Forex News
- NZD/USD kicks off the new week on a subdued note amid a combination of diverging forces.
- The disappointing domestic data caps the NZD, while a weak USD lends support to the pair.
- The bullish technical setup suggests that the path of least resistance remains to the upside.
The NZD/USD pair enters a bullish consolidation phase at the start of a new week and trades around the 0.5975 region during the Asian session, just below its highest level since June, touched on Friday. New Zealand's downbeat Retail Sales data acts as a headwind for the New Zealand Dollar (NZD), though weaker sentiment surrounding the US Dollar (USD) continues to support the currency pair.
From a technical perspective, Friday's breakout above the 0.5900 mark was seen as a fresh trigger for NZD/USD bulls. Adding to this, spot prices hold well above the 200-period Simple Moving Average (SMA) at 0.5845, which underpins the recent advance and keeps a bullish near-term tone. Moreover, the Moving Average Convergence Divergence (MACD) indicator remains slightly positive. However, the Relative Strength Index (RSI) near 69 suggests strong but increasingly stretched upside momentum that could slow the pace of gains rather than immediately reverse them.
That said, a deeper pullback below 0.5900 is expected to attract buying interest to preserve the broader constructive structure and find decent support at the 200-period SMA, near 0.5845. A convincing break below the latter would be needed to negate the near-term constructive outlook and pave the way for some meaningful corrective decline. As long as NZD/USD stays above this floor, the bias would favor further consolidation with a mild topside skew, although the overbought RSI reading hints that fresh bullish extension may require a period of digestion or a shallow correction first.
Hence, the 0.6000 psychological mark might continue to act as an immediate hurdle. Bulls might await sustained strength and acceptance above the said handle before positioning for an extension of the recent strong move higher from the year-to-date, around the 0.5625 region, touched in June.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
NZD/USD 4-hour chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- USD/CHF falls as the US Dollar declines following unexpected fiscal policy moves to cap rising Treasury bond yields.
- US Treasury Secretary Scott Bessent signaled buybacks over $4 billion to show elevated yields mismatch true economic fundamentals.
- SNB policy rate remains at 0% with plans to intervene against excessive Franc appreciation.
USD/CHF depreciates after two days of gains, trading around 0.8000 during the Asian hours on Monday. The currency pair depreciates as the US Dollar (USD) struggles under pressure from newly announced fiscal measures in Washington.
Financial markets were caught off guard when the US Treasury Department pledged to at least double its buybacks of longer-dated government debt to curb rising bond yields. Treasury Secretary Scott Bessent indicated that these buybacks could exceed $4 billion, representing a strategic push to signal that elevated yields fail to accurately reflect underlying economic fundamentals.
Low volatility seen underpinning renewed interest in carry trades
Analysts at ING argue that the US authorities’ greater focus on supporting the Treasury market should be interpreted as a “risk-positive story,” with the bank expecting that “volatility will stay low, and interest will remain firm in the carry trade.” This backdrop, in their view, continues to favour strategies that lean on stable funding conditions and subdued market swings.
However, the Greenback's downside may be constrained by rising safe-haven demand driven by escalating geopolitical tensions in the Middle East. Friction intensified after Iranian Foreign Minister Abbas Araghchi dismissed upcoming US sanctions as an act of desperation, while Iranian Security Chief Mohsen Rezaei warned of "earthquake-like" retaliation if US President Donald Trump takes further action, reinforcing a risk-off mood across global markets.
Meanwhile, the Swiss National Bank (SNB) kept its policy rate at 0% and is expected to maintain this stance through 2027, reaffirming its readiness to intervene in foreign exchange markets to curb excessive franc appreciation. While most economists anticipate the first-rate hike in early 2028, markets are already pricing in a move as early as March 2027, a shift that could make the Franc increasingly attractive as a funding currency for carry trades.
Technical Analysis:
In the daily chart, USD/CHF trades at 0.8000, keeping a bearish near-term tone as price holds below both the short- and medium-term Exponential Moving Averages (EMAs). The alignment of the EMAs above spot suggests the pair remains capped, while the 14-day Relative Strength Index (RSI) around 40 hints at lingering downside pressure without yet reaching oversold conditions.
