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Pound Sterling jumped to $1.3675 after UK services activity unexpectedly accelerated, adding to signs that the economy is holding up better than feared. The Pound to Dollar (GBP/USD) exchange rate surged to an intraday high of 1.3675 on Friday after a much stronger-than-expected UK services survey delivered a fresh positive surprise for Sterling.

The S&P Global flash PMI survey showed the UK Services PMI rising to 52.8 in August from 52.1 in July, its strongest reading for six months and well above the 51.8 consensus in a Reuters poll.

The composite PMI also strengthened to 52.5 from 52.2, compared with expectations for 51.6, while manufacturing eased to 51.5 from 51.9.

GBP/USD later eased back to around 1.3656 by late morning, still 0.09% higher on the day and 0.91% stronger over the previous five sessions.

Pound Sterling reaction around the 09:30 BST UK Services PMI release, showing GBP/USD and GBP/EUR. Services Surprise Strengthens the UK Resilience Story S&P Global said the survey was consistent with UK GDP growth of around 0.3% in the third quarter, with services benefiting from better domestic conditions, favourable weather and technology investment.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “The expansion is being helped by sunny weather and tech investment”.

There were still reasons for the Bank of England to remain cautious. Employment continued to fall and price pressures picked up again as higher energy costs fed into business expenses.

The combination leaves the BoE facing stronger activity alongside persistent inflation risks, reducing the urgency for any near-term policy easing.

For GBP/USD, the fresh 1.3675 high is now the immediate resistance point. A sustained break above that area would put the 1.3700 level in focus, while a retreat below 1.3600 would suggest the post-PMI momentum is beginning to fade.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

The AUD/USD pair regains positive traction following the previous day's dismal Aussie jobs data-led modest fall and climbs to a fresh high since early June during the first half of the European session. Spot prices currently trade just below mid-0.7100s, up nearly 0.50% for the day, and remain on track to register gains for the seventh week in a row amid a supportive fundamental backdrop.

The US Dollar (USD) languishes near a three-month low, touched on Thursday, amid receding bets for an immediate rate hike by the Federal Reserve (Fed), which, in turn, is seen as a key factor supporting the AUD/USD pair. Bulls, meanwhile, seem rather unaffected by geopolitical uncertainties stemming from the US-Iran standoff over the Strait of Hormuz, suggesting that the path of least resistance for spot prices remains to the upside.

From a technical perspective, the latest leg up confirms a fresh breakout above the 61.8% Fibonacci retracement level of the May-June decline. Moreover, the Relative Strength Index (14) near 67 suggests stretched but still constructive momentum and is backed by a mildly positive Moving Average Convergence Divergence (MACD) reading above zero. The set-up, in turn, further validates the near-term positive outlook for the AUD/USD pair.

Meanwhile, the 78.6% Fibo. retracement at 0.7188, which might cap the advance for now. A sustained move beyond the said hurdle is needed to open the way toward higher recovery targets. On the downside, initial support is located at the 61.8% retracement at 0.7119, ahead of a stronger structural floor formed by the 50.0% retracement at 0.7070 and the nearby 100-day SMA at 0.7069. A break below this cluster would likely trigger a deeper pullback toward the 38.2% level at 0.7021 and the 23.6% retracement at 0.6961, if selling accelerates.

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

AUD/USD daily chart

Australian Dollar Price This week The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies this week. Australian Dollar was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-1.12%-0.91%-0.25%-0.80%-0.81%-1.27%-1.48%EUR1.12%0.36%0.87%0.32%0.27%-0.16%-0.36%GBP0.91%-0.36%0.59%-0.01%-0.09%-0.52%-0.77%JPY0.25%-0.87%-0.59%-0.53%-0.61%-1.03%-1.25%CAD0.80%-0.32%0.01%0.53%-0.07%-0.50%-0.74%AUD0.81%-0.27%0.09%0.61%0.07%-0.43%-0.68%NZD1.27%0.16%0.52%1.03%0.50%0.43%-0.26%CHF1.48%0.36%0.77%1.25%0.74%0.68%0.26% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

TL;DR: Japan’s data is strengthening and Australia’s is weakening, yet AUD/JPY keeps rising — because the cross is trading on the global yield backdrop and carry differential, not on either country’s local fundamentals.

