Forex News

• WTI Oil loses more than 1% on Friday, although geopolitical risks continue to sustain a significant risk premium.
• US military escorts of commercial vessels through the Strait of Hormuz ease immediate concerns over supply disruptions.
• Renewed hostilities between the US and Iran keep the risk of disrupted Oil flows through the strategic route elevated.

West Texas Intermediate (WTI) US Oil declines 1.21% on Friday and trades around $88.55 per barrel at the time of writing. The Crude Oil remains close to its recent highs and is still heading for a strong weekly gain as tensions between the United States (US) and Iran maintain a significant geopolitical risk premium in the Oil market.

WTI comes under some selling pressure after US military forces escorted 40 commercial vessels carrying around 18 million barrels of Oil through the Strait of Hormuz on Tuesday. The operation helps reassure investors about the ability of tankers to navigate the strategic route and temporarily eases concerns over a major disruption to supplies.

Risks nevertheless remain elevated. Iran targeted US military bases in Kuwait and the United Arab Emirates (UAE) on Thursday, while clashes around the Strait of Hormuz continue to fuel concerns about maritime security. US forces also reportedly intercepted a cruise missile and repelled several drone attacks during Tuesday's escort operation.

South Korea is also reportedly preparing to deploy military assets to help ensure freedom of navigation through the Strait of Hormuz. These developments show that, despite vessels continuing to transit under military protection, tensions remain high enough to sustain a risk premium in Oil prices.

The Strait of Hormuz remains at the center of market attention because of its importance for global energy exports. The possibility of further escalation between Washington and Tehran could therefore quickly revive concerns over Oil flows and limit the extent of WTI's correction.

Meanwhile, disruptions affecting refined products add to tensions across energy markets. Average US Diesel prices reached a record $5.82 per gallon on Thursday, according to GasBuddy data cited by Reuters in the provided source. Hostilities between the United States and Iran, combined with disruptions caused by Ukrainian strikes on Russian Diesel-exporting refineries, are contributing to tighter global supplies.

Conversely, comments from Russian President Vladimir Putin expressing openness to potential peace negotiations provide a modest counterweight to geopolitical risks. For WTI, however, developments around the Strait of Hormuz and the ability of US forces to ensure the safe passage of Oil tankers remain the main short-term drivers.

Commerzbank’s Dr. Christoph Balz expects the Federal Reserve to keep rates unchanged, but highlights a significant risk of another 25 bps hike. He notes gasoline-driven headline Consumer Price Index (CPI) strength versus moderate core inflation, and stresses that upcoming jobs and Consumer Price Index (CPI) data could tip the decision. Political pressure and concerns about entrenched inflation expectations complicate the Fed’s policy path.

Gasoline lifts CPI, core stays moderate

"Will the Federal Reserve raise interest rates or not? A clear decision is not yet in sight, even though the risk of a rate hike has increased. Today, Friday, the August jobs report will be released, and consumer price data will be released at the end of next week."

"As for consumer prices, we expect a significant increase of 0.4% from July. This would be noticeably higher than last month’s 0.1%. The main reason is the gasoline price, which has risen another 4% following the renewed escalation in the Persian Gulf."

"Fed officials could therefore argue that the inflation trend continues to slow and refrain from raising interest rates. In principle, a single monthly figure should not play a decisive role anyway. However, several Fed officials have made it clear that they fear the inflation rate—which has been too high for too long—could increasingly influence wage and price negotiations."

"Ultimately, we still expect the Federal Reserve to hold interest rates steady. However, there is a significant risk that things could turn out differently. If the figures—particularly the core inflation rate—surprise on the upside, a 25-basis-point hike would likely be in order."

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

MUFG’s Michael Wan highlights a sharp strengthening in the Japanese Yen, with USD/JPY dropping from 160 to around 155.30 as the Dollar broadly weakened and Asian FX gained. The report notes uncertainty over any Bank of Japan (BoJ) intervention, discusses hawkish BoJ rhetoric, and argues that excessive Fed rate expectations should unwind, leading to a weaker Dollar over time.