On the topside, initial resistance is seen at the nine-EMA near 0.8049, followed by the 50-EMA at 0.8060, which together form a tight overhead supply zone that bulls would need to reclaim to ease the current bearish bias. With no nearby structural supports in the data, any further slide from current levels would leave the pair seeking new demand zones below 0.8000, keeping risks skewed to the downside while it trades under these moving averages.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
- EUR/JPY posts modest losses around 185.60 in Monday’s early European session.
- The cross is well-supported above the key 100-day SMA, with bullish RSI momentum.
- The initial support level is seen at 185.15; The first upside barrier to watch is 187.35.
The EUR/JPY cross trades with mild losses near 185.60 during the early European session on Monday. The Japanese Yen (JPY) edges higher against the Euro (EUR) after data showed core Consumer Price Index (CPI) inflation accelerated in July, bolstering the case for a rate hike by the Bank of Japan (BoJ).
Japan’s headline National Consumer Price Index (CPI) inflation climbed to 1.9% YoY in July from 1.6% in June, hitting its highest level so far this year, the Statistics Bureau revealed on Friday. Meanwhile, the core CPI, which includes energy-related items but excludes volatile fresh food prices, rose 1.8% YoY in July, versus 1.6% prior. This report bolsters the case for another interest rate hike by the Japanese central bank.
As of late Friday, markets have priced in a roughly 82% chance of a September rate increase, more than tripling from about 23% immediately before the BoJ’s July policy meeting, according to Bloomberg.
Traders await the speech by BoJ Deputy Governor Ryozo Himino on Thursday as it might offer some hint about the pace of rate hikes. Any hawkish remarks from BoJ policymakers could underpin the JPY and act as a headwind for the cross.
"Himino may signal the BOJ is moving closer to another interest rate hike," said Commonwealth Bank of Australia strategist Joe Capurso.
BoJ normalization path seen intact as SocGen sticks to September hike call
Analysts at Societe Generale argue that the latest inflation data in Japan “should not push the BoJ to move faster than currently priced,” but instead “clearly support the current normalization path and our call for a September hike.” In their note, titled “On Our Minds: BoJ call change: quarterly rate hikes until next June,” they reiterate that the figures back the Bank of Japan’s existing trajectory rather than forcing a more aggressive tightening pace.
Technical Analysis: EUR/JPY maintains a constructive bias above the 100-day SMA
In the daily chart, EUR/JPY maintains a bullish near-term bias as price holds above the 100-day simple moving average (SMA) and the Bollinger middle band. The pair is advancing toward the Bollinger upper band, while the Relative Strength Index (RSI) at 58.18 remains in positive territory without yet signaling overbought conditions, which suggests upward momentum is still constructive.
On the downside, initial support is located at the 100-day SMA around 185.15, with a deeper cushion offered by the Bollinger middle band near 184.00 and the lower band at 180.60. On the topside, the Bollinger upper band at 187.35 stands as the next significant resistance, and a sustained break above this barrier would open the path for a continuation of the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
(This story was corrected on August 24 at 05:10 GMT to say, in the first bullet point, that EUR/JPY posts modest losses around 185.60 in Monday’s early European session, not Asian session.)
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 prices rose in India on Monday, according to data compiled by FXStreet.
The price for Gold stood at 14,267.46 Indian Rupees (INR) per gram, up compared with the INR 14,160.54 it cost on Friday.
The price for Gold increased to INR 166,411.60 per tola from INR 165,165.70 per tola on friday.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 14,267.46 |
10 Grams | 142,673.50 |
Tola | 166,411.60 |
Troy Ounce | 443,769.20 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
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.
(An automation tool was used in creating this post.)
- Silver kicks off the new week on a subdued note and oscillates in a range below a two-month high.
- Last week’s breakout through key technical barriers favors bulls and backs the case for further gains.
- A move beyond the 50% Fibo. near the $72.00 mark is needed to reaffirm the constructive outlook.
Silver (XAG/USD) seesaws between tepid gains and minor losses around the $69.00 mark through the Asian session on Monday. The white metal, however, remains within striking distance of a two-month high, around the $70.00 psychological mark touched on Friday, and seems poised to appreciate further.
The XAG/USD holds a near-term bullish bias following last week's breakout above the $66.65-$66.70 horizontal resistance and the 38.2% Fibonacci retracement of the May-July decline. Moreover, the white metal holds above the 200-period Simple Moving Average (SMA) on the 4-hour chart, which, along with positive oscillators, underpins the advance.