Domestic Data Point Clearly Lower for AUD/JPY AUD/JPY has rebounded strongly even though this week’s data from both sides of the cross argue for the opposite move. Japan delivered firmer inflation and stronger business activity. Australia produced a weak jobs report and softer PMIs. On domestic fundamentals alone, that combination should favor the Yen over the Aussie.

Japan’s July core CPI rose from 1.6% to 1.8% y/y, while core-core CPI accelerated from 1.7% to 1.9% — a broadening that ActionForex covered in detail here, noting firmer services inflation and renewed energy pressure ahead of the BoJ’s September meeting. August PMIs strengthened as well: PMI Manufacturing rose from 54.5 to 55.1, while PMI Services climbed from 51.2 to 52.3 — part of a broader acceleration where overseas demand posted its strongest growth in more than eight-and-a-half years, led by semiconductor and AI-related industries. Those readings reinforce expectations the BoJ could raise rates again at its September meeting.

Australia moved in the opposite direction. Employment fell -15.8K in July, against expectations for an increase, while unemployment rose from 4.4% to 4.5%. August PMI Composite Output then eased from 53.2 to 52.5, while PMI Services Business Activity fell from 53.6 to 52.9. PMI Manufacturing Output slipped from 50.3 to 49.7, moving back into contraction, even as manufacturing orders improved and cost pressures accelerated.

Global Yields Are Overriding Local Fundamentals That AUD/JPY is rising anyway is the more important signal. The cross is currently trading less on Australian and Japanese data than on the global yield backdrop.

The Yen briefly benefited after the US Treasury’s August 19 buyback announcement drove long-dated US yields sharply lower. That compressed yield differentials globally and temporarily reduced pressure on low-yield funding currencies. But the move didn’t last — US yields rebounded quickly on Thursday, with the 10-year Treasury yield returning toward 4.70% and the 30-year yield moving back above 5.20%. Other major sovereign yields also rose. As carry conditions improved again, the Yen returned to underperformance.

That mechanism matters more for AUD/JPY than the latest local data. When global yields rise, the opportunity cost of holding a low-yielding currency such as the Yen increases. Carry demand then tends to favor currencies offering substantially higher policy rates, including the Aussie.

BoJ Hike Bets Are Rising, But the Carry Gap Is Still Wide Japan’s stronger CPI and PMI data still matter because they reinforce September BoJ hike expectations. But even another 25bp increase wouldn’t transform the relative-rate picture.

The RBA cash rate stands at 4.35%, compared with the BoJ policy rate at 1.00% — a gap of roughly 335bp. A BoJ hike to 1.25% would narrow it to around 310bp, still a substantial spread.

That helps explain why the Yen can weaken even as BoJ normalization expectations strengthen. Markets may be becoming more confident that Japan will hike, but the expected adjustment is still small relative to the existing carry advantage. Australia’s softer data could eventually narrow that gap from the other side if markets become convinced the RBA’s tightening bias won’t survive. But this week’s releases haven’t been enough to overpower the global yield move.

ActionForex’s Technical View on AUD/JPY Technically, the current rebound supports the view that the correction from 114.91 completed with three waves down to 109.25. That decline held above 108.77, the bottom of wave four of a lesser degree. Support from the 55-day EMA also strengthens the bullish interpretation.

The near-term outlook stays bullish while 112.21 support holds. The next target is the 114.65–114.91 resistance zone.

A decisive break of 114.91 would be much more important. It would confirm resumption of the larger uptrend from 86.03, the 2025 low. The next upside target would then be the 38.2% projection of 86.03 to 114.91 from 109.25, at 120.28, putting the psychological 120 level directly into focus.

A move below 112.21 would delay the bullish case and suggest the correction from 114.91 is still unfolding, with another near-term decline possible before the broader uptrend resumes.

AUD/JPY Is Sending a Global, Not Domestic, Signal The key takeaway isn’t that Australian fundamentals suddenly improved or that Japanese data failed to matter. It’s that both local stories are being overwhelmed by a larger market force. Japan is getting stronger. Australia is getting softer. Yet AUD/JPY is rising because global yields have reasserted the carry advantage over the Yen.

