Forex News
- USD/CAD softens to near 1.3770 in Wednesday’s early European session.
- Renewed Middle East tensions boost crude oil prices, supporting the commodity-linked Loonie.
- Traders await the key US inflation data this week for more clues about the Fed's interest rate trajectory.
The USD/CAD pair declines to around 1.3770 during the early European session on Wednesday. Reports of a US strike on Iranian tankers and attacks on Saudi infrastructure boost crude oil prices and lift the commodity-linked Canadian Dollar (CAD). Traders will closely monitor the key US inflation reports later this week for more clues about the US interest rate path.
CNBC reported on Tuesday that the US struck multiple Iranian oil tankers that officials say are linked to Iran’s Islamic Revolutionary Guard Corps (IRGC). The strikes were a response to attempted missile attacks on a US warship.
Additionally, Iran-backed Houthi militants said they again targeted Saudi Arabia’s 400,000 barrel-a-day Jazan refinery and facilities that serve the domestic market.
It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the Loonie.
The US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data will be the highlights later this week. These reports could offer some hints about the US interest rate path. Hotter-than-expected inflation readings could reinforce a Federal Reserve (Fed) interest rate hike at the September policy meeting, helping limit the Greenback’s losses.
Geopolitical tensions keep oil and gold risk premium supporting the Canadian Dollar
Strategists at National Bank of Canada note that renewed geopolitical strains are reinforcing the recent support for the Canadian Dollar. They point out that “with tensions flaring up again in the Strait of Hormuz in August, market-implied odds of a return to normal by year-end have fallen below 30%, from more than 50% previously.” According to the bank, this shift “keeps a geopolitical risk premium embedded in both oil and gold, providing support for the Canadian dollar.”
Technical Analysis: USD/CAD maintains a negative outlook under the 100-day SMA
In the daily chart, USD/CAD extends a corrective pullback and holding below a dense band of moving-average and Bollinger resistance. The pair remains capped beneath the 20-day Bollinger middle band and the 100-day simple moving average, with the upper Bollinger band reinforcing the topside ceiling. The Relative Strength Index (14) around 38 stays in bearish territory, hinting that downside pressure persists despite the recent stabilization off intraday lows.
On the downside, initial support aligns with the lower Bollinger band near 1.3750; a clear break below this floor would expose deeper weakness toward prior swing areas not shown by the current indicators. On the topside, a recovery above the 20-day Bollinger midpoint at 1.3842 would be the first sign of easing pressure, while the 100-day SMA at 1.3925 and the upper band at 1.3935 form a tight resistance cluster that must be reclaimed to shift the near-term bias away from bearish.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- DXY drifts lower for the third straight day as the JPY extends a hawkish BoJ-inspired rally.
- Rising Fed rate hike bets and geopolitical risks could support the safe-haven Greenback.
- Traders now await US inflation figures for Fed rate cuts and a fresh directional impetus.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, attracts sellers for the third straight day and drops to a nearly three-week low, around the 98.70-98.65 area, during the early European session on Wednesday. The index now eyes the August swing low as traders keenly await the release of US inflation figures.
The US Producer Price Index (PPI) and the Consumer Price Index (CPI) will be published on Thursday and Friday, respectively. The crucial data will be looked at for more cues about the US Federal Reserve's (Fed) policy path, which, in turn, will determine the next leg of a directional move for the DXY. In the meantime, USD bulls remain on the back foot amid the hawkish Bank of Japan (BoJ)-inspired rally in the Japanese Yen (JPY).
Meanwhile, traders ramped up bets for a September Fed rate hike following the release of the better-than-expected US Nonfarm Payrolls (NFP) report. Furthermore, inflation risks stemming from persistently higher energy prices underpin prospects for Fed tightening. In fact, crude oil prices rose to a three-month high as escalating US-Iran tensions and clashes in the Strait of Hormuz continue to fuel a prolonged disruption to supplies.
US CPI in focus as Fed hike odds hinge on inflation print
Economists at DBS argue that “this week’s CPI data will prove pivotal for the FOMC meeting next week,” with markets still lacking a clear policy signal despite resilient activity. They note that “firm labour market data kept Fed hike bets elevated (60% chance of a hike in September) but was not sufficient to decisively nudge investors firmly in one direction.” Instead, DBS stresses that “the focus now lies squarely on inflation,” pointing out that “the past few inflation prints have been very benign as increases in the transport component proved surprisingly muted.”
In the latest developments surrounding the Middle East crisis, the US attacked Iranian oil tankers in the Gulf of Oman and near Kharg Island. Iran responded by firing over 30 missiles at US forces stationed at the Al Azraq base in Jordan. This, in turn, keeps the geopolitical risk premium in play and could offer some support to the safe-haven USD, warranting some caution for bearish traders before positioning for any further losses.
