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MUFG notes that USD/JPY remains well below pre-intervention levels. Japanese retail traders entered the episode with a record short position in the pair and likely covered those positions during the intervention-led decline, partially offsetting official yen purchases.

Japanese retail flows and Yen intervention

"USD/JPY continues to stabilise at levels significantly lower than where we were prior to the intervention last Thursday and Friday. We remain around 6 big figures below the level when intervention probably began on Thursday, having rebounded two big figures from the intra-day low on Monday. If intervention did not take place on Monday (we can’t be sure but BoJ data suggests possibly not) the impact of this intervention has been more powerful than the intervention that took place in April/May this year or indeed any of the four previous episodes in 2022 and 2024."

"The OTC FX margin retail positioning data for June ahead of the intervention revealed a swing from yen shorts against all currencies reported combined to yen long. The yen long position was the largest since October 2023. The primary currency pair explaining this shift on a combined basis was in fact USD/JPY."

"The USD/JPY short position increased in June to a record total. The implied short USD/JPY position was USD 17.65bn which as can be seen historically is an extreme position and by some distance a record. The position is larger than the probable total size of the intervention undertaken last week."

"We can also assume that following intervention Japanese retail traders were quick to liquidate and were likely active buyers given the historic short position that was in place. So Japan’s retail sector was likely a key buyer of USD/JPY on the decline during intervention, curtailing some of the impact of the MoF’s record yen buying intervention."

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

• GBP/JPY steadies as the Japanese Yen gives back part of its intervention-driven gains.
• Japan’s planned tax cuts and household handouts raise doubts about durable support for the Yen.
• The pair remains supported by the 200-day SMA despite a bearish near-term technical bias.

GBP/JPY trades in a narrow range on Thursday, with the British Pound (GBP) modestly outperforming the Japanese Yen (JPY). The Yen stays on the back foot for a third consecutive day, reversing part of the intervention-driven rally that briefly sent GBP/JPY below 210.00 at the start of the week.

At the time of writing, GBP/JPY changes hands near 212.53, finding support at the 200-day Simple Moving Average (SMA).

Yen support questioned as Japan turns to tax cuts and handouts

Rabobank’s Bas van Geffen notes that only days after the Japanese Ministry of Finance and the US Treasury intervened in FX markets to prop up the Yen, “the cabinet approved a plan to cut the sales tax on food for two years.” He adds that, “on top of that, the government is planning handouts to lower-income households.”

Rabobank highlights that “the tax cut costs JPY 4 trillion (around 0.6% of GDP) in lost revenues annually, and the government did not specify how it would fund this shortfall.” The prime minister has tried to reassure investors that the measures are temporary, while Finance Minister Katayama has “pledged to refrain from financing this tax cut through Japan’s deficit.”

Crucially for JPY, Rabobank argues that “these tax cuts do not lead to investments that could structurally improve Japan’s economic growth – which could have lent JPY some of the necessary support.” They add that, “paradoxically, the cost of effective growth-enhancing policies would probably eclipse the budgetary implications of Takaichi’s food tax cuts,” leaving the Yen without the kind of durable, growth-based backing that markets are looking for.

Technical analysis

On the daily chart, GBP/JPY holds below the 100-day, 50-day and 21-day Simple Moving Averages (SMAs), which keeps the near-term bias bearish and the pair structurally capped.

The pair is still anchored above the longer-term 200-day SMA at 211.85, but the slide away from recent highs, together with a subdued Relative Strength Index (RSI) around 36 and a negative Moving Average Convergence Divergence (MACD) line below zero, indicate that downside momentum remains dominant.

On the topside, immediate resistance is seen at the 100-day SMA at 214.47, followed by the 50-day SMA at 215.44 and then the 21-day SMA near 216.47, which together define a dense cap on recovery rallies.

On the downside, initial support emerges at the 200-day SMA at 211.85, ahead of the horizontal floor around 210.00. A daily close below these levels would open the way for a deeper corrective phase, while holding above them would keep GBP/JPY in a broader consolidation despite the current bearish bias.