That makes the next move in US and global bond yields more important for this cross than another small change in local data. As long as carry pressure stays elevated and 112.21 holds, AUD/JPY can keep pressing toward 114.91 despite a domestic macro backdrop that, on paper, argues for the opposite.

Key Takeaways Japan’s core-core CPI accelerated to 1.9% and PMIs strengthened broadly, while Australia’s jobs report contracted and PMIs softened — a combination that should favor Yen, not Aussie. AUD/JPY’s rise despite this divergence signals the cross is trading on global yields and carry conditions, not local fundamentals, right now. The RBA-BoJ rate gap stands at roughly 335bp; even a September BoJ hike to 1.25% would only narrow it to around 310bp, preserving a substantial carry advantage for AUD. US yields briefly fell on the Treasury buyback announcement but rebounded quickly, restoring carry pressure on the Yen within days. AUD/JPY holds a bullish bias above 112.21 support, targeting 114.65-114.91; a break above 114.91 would open a path toward 120.28.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

The New Zealand Dollar strengthened above 0.5950 as China kept lending rates unchanged and a softer US Dollar supported higher-beta currencies. The New Zealand Dollar extended its recovery on Thursday, pushing above 0.5950 against the US Dollar and towards its strongest level of August.

The New Zealand Dollar to US Dollar (NZD/USD) exchange rate traded around 0.5955, up 0.34% on the day and 1.74% higher over five sessions.

China's one-year loan prime rate was left at 3.00% and the five-year rate at 3.50% for a fifteenth consecutive month, matching market expectations.

Image: NZD crosses today China Stability Supports Kiwi Sentiment The decision offered some reassurance for currencies exposed to Chinese demand, including the New Zealand Dollar.

Barclays said the People's Bank of China “remains in no rush to cut policy rates or the reserve requirement ratio,” with Beijing currently favouring fiscal measures and targeted support.

The Kiwi has also benefited from broader US Dollar weakness after Washington's larger Treasury buyback plan pulled long-term US yields lower.

ING strategists Chris Turner and Francesco Pesole expect that theme to remain supportive, saying: “We expect NZD/USD to be lifted in the coming months by lower front-end USD rates”.

The bank forecasts NZD/USD around 0.60 over three to six months and 0.61 over 12 months.

Image: ERUK's NZD/USD sentiment survey results August 2026 The immediate hurdle is the 0.6000 area, followed by the 2026 high around 0.6093.

A failure to hold 0.5900 would weaken the latest breakout, but the combination of steady Chinese policy and softer US rate expectations currently favours further upside pressure.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

The Australian Dollar fell immediately after a weak employment report before recovering as broader US Dollar softness limited the damage to AUD/USD. The Australian Dollar came under pressure after Australia's July labour-market report showed an unexpected fall in employment and unemployment at its highest level in almost five years.

Employment dropped by 15,800 against expectations for a gain of around 15,000, while the unemployment rate rose to 4.5%.

Image: AUD crosses today Australian jobs data The Australian Dollar to US Dollar (AUD/USD) exchange rate fell towards 0.7111 immediately after the release before recovering to around 0.7126 later in the morning.

At that later level, the pair was marginally higher on the day, underlining the importance of distinguishing the initial Australian data reaction from subsequent US Dollar weakness.

Jobs Data Eases Pressure on RBA Full-time employment still increased by 16,300, but participation slipped to 66.9% and total hours worked fell 0.6%.

The softer headline reduces pressure on the Reserve Bank of Australia to tighten policy again quickly.

Westpac economist Ryan Wells had already highlighted “the rising trend in unemployment and underemployment” as evidence that labour-market slack was building.

Oxford Economics Australia chief economist Ben Udy said the July figures were slightly weaker than the RBA had expected and, alongside slower wage growth, reduced near-term pressure for another increase.

Markets remain divided over whether the RBA will need another increase later this year, particularly with inflation still uncomfortable.

Image: AUD/USD intraday chart For the AUD/USD exchange rate, the immediate support zone sits around 0.7100, while the August high near 0.7129 is the first upside test.