DXY daily chart
Technical Analysis
The DXY holds a bearish near-term bias following the recent failure near the 100-day Exponential Moving Average (EMA) at 99.67 and the 61.8% Fibonacci retracement at 99.21. The latter is the first notable cap on the upside, with the EMA and the 50% retracement at 99.70 reinforcing a dense resistance band just overhead. On the downside, initial support emerges at the 78.6% retracement at 98.51, ahead of the recent cycle low region around 97.62, where a break would likely extend the prevailing bearish phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.41% | -0.32% | -4.28% | -0.90% | -1.21% | 0.54% | -0.42% | |
| EUR | 0.41% | 0.08% | -3.91% | -0.54% | -0.82% | 0.99% | 0.00% | |
| GBP | 0.32% | -0.08% | -3.99% | -0.59% | -0.88% | 0.89% | -0.08% | |
| JPY | 4.28% | 3.91% | 3.99% | 3.53% | 3.27% | 5.32% | 4.03% | |
| CAD | 0.90% | 0.54% | 0.59% | -3.53% | -0.28% | 1.73% | 0.49% | |
| AUD | 1.21% | 0.82% | 0.88% | -3.27% | 0.28% | 1.71% | 0.79% | |
| NZD | -0.54% | -0.99% | -0.89% | -5.32% | -1.73% | -1.71% | -0.98% | |
| CHF | 0.42% | -0.01% | 0.08% | -4.03% | -0.49% | -0.79% | 0.98% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
ING analysts Warren Patterson and Ewa Manthey say Oil prices are grinding higher, with ICE Brent close to $100/bbl as Middle East tensions escalate and OPEC output falls. They highlight US strikes on Iranian tankers, Iranian missile responses, and disruptions to Saudi supply, arguing that the market will likely keep a sizeable risk premium while flows through the Strait of Hormuz recover only gradually.
Brent nears $100 with OPEC cuts
"The oil market continues to move higher this morning as Middle East tension escalates. ICE Brent is close to breaking above $100/bbl. Given developments in the region, it seems only a matter of time before the market tests this key level."
"The US carried out additional strikes on Iranian oil tankers near Kharg Island, hitting 5 vessels in response to Iran attempting to strike a US Navy warship. This resulted in Iran firing ballistic missiles towards Jordan, while also warning vessels in the Persian Gulf could be targeted. Recent developments only reinforce the view that we’re still some way from a restart in talks."
"In the meantime, the market is likely to continue to price in a sizeable risk premium."
"Preliminary production numbers for OPEC are starting to come in. A Bloomberg survey estimates output in August fell 900k b/d month-on-month to 19.91m b/d. The decline was driven by Saudi Arabia, where output is estimated to have fallen by 1.12m b/d amid the escalation seen through August."
"China’s still‑sizeable crude inventories mean lower import levels are broadly sustainable — a dynamic the market may actually need, particularly if Middle East escalation triggers renewed supply disruptions."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
MUFG’s Michael Wan highlights ongoing strength in the Japanese Yen, with recent USD/JPY volatility seeing the pair drop toward 152.88 before stabilizing near 153.26. Mixed Japanese data, including stronger labour cash earnings and softer GDP, have not altered expectations for a 25 bps BoJ rate hike in September, keeping attention on BoJ communication and Yen-supportive policy signals.
Yen strength, BoJ path and risks
"The focus in our part of the world is still on the ongoing strength in the Japanese Yen, while also keeping an eye out on other global factors such as spikes in oil, the US Treasury’s buyback plans, coupled with importantly US CPI later this week."
"We saw some volatility over the past day in USD/JPY, with the pair falling to as low as 152.88, and settling around 153.26 at the time of writing."
"Overall, these numbers do not seem to have changed the pricing of BOJ rate hike for September, with markets essentially fully priced for a 25bps hike, and with the focus of the markets likely to be on the BOJ’s communication for the longer-term rate path."
"Meanwhile, US Treasury Secretary Scott Bessent challenged traders and the market to counter his efforts to strengthen the Yen, essentially saying he has more information than others on what Japanese policymakers and the BoJ will do."
"Looking back at history, sharp moves lower in USD/JPY of 10% or more are not uncommon, but whether this happens due more to domestic factors, or external drivers such as risk-off episodes and with that a sharp pick-up in vol also matter for other markets."
"So far, the moves are more consistent with domestic drivers in Japan as the dominant factor, and as such EM in general and also carry trades have remained very resilient, but this is still a risk to watch for moving forward."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/JPY drops to the mid-207.00s, drawing closer to YTD lows at 207.10.
- The Yen rallies as BoJ tightening hopes offset concerns about higher Oil prices.
- Dovish comments by BoE Bailey capped Pound's recovery attempts on Tuesday.
The British Pound (GBP) extends losses on Wednesday as the Japanese Yen (JPY) rallies across the board, with investors bracing for a quarter-point rate hike by the Bank of Japan (BoJ) at next week’s monetary policy meeting. The GBP/JPY’s rebound from year-to-date lows at 207.10 was capped at the 209.00 area on Tuesday, and the pair retreated again on Wednesday, hitting session lows near 207.50 at the London session opening.
Higher Crude prices, a traditional headwind for Yen rallies, have failed to dent JPY's recovery. Brent oil is ticking down on Wednesday but remains near its highest levels in the last two months at $97.00, as the conflict in the Middle East widens, threatening to escalate into a full regional war.