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

OCBC’s Christopher Wong and Sim Moh Siong highlight that the Reserve Bank of India's (RBI) decision to hold the repo rate at 5.25% while lowering inflation forecasts and nudging growth higher, alongside strong capital inflows, has put India’s balance of payments on track for a healthy surplus. Lower Oil and rising reserves provide a buffer for Indian Rupee (INR), though elevated US yields and volatile Oil may cap further USD/INR downside.

RBI stance and technical levels

"The RBI kept the repo rate unchanged at 5.25% and retained its neutral stance, while lowering its inflation forecasts and nudging its growth projection higher."

"The RBI also shared that its recent measures had attracted nearly USD41bn of capital inflows (USD36.7bn from FCNR deposits, USD2.57bn through overseas foreign currency borrowings and USD1.5bn raised through swap facilities from External Commercial Borrowings). This puts India’s balance of payments on track for a healthy surplus and can support banking system liquidity."

"Governor Sanjay also reiterated that the exchange rate should remain market-determined, while the RBI would curb excessive volatility and prevent moves that become detached from fundamentals."

"Together with lower oil and the sharp rise in reserves, this gives the INR a firmer near-term buffer, although choppy oil prices amid fluid US-Iran geopolitical developments and still-elevated US Treasury yields on worries of Fed tightening may still restrain gains in INR."

"USD/INR last closed at 95.13. Bearish momentum on daily chart intact though RSI is near oversold conditions. Support at 95 levels, 94.70/74 levels (100 DMA, 76.4% fibo retracement of Jun low to Jul high). Resistance at 95.40 (50DMA, 50% fibo), 95.70 (38.2% fibo)."

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

BNY’s Geoff Yu reports that S&P has affirmed Australia’s AAA rating with a stable outlook, citing strong institutions and modest public debt. The agency expects deficits to remain contained and net debt to stabilize over the forecast horizon. However, slower real Gross Domestic Product (GDP) growth, persistent above-target inflation and weak productivity remain potential headwinds for the Australian Dollar (AUD).

Fiscal strength versus softer growth

"S&P has affirmed Australia’s AAA rating with stable outlook, citing strong institutions, a wealthy and diversified economy, credible monetary policy and still-modest public debt."

"The agency expects the general government deficit to remain around 1.6% of GDP over the next two years, while net debt stabilizes near 28% of GDP by fiscal 2029."

"The rating is supported by resilient policy frameworks, but the report also flags slower growth, with real GDP expected to ease to 1.5% in fiscal 2027 as higher rates weigh on demand."

"Inflation remains above target, productivity is weak and per capita GDP has declined in ten of the past 15 quarters."

"Downside risks include weaker fiscal outcomes and softer per capita growth."

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

Commerzbank’s Tatha Ghose expects the Czech National Bank (CNB) to keep its policy rate at 3.75%, framing June’s hike as fine-tuning rather than a new cycle. With headline and core inflation still within target, CNB can wait but must avoid sounding dovish. Ghose sees EUR/CZK moving sideways around 24.20 over the coming month, while Iran-related risks could still force further tightening.

CNB stance and EUR/CZK range

"The Czech National Bank (CNB) is unanimously expected to leave its policy rate unchanged at 3.75% later today. This should not come as a surprise because board members have spent recent weeks stressing that the June 25bp rate hike was ‘fine-tuning’, not the start of a new tightening cycle. Governor Ales Michl continues to sound hawkish on domestic inflation risks, meanwhile other members such as Jan Kubicek and Jakub Seidler have also argued that there is no need to move quickly and that one more hike by year-end could be sufficient."

"The latest CPI data do not force an immediate move either. July headline inflation picked up to 1.7%y/y from 1.5%y/y, exactly in line with expectations and still within target. Fuel prices were the main driver, rising by an estimated 3.6%m/m, which is not surprising against the global backdrop."

"This can change in coming months, but CNB can afford to wait today, although it cannot afford to sound dovish. Lending growth remains robust, nominal wage growth is likely still strong, and house prices remain the board’s focus. If the Iran situation were not to calm down, pro-inflationary risks would rise visibly and further rate hikes would become very likely."