A renewed break below 0.7100 would suggest the labour-market disappointment is beginning to dominate the broader Dollar story.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

The Chinese Yuan received a firmer official signal after the PBOC set the USD/CNY reference rate at 6.7808, stronger than the previous 6.7854 fixing. China's central bank strengthened its daily Yuan reference rate on Thursday, setting USD/CNY exchange rate at 6.7808 compared with 6.7854 in the previous session.

The 46-pip shift continues a period in which the People's Bank of China has used the fixing to guide the currency more firmly while balancing pressure from exporters and the domestic economy.

The stronger midpoint came on the same day that China left its benchmark loan prime rates unchanged for a fifteenth consecutive month.

The one-year LPR stayed at 3.00%, while the five-year rate remained at 3.50%.

PBOC Keeps Policy Support Targeted The combination of a firmer fixing and unchanged lending rates suggests Beijing remains reluctant to deploy broad monetary easing that could undermine the currency.

Foreign exchange analysts at ING noted that the PBOC has increasingly guided daily fixes stronger and that exporters have tended to sell Dollars into USD/CNY rallies.

ING economists Deepali Bhargava and Lynn Song maintain a 6.67-6.92 forecast band for the remainder of 2026 and favour “further CNY strength heading into 2027.” Read our latest USD/CNY forecast sentiment survey for 2026, 2027 and 2028 here.

The official fixing does not guarantee the direction of USD/CNY, but it remains an important policy signal because onshore trading is permitted only within a band around the midpoint.

Further stronger-than-expected fixings would reinforce the view that authorities are comfortable with gradual Yuan appreciation, while renewed economic weakness could test that preference.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

The Euro (EUR) posts a fresh three-month high at around 1.1693 against the US Dollar (USD) during the European trading session on Thursday. The major currency pair strengthens as the US Dollar takes a hit due to plunging United States (US) long-dated bond yields after the Treasury Department’s announcement that it will double down on its bond-buying operations to curb higher borrowing costs.

Strategists at Danske Bank note that EUR/USD “spiked higher” after the US Treasury announced an increase in buyback volumes of longer-dated Treasury bonds, a move that coincided with a flattening of the US yield curve. They highlight that the 10Y UST, at “4.64% currently, … is now 10bp below the peak on Tuesday,” and that the adjustment in US yields has “only partly spilled over to Europe, where the primary market has opened with plenty of SSA and covered bond deals.”

In the European session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, extends its decline and posts a fresh 11-week low near 98.70.

US Dollar Price Today The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.

USDEURGBPJPYCADAUDNZDCHFUSD-0.15%-0.17%0.16%-0.24%-0.01%-0.33%0.15%EUR0.15%-0.02%0.30%-0.08%0.13%-0.19%0.30%GBP0.17%0.02%0.32%-0.07%0.15%-0.15%0.32%JPY-0.16%-0.30%-0.32%-0.40%-0.17%-0.50%-0.01%CAD0.24%0.08%0.07%0.40%0.24%-0.08%0.39%AUD0.01%-0.13%-0.15%0.17%-0.24%-0.31%0.16%NZD0.33%0.19%0.15%0.50%0.08%0.31%0.50%CHF-0.15%-0.30%-0.32%0.01%-0.39%-0.16%-0.50% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

On the Euro front, financial markets are confident that the European Central Bank (ECB) will raise interest rates at the September meeting. In contrast, the Federal Reserve (Fed) is expected to leave them steady in the same month.

EUR/USD Technical Analysis

EUR/USD trades at 1.1693, extending its advance above the 20-period exponential moving average (EMA) at 1.1547. The pair’s position comfortably above this short-term trend indicator suggests a constructive near-term bias, though the Relative Strength Index (RSI) at 73.98 signals overbought conditions that could cap upside in the very short run.

On the downside, initial support is located at the 20-day EMA around 1.1547, where a pullback would likely be tested before any deeper correction unfolds. Looking up, the pair could advance towards May's high at around 1.1800 once it stabilizes above 1.1700.

Analysts at UOB Group are also constructive on the pair in the near-term horizon, recalling that they “turned positive on Monday (17 Aug, spot at 1.1570), indicating that ‘the price action suggests EUR is likely to trade with an upside bias.’” On Tuesday (18 Aug, spot at 1.1580), they maintained that “while the upside bias remains intact, given that there is no significant increase in upward momentum, EUR must break and hold above 1.1615 before a move to 1.1655 and beyond can be expected.” That condition was met yesterday as EUR “broke above 1.1615, as it rallied sharply to 1.1679,” with the pair closing “at a three-month high of 1.1677, up by 0.89%.”