The Moving Average Convergence Divergence (MACD) stays marginally positive, hinting that the upward trajectory is still in place but moderating. Furthermore, the Relative Strength Index (RSI) near 66 suggests strong buying pressure, though the approach toward overbought territory could slow the pace of gains.
Hence, a subsequent move up might confront initial resistance at the 50.0% retracement at $71.95, ahead of the 61.8% level at $76.08, with further barriers at the 78.6% retracement at $81.97 and the cycle high at $89.47. On the downside, immediate support is seen at the reclaimed 38.2% Fibo. retracement at $67.81, followed by the 23.6% level at $62.70 and the 200-period SMA at $60.93, while a deeper setback would expose the structural floor anchored around $54.43.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
XAG/USD 4-hour chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- US Dollar Index weakens to around 98.80 in Monday’s Asian session.
- Treasury bond buybacks raise concerns over the deteriorating fiscal outlook.
- Bessent said he will hold a press conference on Monday to explain fresh US sanctions against Iran.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 98.80 in the Asian trading hours on Monday. The DXY declines to near three-month lows as a market unsettled by the US Treasury's promise to buy back more long bonds.
US Treasury Secretary Scott Bessent said on Thursday that it would double its long-end bond buybacks to $4 billion per operation to cap surging 30-year yields. The announcement came one day after the department surprised markets by pledging to at least double the size of its buybacks of longer-dated debt in an effort to rein in bond yields.
"Bessent’s efforts to suppress U.S. yields haven't done much for U.S. yields, but it's undermined the dollar," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "The market is pushing back,” Chandler added.
Recent US inflation data show signs of easing, though some Federal Reserve (Fed) officials said they would need to see more evidence that price pressures were receding. Markets are now pricing a 41.0% chance of a Fed rate hike at the upcoming policy meeting, down from 47% a month earlier, according to the CME FedWatch Tool.
Later on Monday, Scott Bessent is scheduled to hold a press conference after threatening "the toughest sanctions in history" on Iran, with traders focused on whether he will target China.
Last week, US President Donald Trump announced the most severe economic action ever taken against Iran, saying this will be economic conflict and isolation on an unprecedented scale and the countries allowing financial aid to Iran will face severe economic consequences. Rising tensions in the Middle East could boost a safe-haven currency such as the USD against its rivals in the near term.
Dollar seen bearing brunt of US fiscal worries as yields capped
Strategists at Scotiabank argue that the current policy mix leaves the currency particularly exposed to fiscal concerns. With authorities aiming to keep long-dated borrowing costs in check, they note that “efforts to suppress long-term yields means that the USD will bear a greater—negative—burden from US fiscal policy concerns,” reinforcing their view that the Dollar is likely to remain under pressure as fiscal uncertainty persists.
Fed's Musalem flags upside inflation risks, keeps Dollar bulls alert despite neutral stance
Fed's Musalem delivers a speech that aligns with the 7/10 FXS Speechtracker score, broadly in line relative to the historical average, but with a subtly more hawkish tilt beneath an ostensibly neutral policy description. By stating that monetary policy is “neutral or accommodative” while warning that underlying inflation is stuck around 2.5%-3%, that current rates carry a lower probability of reaching 2%, and that hiking now could avert more aggressive action later, the remarks lean toward pre-emptive tightening despite acknowledging strong growth, accommodative financial conditions, and potential supply shocks like a Super El Nino. The emphasis on preserving Fed credibility, keeping monetary policy independent of fiscal policy, and focusing on core inflation under supply shocks reinforces a price-stability-first narrative that is modestly supportive for the Dollar and U.S. yields.
The FXS Fed Sentiment Index slipped by 0.34 points to 132.42, signaling a minor pullback in perceived hawkishness even as the index remains firmly above the 100 neutral line. This configuration suggests that, while the immediate tone is slightly less hawkish than recent communications, the broader policy backdrop stays in hawkish territory, consistent with a 7/10 FXS Speechtracker score and a Fed still biased toward further tightening if inflation fails to move convincingly back to 2%.
Technical Analysis: US Dollar Index remains capped below the 100-day SMA
In the daily chart, Dollar Index Spot maintains a bearish near-term bias as it sits below the 100-day moving average and the Bollinger middle band. Price is pressing into the lower half of the recent range, while the Relative Strength Index (14) near 30 suggests the index is approaching oversold territory, hinting that downside momentum is stretched but still dominant as long as it remains capped beneath these overhead averages.