"But against a slightly constructive news backdrop at present, we see EUR/CZK trading sideways in the 24.20 range over the coming month."

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

• The Euro trades slightly lower at around 1.1545 against the US Dollar.
• Investors keenly await the US NFP data for July.
• Weak US ADP Employment Change data has set a negative tone for the US NFP data.

The Euro (EUR) trades marginally lower at around 1.1545 against the US Dollar (USD) during the European trading session on Friday. The major currency pair edges down as the US Dollar ticks up, while investors shift their focus to the United States (US) Nonfarm Payrolls (NFP) data release on Friday.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher to near 99.73. However, it is still close to its two-day low of 99.63.

Investors will closely track the US NFP data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

The US NFP report is expected to show that the economy created 80K fresh jobs in July, higher than 57K in June. The Unemployment Rate is seen remaining steady at 4.2%. Average Hourly Earnings, a key measure of wage growth, are expected to have grown steadily at 0.3% and 3.5%, monthly and yearly, respectively.

Though estimates from the FXStreet economic calendar indicate stronger NFP figures than previous ones, weaker-than-expected ADP Employment Change data for July has established a cautious backdrop for official employment.

On Wednesday, ADP reported that the private sector hired 44K new workers, lower than estimates of 70K and the prior release of 98K.

Meanwhile, the Euro trades broadly calm as investors seek fresh cues regarding the European Central Bank’s (ECB) monetary policy outlook.

EUR/USD technical analysis

In the daily chart, EUR/USD trades at 1.1540. The pair is holding above the 20-day exponential moving average (EMA) at 1.1470, but wobbles near the downtrend resistance line at around 1.1537, which together suggests a bullish near-term bias. The Relative Strength Index (14) at 61.37 stays in positive territory but below overbought conditions, hinting that upside momentum remains constructive without yet looking stretched.

On the downside, initial support is seen at the 20-day EMA at 1.1470. Looking up, the pair might attempt to extend the advance towards the May 29 high at 1.1686 if it manages to stabilize above the downward-sloping trendline at around 1.1537.

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

• GBP/USD consolidates above 1.3450, with recent price action showing a lack of clear bias.
• The Pound drew some support from upbeat UK services activity data on Wednesday.
• In the US, dwindling hopes of a Fed rate hike in September are keeping the USD on the defensive.

The British Pound (GBP) holds marginal losses against the US Dollar (USD) on Thursday, trading at 1.3460 at the time of writing, down from Wednesday's highs at 1.3486. This leaves the GBP/USD pair hovering within a 100-pip range, with bulls capped below 1.3500 while a weak US Dollar keeps downside attempts supported above the 1.3400 area.

The Sterling drew some support on Wednesday from an upward revision of July’s S&P Global Services PMI figures and another downbeat employment reading in the US, which cast doubts about Friday’s Nonfarm Payrolls report and cooled hopes of Federal Reserve (Fed) rate hikes further.

Strategists at Scotiabank describe the Pound’s tone as “neutral/bullish,” highlighting a “solid rise in Cable last week and bullish leaning (but still weak) trend oscillators suggesting some upside potential for the Pound, however.” In their view, “gains through the low 1.35 zone should allow spot to retest the recent peak around 1.3555/60,” while “support is 1.3390/00.”

US Dollar struggles amid fading Fed tightening bets

The US Dollar, on the other side, remains on its back foot amid lower US Treasury yields. Recent macroeconomic releases have not been particularly supportive of further monetary tightening and have prompted traders to dial down bets of a September rate hike to 54% from 67% earlier this week.

Beyond that, Analysts at MUFG suggest that doubts over Fed independence are putting additional pressure on the USD, and cite a Wall Street Journal report highlighting "repeated" meetings between President Donald Trump and Fed Chair Kevin Warsh since he took over at the Fed. WSJ points to “bursts” of calls “several times in a stretch of days,” a pattern that “will only reinforce the impression of greater political influence undermining Fed independence.”