UOB now judges that, “given the strong momentum, there is room for further upside in EUR toward 1.1725,” and will “maintain our positive EUR view as long as it stays above 1.1600 (‘strong support’ level previously at 1.1525).”

(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.

EUR/GBP trades on the front foot on Wednesday, pushing up to the vicinity of a two-week high near the 0.8570 region as the Euro holds firm against a softer British Pound (GBP). The pair has cleared its recent range after a run of green candles on the 4-hour chart.

The move followed July inflation reports from both economies. UK headline Consumer Price Index (CPI) rose 2.9% over the year, a four-month high and up from 2.6% in June, matching forecasts. Core CPI held at 2.6%, a touch hotter than the 2.5% expected. But core services inflation, the gauge the Bank of England (BoE) watches most closely, eased to 3.4% from 3.6%, and that cooling limited Sterling's lift after the release.

On the other side of the pair, the final euro-area reading confirmed headline inflation at 2.9% for July, unchanged from June and still well above the European Central Bank (ECB) target. With price pressure firm and the print in line, the Euro kept its footing.

The backdrop remains a global bond-market squeeze. Longer-dated yields have run to multi-year highs this week on inflation and fiscal worries, with German and UK long-end yields both elevated. US Treasury yields pulled back on Wednesday from those highs as traders square up ahead of the Federal Reserve's (Fed) Federal Open Market Committee (FOMC) Minutes.

Investors will look for detail on the split at that meeting, where pre-release reporting flagged three dissenters who wanted a rate hike. The tone of the Minutes will steer broader risk sentiment into the European close.

Short-term technical analysis:On the 4-hour chart, EUR/GBP trades at 0.8572, holding a modest bullish bias as it remains above both the 20-period Simple Moving Average (SMA) at 0.8552 and the 100-period SMA at 0.8559. The cluster of nearby horizontal levels at 0.8561 and 0.8563 reinforces this underlying demand zone, while the Relative Strength Index (RSI) near 68 suggests firm upward momentum that is edging toward overbought territory, hinting at the risk of a short-term pause if buyers hesitate near the current highs.

On the topside, immediate resistance is defined by the recent horizontal barrier at 0.8573, and a sustained break above this level would open the way for further gains in the near term. On the downside, initial support is seen at the 0.8563/0.8561 band, ahead of the 100-period SMA at 0.8559 and the lower horizontal and moving average floors at 0.8558 and 0.8552, where dip-buying interest is likely to emerge while the pair maintains its current constructive structure.

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

Summary:

The AUD/JPY has pulled back after a strong uptrend, with the momentum attributed to short-term profit-taking. However, the pair’s broader uptrend remains intact Joint interventions have not helped the yen much and stubborn inflation is a significant concern for Japan’s policymakers Despite the recent dip, the wide interest rate gap between the RBA and BoJ continues to favour carry trade in the long-term The AUD/JPY currency pair climbed for over ten straight days from its early August low around 110.14. It started falling on Tuesday, though, and has kept dropping into today’s trading session.

Earlier this month, the pair rose from roughly 110-111 to a high near 113.27-113.65. It’s since dropped, however, to about 112.64-112.72. This move signals a break in the prior upward trend.

So, is this the start of a bigger downtrend? What’s making the yen stronger? And what does it mean for carry traders?

Is Momentum Shifting Lower? Recent price movements point to a short-term pause, not a full trend reversal. The pair still trades above important long-term moving averages across various analyses, and the overall trend since the August lows still suggests a recovery.

However, technical indicators on medium-term charts, however, look more cautious. Some suggest short-term selling pressure has built up after the rapid ascent.

The Relative Strength Index (RSI) on daily charts has moved back toward the 50-52 range. This doesn’t automatically signal a bearish divergence. Instead, it likely shows the pair correcting from overbought conditions after a long period of gains

Reuters reports the Bank of Japan (BOJ) is getting ready to raise interest rates as early as its September 17-18 meeting. Policymakers might even speed up the pace of hikes beyond the current rate of about twice a year.