Yen surge and Dollar repricing

"There were significant moves in the FX market, with the Japanese yen in particular strengthening sharply from the 160 level on 2 Sep all the way down to as low as 155.30 overnight, a 5 big figure move."

"It is not entirely clear whether the moves in USD/JPY were driven by FX intervention, but from what we do know Bank of Japan current account data for Wednesday do not suggest the moves were driven by intervention."

"More generally on the Bank of Japan front, BOJ Board Member Takata – one of BOJ’s most hawkish members - gave a speech earlier this week leaving the door open for an outsized interest rate increase as well as back-to-back hikes."

"This led the JPY OIS market to start to price in some chance albeit small right now of more than 25bps hike in BOJ’s September meeting."

"Overall, these views and developments fit in with our global teams’ views that pricing for Fed hike rate expectations are too excessive especially post the Jackson hole meeting, and the Dollar should weaken over time."

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

• The US Dollar Index ticks up to near 99.00 in the countdown to the US NFP data for August.
• Fed officials deliver encouraging remarks on inflation.
• Traders have trimmed hawkish Fed bets as officials seem confident in progress in inflation cooling down.

The US Dollar (USD) is marginally up on Friday ahead of the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades slightly higher at around 99.07.

Investors will pay close attention to the US NFP data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

The US NFP report is expected to show that employers hired 56K fresh workers after firing 23K employees in July. The Unemployment Rate is seen as steady at 4.1%. Average Hourly Earnings, a key measure of wage growth, is seen arriving lower at 3% Year-on-Year (YoY) from 3.2% in July.

According to TD Securities, the upcoming US payrolls release could trigger an uneven response in rates markets. Strategists warn that a "firm NFP may increase hike fears, but inflation keeps markets nervous and the reaction asymmetric," with investors reluctant to fully price in a more aggressive Fed path until they see the next CPI print. At the same time, TD Securities argues that "a modestly softer payroll print would allow the market to lower the pricing for a September rate hike," underscoring their view that downside surprises in employment data are more likely to be reflected in near-term policy expectations than upside ones.

Meanwhile, financial markets have trimmed hawkish Fed interest rate expectations after encouraging comments from Federal Open Market Committee (FOMC) board members on inflation.

Analysts at Commerzbank said that lingering uncertainty over the US rate outlook was “underscored Thursday by comments from Fed Governor Christopher Waller,” who, in their words, signalled that “a rate hike is by no means necessary.” They add that Waller “also confirmed what we have been arguing: next week’s inflation data are likely to be the key input for the Fed’s upcoming policy decision,” a shift in emphasis that, in their view, “further [reduces] the significance of today’s employment report.”

On Wednesday, New York Fed Bank President John Williams also said, "Recent data have been encouraging on inflation." Williams added, "Inflation expectations are contained," and I am “not seeing second-round inflation impact from tariffs".

US Dollar Index Technical Analysis

In the daily chart, the Dollar Index Spot trades at 99.07, keeping a bearish near-term tone as it holds below the 20-day exponential moving average (EMA) at 99.45 and the 61.8% Fibonacci retracement at 99.23.

The Relative Strength Index (RSI) at 41.30 hovers below the midline, hinting at lingering downside pressure but without oversold conditions, suggesting scope for further downside or a shallow consolidation under these caps.

On the topside, initial resistance aligns at the 61.8% retracement near 99.23, followed by the 20-day EMA at 99.45 and the 50% retracement around 99.72, while higher barriers emerge at the 38.2% level near 100.22 and the 23.6% retracement at 100.83. On the downside, immediate support is seen at the 78.6% Fibonacci level around 98.53, with a firmer floor at the 100% retracement near 97.63, where buyers may attempt to stabilize the index if the current decline extends.

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

• Silver consolidates below the 100-day SMA near $67 following two straight days of gains.
• Momentum indicators suggest limited bullish strength, with the RSI near 55 and the ADX around 17.
• Fading MACD red histogram bars point to easing bearish momentum, but a clear breakout is still lacking.

Silver (XAG/USD) consolidates with marginal losses on Friday following back-to-back daily gains, as traders avoid taking large positions ahead of the US Nonfarm Payrolls (NFP) report. The 100-day Simple Moving Average (SMA) near $67 caps the immediate upside, while momentum indicators point to limited bullish strength. At the time of writing, XAG/USD trades around $66.80.