On the topside, initial resistance aligns at the 100-day moving average near 99.70, followed closely by the Bollinger 20-period simple moving average at 99.75, forming a tight supply zone before the upper Bollinger band at 101.00. On the downside, the immediate cushion is the lower Bollinger band at 98.50, where a clear break would open the door to a continuation of the downtrend, while a bounce from this area would likely see the index retesting the clustered resistance just above 99.50.
(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.
- USD/JPY falls as two months of accelerating Japanese inflation heightened expectations for a September BoJ rate hike.
- The US Dollar falls after the Treasury unexpectedly doubled long-dated debt buybacks to curb surging bond yields.
- Tensions rose as Iranian Foreign Minister Abbas Araghchi called upcoming US sanctions an act of desperation bound to fail.
USD/JPY extended its losses for the second straight day after intraday volatility, trading around 158.80 during Asian hours on Monday. The pair declines as the Japanese Yen (JPY) gains ground on stronger-than-expected inflation data, which accelerated for a second straight month. Rising price pressures bolster expectations that the Bank of Japan (BoJ) could raise interest rates as early as September, aligning with Governor Kazuo Ueda's recent hawkish comments on accelerating policy normalization.
Yen firms as Japan inflation data reinforce BoJ tightening expectations
Strategists at Scotiabank note that the latest Japan inflation release has “added marginally to conviction that the BoJ will tighten next month,” with “20bps or hikes reflected in swaps.” They add that the “price data helped lift the JPY to a 0.4% rise against the soft USD on the day,” underscoring how the market is increasingly aligning with the prospect of near-term policy tightening by the BoJ.
Additionally, the USD/JPY pair loses ground as the US Dollar (USD) struggles under pressure from newly announced United States (US) fiscal moves. The Treasury Department surprised financial markets by pledging to at least double its buybacks of longer-dated government debt in an attempt to rein in rising bond yields. Treasury Secretary Scott Bessent noted that buybacks could expand beyond $4 billion, a strategic effort aimed at signaling that elevated yields do not accurately align with underlying economic fundamentals.
However, the downside of the Greenback could be limited as safe-haven demand increases amid escalating geopolitical tensions in the Middle East. Tensions flared after Iranian Foreign Minister Abbas Araghchi dismissed upcoming US sanctions as an act of desperation that would fail to weaken Tehran. Adding to the friction, Iranian Security Chief Mohsen Rezaei warned of "earthquake-like" retaliation if US President Donald Trump takes further action, reinforcing risk-off sentiment in global markets.
Technical Analysis:
In the daily chart, USD/JPY trades at 158.80, keeping a bearish near-term tone as it remains below both the short-term and medium-term moving averages. The nine-period Exponential Moving Average (EMA) and the 50-period EMA sit overhead as immediate and secondary resistance, suggesting rallies are likely to be capped while price holds beneath this cluster. The 14-day Relative Strength Index (RSI) at 42.67 stays below the midline, hinting at subdued bullish momentum and reinforcing the downside bias rather than a decisive oversold condition.
On the topside, initial resistance is located at the nine-period EMA near 159.03, with further supply expected at the 50-period EMA around 160.13 if buyers attempt a recovery. With no nearby technical supports defined by the current dataset, the pair appears vulnerable to further slippage until a fresh demand area forms, leaving the immediate focus on how price reacts to the 159.03 barrier in upcoming sessions.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- USD/CAD kicks off the new week on a positive note, though it lacks follow-through buying.
- US-Canada trade war fears and sliding oil prices undermine the Loonie and lend support.
- A weak USD caps further gains as US-Iran tensions keep geopolitical risk premium in play.
The USD/CAD pair struggles to capitalize on a bullish gap opening on Monday, though it retains an intraday positive bias amid concerns about a deepening US-Canada trade war. Spot prices currently trade just below the 1.3800 mark, up nearly 0.30% for the day, and, for now, seem to have snapped a three-day losing streak to a three-month low, touched on Friday.
The US imposed 50% tariffs on $20bn worth of Canadian goods on Saturday after trade talks between the two countries fell apart on Friday. In response, Canadian Prime Minister Mark Carney said that the country would impose its own retaliatory tariffs beginning on September 8. This, along with a modest pullback in crude oil prices, undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair.