Policymakers are reportedly growing more concerned about ongoing inflation, strong global demand driven by AI, and the yen’s persistent weakness, even after joint currency interventions. Bank of America has even raised its year-end forecast for the yen, noting intervention needs faster rate hikes to be truly effective.

Implications for Carry Traders The AUD/JPY is among the most popular currency pairs in carry trade. Traders usually borrow Japanese yen, with its low interest rates, to buy the Australian dollar, which offers higher returns. This rate difference made the pair appealing over the last year. But when the exchange rate falls, that advantage shrinks, and traders often adjust their positions.

If you’re already holding long-carry positions, the recent drop means your investments are worth less on paper. It also raises the risk of further selling if prices keep falling. If the carry trade loses its appeal, some investors might trim their holdings or look to hedge more.

On the other hand, if the pair stabilizes or starts to climb, the carry trade strategy will regain its appeal. This is especially true if Australian economic data stays strong and the Bank of Japan slowly tightens its monetary policy. When these shifts happen, the pair can become more volatile as traders adjust their leveraged positions.

Has AUD/JPY momentum clearly turned bearish?

It is not yet confirmed. The current decline follows a strong multi-session rally and looks like consolidation before a potential break of key support.

What is driving the yen’s recent strength?

Market expectations for a Bank of Japan rate hike are up, there are lingering effects from late-July intervention, and policy outlooks differ when compared to Australia.

How does this affect carry trades?

A falling AUD/JPY cuts the profit from borrowing yen to hold Australian dollars. This can prompt leveraged traders to reduce their positions.

Trump delays threatened 50% tariffs on Canadian goods
US-Canada deal puts Keystone XL pipeline back on the table
USD/CAD tariff tail risk materially reduced
As alluded to in a separate analysis piece released on Tuesday, one of the key headwinds overhanging USD/CAD was the status of tariff negotiations between the United States and Canada. Well, it looks like Donald Trump has brought TACO to the tariff negotiations.

In a Truth Social post, Trump said the slated 50% tariffs on roughly US$20 billion of Canadian goods, which had been due to kick in tomorrow morning, have now been postponed for three days. More importantly, he said the two sides, subject to the finalisation of documents, “have a DEAL!”

Source: Truth Social

Of note, after repeated setbacks in trying to secure cheaper energy from the Gulf, energy infrastructure looks to be at the centre of the agreement. With talks between the United States and Iran now effectively dead, Trump appears to be looking north for another route to eventually deliver lower US energy prices. He immediately linked the tariff reprieve to the Keystone XL pipeline.

Trump approved the project during his first term, only for the Democrats to pull the plug after returning to power. Now, more than five years later, it looks like it may be back on the table.

Bullish reversal risk recedes

Source: TradingView

Having flagged bullish reversal risks a little over 24 hours ago, USD/CAD did pop higher on Tuesday, with the close roughly in line with the midpoint of Monday’s bearish candle, completing a three-candle morning star reversal pattern in the process.

However, the latest news flow immediately raises questions about the validity of that signal, with USD/CAD pulling back from minor horizontal resistance at 1.3910. The pair remains stuck in a narrow range between that level on the topside and a support zone running from 1.3870 down to the 200-day moving average at 1.3851. Those are the two immediate focal points for traders.

Given the reaction to the tariff news, the risk of a resumption of the broader bearish trend may be increasing, putting the emphasis on a potential break beneath the lower end of that support zone. If that were to occur, 1.3775 is the first level to watch, followed by a more pronounced support zone around 1.3714, the 78.6% Fibonacci retracement of the September 2024 to January 2025 bull move. That area has seen plenty of work over recent months, acting as resistance for lengthy periods earlier this year.

If the bullish price signal proves more prescient, the immediate focal point above 1.3910 is the 100-day simple moving average at 1.3919, where the price bounced on several occasions before breaking lower earlier this week. A break above would put horizontal resistance at 1.3967 in play, with 1.3991 another minor level overhead before the broader downtrend from the July highs comes into play.

The message from the oscillators still favours selling into strength. RSI (14) continues to trend lower and sits marginally above oversold territory at 32, while MACD confirms the message, continuing to trend lower in negative territory after crossing its signal line from above.