The US economy is expected to add 56K jobs in August after shedding 23K in July, while the Unemployment Rate is forecast to hold at 4.1%. The US economy is expected to add 56K jobs in August after shedding 23K in July, while the Unemployment Rate is forecast to hold at 4.1%.

The figures are likely to play a key role in shaping the Federal Reserve’s (Fed) decision at its September 15-16 monetary policy meeting, with the CME FedWatch Tool currently showing around a 50% chance of a 25-basis-point rate hike.

A stronger-than-expected NFP could keep XAG/USD below the 100-day SMA, while a disappointing result may clear the way for a bullish breakout.

Technical analysis

XAG/USD holds above the 50-day Simple Moving Average (SMA) at $62, but remains below the 100-day SMA and the 200-day SMA, leaving the near-term bias broadly neutral with a slight topside cap.

The Relative Strength Index (RSI) on the daily chart around 55 hints at modest bullish momentum, yet the Average Directional Index (ADX) near 17 suggests a weak underlying trend.

Meanwhile, the Moving Average Convergence Divergence (MACD) remains marginally negative, although the fading red histogram bars indicate that bearish momentum is easing, reinforcing the idea of a consolidation phase rather than a clear directional move.

On the downside, the 50-day SMA near $62 and the psychological $60 mark form a strong support zone, followed by a more robust horizontal floor around $55.

On the topside, immediate resistance emerges at the 100-day SMA near $67, followed by the 200-day SMA around $72. A break above these levels could open the door towards the $80 mark.

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

• USD/CAD holds losses around 1.3800, with price action forming a bearish engulfing candle on the weekly chart.
• Canadian Dollar rallied earlier this week, buoyed by a 6.5% increase in Oil prices.
• The pair remains flat on Friday as traders await US and Canada's employment figures to make investment decisions.

The Canadian Dollar (CAD) holds minor losses against the US Dollar (USD) on Friday, as the USD/CAD pair trades just above 1.3800 after bouncing from two-week lows at 1.3765. The Loonie, however, remains on track for a 0.7% rally this week, and the USD/CAD weekly chart is forming a bearish engulfing candle, which is a negative signal, with all eyes on August's employment figures from Canada and the US.

Loonie bulls have been encouraged by the increase in Crude Oil prices, Canada’s main export, as the US and Iran resumed reciprocal attacks and escalated their threats, heightening concerns about an all-out war in the region. The barrel of Brent Oil appreciated about 6.5% on the week, hitting one-and-a-half-month highs above $96.00 on Thursday, before pulling back below $94.00 on Friday.

CAD braces for another labour market surprise

Analysts at Commerzbank observe that the Bloomberg consensus “expects an increase of 15,000 jobs” in Canada in August, but caution that “the consensus has often been in this range in recent months, while the actual figures have delivered substantial surprises in either direction.”

Commerzbank argues that “today’s data surprise is likely to play an important role.” In their view, “if the labour market once again surprises to the upside, the CAD should benefit as well,” although they stress that Canada’s jobs backdrop “has been on something of a roller coaster in recent years” and that the “escalation in relations with the US is likely to have weighed on sentiment,” meaning “weaker figures would hardly come as a surprise either.”

Fed caution keeps Dollar on the back foot as focus shifts from jobs to inflation

The highlight of the day, however, is the US Nonfarm Payrolls (NFP) report, released at the same time as the Canadian jobs data. Net employment is expected to have increased by 56K in August following an unexpected 23K drop in July. The impact on the US Dollar, however, might be muted in this case, as investors await next week's Consumer Price Index (CPI) data to complete the Federal Reserve's (Fed) monetary policy puzzle.

Analysts at MUFG highlight that New York Fed President John Williams' comments affirming that “the trend in inflation is moving slowly down as some of the effects of the tariffs move into the rearview mirror.” and that current policy rates “remain in a good place for the economy,” have triggered some reassessment of the Fed's near-term monetary policy, reinforcing the impression of a cautious, data-dependent stance.