MUFG also warns that “concerns that emanate from Washington over financial market developments will hardly instill confidence in global investors in holding US assets and could herald another spell of increased US [D]ollar hedging like January this year, which would be bad news for the [D]ollar.”

ING’s Warren Patterson and Ewa Manthey highlight a sharp Gold rally of more than 4%, with prices moving closer to $4,300/oz as optimism grows that a US-Iran agreement and lower energy prices will ease inflation. A softer Dollar, reduced Federal Reserve (Fed) tightening expectations and ongoing Chinese investment demand are seen as key supports for bullion in the current environment.

Bullion buoyed by energy and Fed hopes

"Gold rallied more than 4% on Wednesday. The strength has continued this morning, with the market moving closer to $4,300/oz amid growing optimism that a US-Iran agreement will ease inflation. A softer US dollar and rising expectations for lower US interest rates provided support for bullion."

"The market is increasingly focusing on the disinflationary implications of lower energy prices. Expectations for Federal Reserve tightening have eased, improving the outlook for non-yielding assets such as gold. Continued investment demand from China has also helped underpin the market."

"Gold is likely to take its cues from developments in US-Iran negotiations and shifts in Fed expectations. While geopolitical risk premiums may continue to fade, lower oil prices, a weaker dollar and potentially a more dovish-than-expected rates environment should remain supportive for bullion."

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

Brown Brothers Harriman’s Elias Haddad notes that the US Dollar (USD) has recovered part of its recent losses as concerns over the Federal Reserve’s (Fed) credibility ease, but sees limited scope for a sustained rebound. Balanced US labor market conditions, wage growth consistent with the Fed’s 2% inflation target, and strong productivity growth support the disinflation outlook, while upcoming Q2 non-farm productivity data could help shape near-term rate expectations.

Fed credibility gap and data focus

"USD recouped some of yesterday’s losses against most major currencies. SEK bucked the broad USD move as Sweden’s mixed July CPI kept a Riksbank hike by year-end firmly in play. Brent crude is holding just below $80 per barrel after a provisional Iran-Oman agreement raised the prospect of more energy flows resuming through the Strait of Hormuz."

"The drag to USD from the Fed’s credibility gap has eased. US 5y5y inflation swaps have retraced much of the rise triggered by Fed Chair Kevin Warsh’s failure to turn tough inflation rhetoric into credible policy. Comments from some Fed officials may have helped steady the ship."

"Nonetheless, USD relief rallies are likely to remain shallow. USD is trading in line with interest rate differentials, and we see limited scope for a more hawkish repricing in Fed funds rate expectations. The US labor market is in balance, wage growth is consistent with the Fed’s 2% inflation target, and Fed policy is restrictive, assuming a neutral rate of 3.00%."

"Given that services accounts more a much larger share of the US economy (around 80%), weaker services hiring argues for Fed patience, but the renewed pick-up in services price pressure suggests upside inflation risks have yet to fully recede. That raises the cost of waiting to raise rates, with the Fed increasingly at risk of falling behind the curve. Fed funds futures continue to imply about 60% probability of a September rate hike."

"More encouraging for the Fed is the disinflationary force from strong US productivity growth. The Employment Cost Index (ECI) wages & salaries - the Fed’s favorite wage data – was 3.2% y/y in Q2, consistent with the Fed’s 2% target given average annual labor productivity growth of 2.1%. Q2 non-farm productivity report is due today (1:30pm London, 8:30am New York)."

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

• The Indian Rupee drops against the US Dollar amid some recovery in oil prices.
• Iran and Oman are close to finalizing a proposed agreement to control navigation through Hormuz.
• Investors await the US NFP data for July, which will be released on Friday.

The Indian Rupee (INR) trades lower against the US Dollar (USD) on Thursday. The USD/INR pair rises to near 95.22 after rebounding from the fresh monthly low of 94.83 posted the previous day.

As of writing, the MCX Crude Oil contract expiring on August 19 trades 1.2% to near Rs. 7,200, but is close to its three-week low of Rs. 7,078 posted on Wednesday.