FOMC minutes loom
The FOMC minutes from the July meeting screen as the most likely fundamental catalyst to determine the next move in USD/CAD. With Fed tightening expectations having been pared sharply following the recent run of softer US data, traders will be watching for signs of whether the hawkish dissents seen at the meeting extended more broadly across the committee.

TL;DR: Brent’s break above $90 is doing double duty for CAD/JPY — strengthening Canada’s terms of trade while pushing global bond yields higher and deepening Yen funding pressure — and this time Canada’s own data are contributing too, unlike June’s Yen-only rally.

CAD/JPY Has Found a Rare Double Tailwind Brent’s break above $90 is doing more than lifting Canadian Dollar. It is also pushing global inflation expectations and bond yields higher, adding pressure to Yen. For CAD/JPY, that creates an unusually clean setup: same US-Iran shock strengthens one side of cross while weakening other.

June 17 ceasefire framework formally expired on August 17 without renewal, leaving no clear diplomatic settlement in sight. Higher oil improves Canada’s terms of trade and supports petro-currency, while renewed energy and freight inflation keeps global yields elevated. For Yen, still one of market’s principal funding currencies, wider yield differentials reinforce carry pressure. Instead of two separate narratives, CAD strength and JPY weakness are being driven by same underlying shock.

This Time Canada Is Contributing Too That is important because CAD/JPY has rallied on Yen weakness before. Late-June advance eventually stalled because Canadian Dollar itself offered limited independent support. Current move starts from a stronger domestic backdrop.

May GDP rose 0.3% m/m, beating 0.2% forecast and expanding across 13 of 20 sectors. July labor data then surprised decisively, with employment jumping 75K against 15K expected and unemployment dropping to a two-year low of 6.4%. July CPI followed with headline inflation accelerating from 2.8% to 3.0% y/y, above 2.9% consensus, while Trimmed and Median CPI firmed to 1.9% and 2.0% respectively.

Gasoline was a substantial part of headline inflation surge, rising 25.7% y/y, and part of that effect is linked to tax treatment that rolls off in September. That argues against treating CPI as proof that BoC has already returned to a tightening path. But combined with stronger growth and employment, data have at least reopened hike discussion after it had largely disappeared. For CAD, that is enough to distinguish current rally from June’s mostly Yen-driven move.

Oil Shock Is Also Hurting Yen Through Bonds Global bond market supplies second leg. US 30-year yield has climbed to around 5.31%, highest in 19 years, while 10-year is near 4.74%. Germany’s 10-year Bund has reached about 3.22%, highest since 2011, and Canada’s 10-year recently touched 3.75%, a 26-month high.

Current rise in yields carries a stagflationary flavor rather than a straightforward growth signal. Hormuz disruptions and higher energy and freight costs are lifting inflation concerns and encouraging investors to price restrictive rates for longer. That is exactly environment in which Yen’s yield disadvantage becomes harder to ignore.

BoJ normalization may eventually narrow that gap, but global yields are moving higher in meantime. Until Japanese rates catch up more substantially, higher overseas yields continue to reinforce Yen-funded carry trades. Brent above $90 therefore creates a double effect for CAD/JPY: stronger Canadian terms of trade and greater funding pressure on Yen.

Brent Consolidation Will Tell Us Whether CAD Strength Is Real Best test of this rally may come when oil stops rising.

If Brent consolidates around $90–91 and CAD/JPY continues holding or extending gains, that would be strong evidence that Canadian Dollar’s domestic improvement is doing meaningful work. GDP, employment and CPI would then be providing enough support for CAD to carry rally even without another daily oil breakout.

If CAD/JPY instead stalls immediately whenever crude stops climbing, move would look more like June again: predominantly Yen weakness with limited independent CAD follow-through.

That gives current trade a falsifiable fundamental test. A durable move toward 120 should increasingly survive without requiring Brent to make new highs every session.

Japan Can Still Interrupt the Trade Main risk does not currently come from Canada. It comes from Japan.

USD/JPY is moving back toward 160 intervention-sensitive zone, reviving possibility of verbal or direct action from Japanese authorities. September 18 BoJ meeting also approaches with substantial probability of another rate increase already priced.