Against that backdrop, MUFG expects that “today’s nonfarm payrolls report” will “prove less important for Fed rate hike expectations than next week’s CPI report,” which in their view should help “dampen the impact on US rates and the US dollar.”

(This story was corrected at 12:10 GMT to properly mention John Williams' position as New York Fed President, instead of New Fed President.)

• The Indian Rupee gains significantly this week amid strong FCNR receipts and receded hawkish Fed bets.
• Fed’s Waller says that recent data shows some signs of disinflation.
• Soft US ADP data for August sets a weak bar for the US NFP.

The Indian Rupee (INR) jumps almost 1% higher against the US Dollar (USD) this week. On Friday, the USD/INR pair trades close to its two-month low of 94.29 posted the previous day. The Indian currency strengthened due to strong inflows of foreign funds through the Reserve Bank of India’s Foreign Currency Non-Resident (FCNR) (B) scheme and diminished Federal Reserve (Fed) interest rate hike expectations.

RBI reports strong foreign inflows through FCNR scheme

Strategists at Societe Generale highlight that the RBI has materially strengthened its firepower, noting that “the RBI yesterday disclosed that it had raised $136.38 billion through its FX mobilisation schemes, including the FCNR(B) window launched in early June, significantly bolstering reserve buffers and intervention capacity.”

Fed Waller says recent data indicates signs of slowing inflationary pressures

On Thursday, Fed Governor Christopher Waller said at the Reuters NEXT Newsmaker event, “Finally seeing some signs of disinflation in recent data.” Waller pushing back upside inflation risks resulted in a sharp decline in the US Dollar, with traders paring hawkish Fed bets.

The CME FedWatch tool shows traders see a one-in-two chance that the Fed will hike interest rates at the September meeting, down from a two-in-a-three chance seen before Fed Waller’s speech.

Regarding the Fed’s monetary policy outlook, Governor Waller said that he would “support holding interest rates steady” at the September meeting if the Consumer Price Index (CPI) growth cools down. Waller also kept the option of a rate hike on the table in case the inflation data remains hot. "If August inflation data shows progress has reversed, small adjustment to policy rate would help ensure progress resumes," he said.

US NFP data awaited

The next major driver for the US Dollar’s outlook is expected to be the US Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.

Brown Brothers Harriman’s Elias Haddad points out that the latest US labor market read from ADP did little to dispel concerns about cooling demand. He notes that “the ADP August private payrolls data showed labor demand remains unimpressive,” with the economy adding “+38k private sector jobs in August (consensus: +47k) vs. +46k in July, the lowest reading since January.” Haddad cautions, however, that “the correlation between monthly change in ADP private payrolls and nonfarm payrolls (NFP) is weak,” limiting the extent to which investors can extrapolate the ADP miss into Friday’s official employment report.

According to estimates, the US economy is expected to have created 56K fresh jobs after laying off 23K employees in July. The Unemployment Rate is seen steady at 4.1%.

Technical Analysis: USD/INR sees immediate support near 94.08

On the daily chart, USD/INR trades at 94.49, extending a downside bias as price holds below the 100-day simple moving average (SMA) at 95.29. The break under this medium-term gauge suggests sellers remain in control, while the Relative Strength Index (RSI) near 28 signals oversold conditions that could slow, but not yet reverse, the prevailing downtrend.

On the downside, the immediate focus remains on how price behaves around the current 94.49 area, as a sustained close beneath it would expose further weakness toward the May low at 94.08. On the topside, a recovery back above the 100-day SMA at 95.29 would be needed to ease bearish pressure and hint at a corrective rebound toward higher levels.

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

ING’s Chris Turner notes that dovish comments from Federal Reserve official Christopher Waller have pushed US yields and the Dollar lower, while supporting equities and high-yielding FX. He highlights that markets now price a 50% chance of a September Fed hike and see limited impact from US jobs data. Turner expects DXY to face resistance and the Dollar to drift slightly lower near term.

Dollar softens on dovish Fed tone

"Some surprisingly dovish remarks from the Fed's Christopher Waller yesterday sent US yields and the dollar lower, while at the same time sending equities higher. Neither the prospect of a Fed hike nor the surge in the yen has been enough to dent demand for high-yielding FX."