The Indian currency is expected to resume its upside journey on bearish oil price outlook amid firm expectations that navigation through the Strait of Hormuz, a critical chokepoint for almost one-fifth of global energy supply, will normalize.

Brent holds below $80 as Iran-Oman shipping deal hints at future energy flows

Analysts at Rabobank note that Brent crude prices "held steady just below the $80-level" after Iran announced it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz. While they stress that "that’s not the Iran-US deal that Trump had been eyeing," Rabobank argues the accord nonetheless "raises the prospect of more energy flows resuming through the critical waterway," highlighting the potential significance of the arrangement for future regional oil shipments.

Iran and Oman close to finalizing Hormuz framework

Late Wednesday, Iran’s Foreign Ministry spokesperson, Esmaeil Baghaei, said that Iran and Oman are close to finalizing a proposed framework to manage navigation through the Strait of Hormuz. A senior Gulf official said there is a 50% chance that Iran and Oman will reach an agreement on the Strait of Hormuz by Friday.

Iran’s Baghaei has made it clear that the passage reopening depends on Washington fulfilling its commitment to end the naval blockade on Iranian sea ports.

Meanwhile, continuous attacks from Yemen’s Houthis group on Saudi Arabian tankers attempting to pass the Red Sea route are expected to keep energy supply concerns on the horizon.

Houthi military spokesperson Yahya Sarea said in a post on X that Yemen’s forces were able to target the Saudi oil tanker "Daisy" in the Gulf of Aden, adding that the targeting comes within the framework of imposing a maritime navigation ban on the Saudi enemy in accordance with the equation of "siege for siege."

RBI leaves policy rates steady

On Wednesday, the Reserve Bank of India (RBI) left its key Repo Rate unchanged at 5.25%, as expected, for the fourth time in a row. The RBI lowered its inflation forecast for the current year to 5%, but warned that core price pressures could accelerate to 5.9% in the third quarter, citing supply-side pressures from food and fuel.

Meanwhile, investors seek fresh cues regarding how long the RBI’s status quo will continue.

India MPC holds steady for longer as Standard Chartered sees high bar for rate hikes

Economists at Standard Chartered note that India’s Monetary Policy Committee (MPC) “kept the repo rate unchanged at 5.25% in a unanimous decision and maintained its neutral stance, broadly in line with our and consensus expectations.” However, they add that “we were surprised by the relatively dovish tone of the MPC’s statement compared with the April and June policy meetings.”

According to the bank, “while the MPC remains vigilant on future risks, particularly El Niño and crude oil prices, it is inclined to wait for greater clarity on the inflation trajectory and composition before considering rate action.” In their view, “for now, the bar for rate hikes appears high unless inflation materially exceeds expectations,” a conclusion they describe as “consistent with our baseline view of no change in the repo rate in FY27.”

US NFP hogs limelight

This week, the major trigger for global markets will be the US Nonfarm Payrolls (NFP) data for July, which will be released on Friday.

According to TD Securities, July payrolls are expected to show only a mild improvement, with the bank looking for "July NFP picked up modestly to 70k after surprising to the downside with 57k in June." The economists judge that "risks to our payrolls forecast appear balanced," suggesting no strong bias toward either a significant upside or downside surprise. On the unemployment side, TD Securities anticipates that "the UE rate likely went sideways at 4.2% after declining in June," pointing to a broadly steady labor market backdrop.

Technical Analysis: USD/INR trades inside Wednesday's trading range

USD/INR trades at around 95.22, keeping a bearish near-term tone as it remains below the 20-day exponential moving average (EMA) at 95.60. The pair has retreated from recent highs, and price holding under this short-term EMA suggests upside attempts are being capped despite the Relative Strength Index (RSI) hovering in a broadly neutral zone around 42, hinting at modest but not extreme selling pressure.

On the topside, immediate resistance is located at the 20-day EMA at 95.60, which is the key barrier that bulls would need to reclaim to ease the current downside bias and open the way for further recovery toward 96.00. Looking down, key support levels are the August 5 low at 94.83 and the June low at 94.15.

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