structure defined by the clustered overhead levels.
On the topside, immediate resistance is seen at 1.3884, followed closely by 1.3894, forming a nearby barrier ahead of the horizontal cap at 1.3922 and the 20-period SMA at 1.3925. Higher up, the 100-period SMA at 1.4019 reinforces a broader resistance band that would need to be reclaimed to ease bearish pressure. On the downside, initial support is located at 1.3864; a sustained break below this floor would expose further weakness in the trend despite the oversold reading.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