"Yesterday's speech from the Federal Reserve's Chris Waller was a little more dovish than most were expecting. Rather than reinforcing Chair Kevin Warsh's hawkish speech from a week ago, Waller's remarks shifted the burden of proof towards the need for a hot August inflation print to justify a rate hike – otherwise he would vote for a hold."

"High yield and procyclical FX remain in demand for the time being. Given the hot debate over whether the Fed raises rates at all, it looks like investors are concluding that any Fed tightening cycle will be very modest and not enough to derail a relatively benign investment backdrop."

"That presents a mildly negative backdrop for the dollar in the short term. And barring a very strong NFP number today, which would firm up a September rate hike, we could see the dollar drifting a little lower."

"99.15/20 could cap DXY intraday strength, with risk to 98.60 on soft payrolls. On a more multi-day view and given our new house call for a 25bp Fed hike, we tend to see the dollar as relatively stable into year-end now."

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

• AUD/USD edges up to near 0.7203 as the US Dollar faces selling pressure.
• The odds of the Fed raising interest rates this month have diminished to 50%.
• Investors await the US NFP data for August.

The Australian Dollar (AUD) trades marginally higher at around 0.7203 against the US Dollar (USD) during the European trading session on Friday. The Aussie pair is broadly firm as the US Dollar remains under pressure, with traders reassessing Federal Reserve (Fed) interest rate expectations.

Dollar softens as Fed hike odds retreat

Analysts at MUFG observe that the US rates market has scaled back expectations for near-term tightening, with pricing now implying “close to a 50:50 probability of a Fed rate hike this month” compared with “closer to a 70% probability of a hike at the start of this month.” They attribute this “dovish repricing of Fed rate hike expectations in recent days” to “the cautious comments from the Fed’s leadership over the need for rate hikes.”

In particular, MUFG highlights remarks from New York Fed President John Williams, who said recent inflation data has been “encouraging” and that he sees “the trend in inflation moving slowly down as some of the effects of the tariffs move into the rearview mirror.” Williams also stressed that the Fed is “collecting a lot of data now, and will reassess whether rates remain in a good place for the economy.”

Meanwhile, investors await the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published at 12:30 GMT.

Market experts believe that encouraging comments on inflation from Fed’s Williams has underscored the upcoming inflation data as key driver of monetary policy expectations over the official employment report.

MUFG said that it expects the upcoming labour market release to play a more limited role in shaping policy expectations against the backdrop of Fed Williams’s comments, stating: “we expect today’s nonfarm payrolls report to prove less important for Fed rate hike expectations than next week’s CPI report,” a dynamic they see as “helping to dampen the impact on US rates and the US dollar.”

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.7203, maintaining a bullish near-term bias as spot holds above the 20-day exponential moving average (EMA) at 0.7136. The pair extends its advance after reclaiming this dynamic support, while the Relative Strength Index (RSI) at about 66 stays in bullish territory, suggesting buyers retain control even as conditions approach overbought.

On the downside, immediate support is seen at the 0.7200 area, with the 20-day EMA at 0.7136 acting as a secondary floor that would need to give way to signal a deeper correction. Looking up, the pair aims to revisit the four-year high near 0.7280.

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

Williams flags strong economy behind higher yields as inflation trend cools

Fed's Williams delivered a mildly hawkish-leaning message, with a 6/10 FXS Speechtracker score just above the 5.9/10 historical average, emphasizing that rising yields reflect a strong economy and robust outlook rather than worsening inflation expectations. The focus on tariffs and Middle East conflict as key drivers of above-target inflation, alongside contained expectations and a trend toward lower inflation with a stable labor market, signals confidence that the Fed can stay data-dependent while keeping 2% as the clear priority.

The FXS Fed Sentiment Index slipped by 1.42 points to 127.44, indicating a modest pullback in perceived hawkishness despite the still-elevated stance. With the index firmly above the 100 neutral line, markets continue to see policy as hawkish overall, but the slight decline suggests some easing in the perceived urgency for additional tightening relative to recent readings captured by the FXS Speechtracker.