BoJ shift could force rethink of entrenched carry trade assumptions
Strategists at Rabobank observe September's BoJ policy meeting as pivotal for global funding dynamics. If the BoJ "supports the view that it may be embarking on a more rapid pace of rate rises in the coming months," then "the market will have to re-examine some long-standing assumptions regarding the carry trade," say Rabobank analysts in a note.
In their view, any clear signal of a faster BoJ hiking trajectory would challenge the durability of using the Yen as a low-cost funding currency and could prompt investors to reassess established positioning built up over years of ultra-loose Japanese policy.
In the UK, the Bank of England (BoE) Governor, Andrew Bailey, acknowledged on Tuesday that inflation risks "are on the upside," but he also vowed to dispel the idea that rate hikes are inevitable, and that monetary policy decisions will depend on economic and geopolitical developments. The Pound dropped against most peers following Bailey's comments.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Commerzbank’s Antje Praefcke notes that EUR/USD is likely to stay relatively quiet until later in the week, when the European Central Bank (ECB) meeting and US inflation data could trigger stronger moves. She highlights that market expectations for further ECB rate hikes may need to be revised lower, potentially weighing on the Euro, while stronger US inflation could give the Dollar a modest lift.
ECB and US data to drive moves
"Things won’t really get exciting for EUR/USD until the end of the week - specifically, tomorrow with the ECB meeting and on Friday with the US inflation figures for August."
"At the ECB meeting, the key question will be whether the Governing Council signals further rate hikes after tomorrow’s expected rate increase, as the market still sees a chance of another rate hike by year-end and even beyond, whereas our experts are more skeptical and expect the rate-hiking cycle to end."
"If the market has to revise its expectations downward, the euro is likely to weaken."
"The market is hoping that the US inflation data for August will provide clues as to whether the Fed will indeed take action next week and raise the federal funds rate, as it is not yet entirely certain about this. So if the data comes in stronger than expected, adjustments to interest rate expectations could give the dollar a small upward boost."
"As dull as today is likely to be on the foreign exchange market (in contrast to the energy market following the latest escalation in the Middle East) ahead of tomorrow’s ECB meeting and Friday’s US data, EUR/USD could become quite volatile toward the end of the week."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD rises to near 0.7230 as the Australian Dollar trades broadly firm.
- RBA’s Hauser stresses bringing inflation down.
- Investors await the US CPI data for August scheduled for Friday.
The Australian Dollar (AUD) is higher against its major currency peers, except the Japanese Yen (JPY), on Wednesday, trading 0.16% up at around 0.7230 against the US Dollar (USD) during the European session.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.11% | -0.54% | -0.08% | -0.23% | -0.12% | -0.17% | |
| EUR | 0.11% | 0.01% | -0.46% | 0.02% | -0.12% | -0.00% | -0.05% | |
| GBP | 0.11% | -0.01% | -0.46% | 0.03% | -0.11% | -0.00% | -0.05% | |
| JPY | 0.54% | 0.46% | 0.46% | 0.47% | 0.32% | 0.40% | 0.39% | |
| CAD | 0.08% | -0.02% | -0.03% | -0.47% | -0.15% | -0.04% | -0.08% | |
| AUD | 0.23% | 0.12% | 0.11% | -0.32% | 0.15% | 0.11% | 0.08% | |
| NZD | 0.12% | 0.00% | 0.00% | -0.40% | 0.04% | -0.11% | -0.03% | |
| CHF | 0.17% | 0.05% | 0.05% | -0.39% | 0.08% | -0.08% | 0.03% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
The antipodean gains were on the back of remarks from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser in an interview by the ABC on Tuesday, where she stressed bringing inflation down.
“People want inflation down. People are furious about inflation. I understand why,” Hauser said and added, “It’s unfair. It hits people on low incomes. It damages price signals. It makes the job of companies difficult. What they want us to do is our job and bring inflation down,” Financial Review reported.
Comments from RBA’s Hauser stressing the need to bring inflation down have increased central bank’s interest rate hike expectations.
Rabobank notes that the RBA has “just saw Hauser give a hawkish speech, which has markets thinking of hikes this month and in November.” The bank adds that this prospective tightening path is “very much what the US Treasury would like to see – plus a lot more action on non-housing parts of the economy,” underscoring how a more restrictive RBA stance is increasingly aligned with US policy preferences.
Meanwhile, the US Dollar is under pressure, with investors awaiting the United States (US) Consumer Price Index (CPI) data on Friday.
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.7229, extending its advance above the 20-day exponential moving average (EMA) at 0.7158 and keeping a clear short-term bullish bias. The pair holds comfortably above this dynamic support, suggesting dips may be shallow for now, while the Relative Strength Index (RSI) at 69.5 hovers just below overbought territory, hinting that upside momentum is strong but increasingly stretched.
On the downside, the 20-day EMA at 0.7158 is the first notable support, and a daily close below it would hint at a deeper corrective phase. On the upside, the pair is expected to extend its advance to near the four-year high at 0.7277.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
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 Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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