The US Dollar (USD), on the other hand, hangs near its lowest level in more than three months amid diminishing odds for a rate hike by the US Federal Reserve (Fed). Moreover, the US Treasury announced last week that it would at least double buyback operations for long-dated government debt starting in September, triggering a pullback in US bond yields. This further weighs on the USD and caps the USD/CAD pair.
On the geopolitical front, US Treasury Secretary Scott Bessent is due to announce what he has called the toughest sanctions in history on Iran at a press conference on Monday. Iran's Supreme National Security Council secretary, Mohsen Rezaei, responded by warning that the Islamic Republic would halt all oil exports through the Strait of Hormuz and anywhere else in the Persian Gulf if economic war continues.
Rezaei added that any country participating in the US sanctions would be treated as an act of war against Iran, keeping the war-risk premium in play. This could act as a tailwind for crude oil prices and the safe-haven USD, warranting caution before placing aggressive directional bets on the USD/CAD pair. Hence, strong follow-through buying is needed to confirm that spot prices have bottomed out in the near term.
USD/CAD daily chart
Technical Analysis
The USD/CAD pair keeps a bearish near-term bias beneath the 200-day Simple Moving Average (SMA) at 1.3844. The said hurdle should cap any recovery beyond the 61.8% Fibonacci retracement level of the May-June rally, at 1.3815. A sustained strength, however, could lift spot prices to the 50% retracement at 1.3897, with deeper barriers at 1.3980 and the 23.6% level at 1.4081 ahead of the cycle high region near 1.4246. On the downside, initial support is seen at the 78.6% retracement at 1.3698, ahead of the prior swing low area around 1.3549, where buyers may attempt to stem further losses if the current bearish pressure extends.
(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.
- Gold price edges higher to near $4,625 in Monday’s early Asian session.
- Bessent said he may increase the government's repurchases of Treasuries further.
- Iranian official dismissed the threat of a fresh round of US economic sanctions as a “desperate” ploy.
Gold price (XAU/USD) gains traction to around $4,625 during the early Asian trading hours on Monday. The precious metal climbs to the highest since May 15 as the US Treasury's buyback support plan weighs on the US Dollar (USD).
US Treasury Secretary Scott Bessent said on Thursday the government could increase bond buybacks beyond $4 billion, a day after the department unveiled plans to double buybacks of longer-dated securities.
This development has cooled Treasury yields and dragged the USD lower. It’s worth noting that because gold is priced in the USD, a weakening currency makes it significantly cheaper and more attractive to foreign buyers.
"A big factor, of course, is technical... next step is $4,700 if this momentum continues, but also I think it's been very much driven by a drop in the U.S. dollar," said Bart Melek, global head of commodity strategy at TD Securities.
On the other hand, energy-driven inflation concerns amid ongoing Middle East tensions could raise the prospect of Federal Reserve (Fed) rate hikes in the coming months. This, in turn, might cap the upside for the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Iran's Foreign Minister Abbas Araghchi dismissed the threat of a fresh round of US economic sanctions as a “desperate” ploy and said the expected new measures would fail to defeat Tehran, per Reuters. US President Donald Trump last week announced a new campaign to increase the pressure on the Iranian economy, calling it “the most crushing economic operation ever taken against any country”.
Treasury support at the long end underpins Gold as Fed looks through energy
According to TD Securities, “the signal of the Treasury looking to support the longer end may offer enough support on its own,” particularly for Gold and the broader precious metals complex. This is reinforced by “a Fed willing to look past higher energy prices,” which, in their view, helps sustain the current higher trading range and keeps the door open to further upside as trend-following flows respond to the evolving policy backdrop.
Technical Analysis: Gold maintains a constructive outlook amid overbought RSI momentum
In the daily chart, XAU/USD holds a bullish near-term bias as it extends above the 100-day simple moving average (SMA) and the Bollinger middle band, keeping the broader uptrend supported. However, the latest 14-period Relative Strength Index at 70.81 shows overbought conditions, hinting that upside momentum could be stretched even as price pushes toward the upper Bollinger band.
On the topside, immediate resistance is aligned with the Bollinger upper band at roughly $4,675.80, where fresh supply could emerge if buyers attempt another leg higher. On the downside, initial support is seen at the current price area as a nascent floor, followed by the 100-day SMA at $4,379.39 and the Bollinger middle band at $4,305.50, while a deeper correction would expose the lower Bollinger band near $3,935.20.
(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.
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