Either development could hit CAD/JPY even if oil remains high. Actual intervention would likely trigger broad Yen buying across crosses, while a BoJ hike would challenge carry mechanism more fundamentally.

That makes 120 a plausible target, but not a low-volatility one. Stronger oil and global yields are pushing Yen in exactly direction that increases likelihood of Japanese response.

ActionForex’s Technical View on CAD/JPY: Break of 117.50 Would Put 120.86 on Map Technical structure supports bullish case. CAD/JPY has decisively reclaimed 55-day EMA around 114.52, adding to argument that correction from 117.50 ended at 110.82 in a three-wave structure. That low held around 111.28, 38.2% retracement of larger rise from 101.24 to 117.50, preserving medium-term uptrend.

Near-term bias stays higher while 113.86 holds. 116.45 is first resistance and a firm break would strengthen case that rebound has enough momentum to retest 117.50. Decisive break of 117.50 would be more important, signaling likely resumption of broader uptrend and opening 120 psychological level, followed by 120.86, 61.8% projection of 101.24 to 117.50 from 110.82.

Break below 113.86 would postpone that bullish scenario and suggest correction from 117.50 is extending. But while oil stays elevated, Canadian data remain firm and global yields keep Yen under pressure, CAD/JPY has a stronger foundation than during June’s failed advance. This time, both sides of cross are helping.

Key Takeaways Brent’s break above $90 is strengthening CAD/JPY from both sides: improving Canada’s terms of trade while pushing global yields higher and pressuring the Yen’s carry-funding role. Unlike June’s Yen-only rally, Canada’s own data are now contributing, with a 75K jobs beat, firmer May GDP, and CPI reopening the BoC hike discussion. Global bond yields are rising with a stagflationary character, with the US 30-year at a 19-year high and German and Canadian yields at multi-year highs. Brent stabilizing around $90-91 is a falsifiable test: continued CAD/JPY strength without new oil highs would confirm the domestic Canadian story is real. 117.50 is the key resistance for a run toward 120 and then 120.86, but USD/JPY nearing the 159.6-160.6 intervention zone and the September 18 BoJ meeting remain the main risks to that path.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

The Canadian Dollar reached its strongest level since 1 June after July CPI beat forecasts, although the advance later faded. The Canadian Dollar initially strengthened on Monday after headline inflation reached the top of the Bank of Canada’s target range, but the advance was not sustained.

Immediately after the 13:30 BST release, the Canadian currency was 0.17% firmer and USD/CAD traded near 1.3851.

USD/CAD subsequently touched 1.3845, marking the Canadian Dollar’s strongest level since 1 June, before recovering towards 1.3874 much later in the session and returning close to unchanged on the day.

Later ERUK exchange rates data placed GBP/CAD near 1.8790 and EUR/CAD around 1.6064, both slightly higher on the day.

A simultaneous release showed foreign investors bought a net C$40.83bn of Canadian securities in June, led by federal government bonds.

The Statistics Canada CPI release showed prices rising 3.0% year on year in July, up from 2.8% in June and above the 2.9% consensus forecast.

On a non-seasonally-adjusted basis, the index climbed 0.5% on the month, compared with expectations of 0.4%, while the seasonally adjusted increase was 0.3%.

Gasoline inflation accelerated to 25.7% from 20.5% as renewed US-Iran tensions lifted energy costs, while air transportation prices rose 12.0%.

Food bought from stores provided some relief, slowing to 3.1% from 3.9%, and shelter inflation remained contained at 1.3%.

Core Inflation Leaves a Two-Sided BoC Signal The Bank of Canada’s preferred year-on-year measures remained close to 2%, with CPI-trim at 1.9% and CPI-median at 2.0%.

That steadier six- and 12-month picture led BMO Economics senior economist and director Robert Kavcic to conclude that “the inflation side is looking stable and well-behaved despite a bit of heat in July”.

Shorter-term measures were firmer, however.

BMO calculated that the average three-month annualised pace across four core gauges rose to 2.5% from 2.0%.

The faster gauges prompted Scotiabank economist Derek Holt to warn that “measures like these lean against staying at the low end of the BoC’s neutral rate range”.

Scotiabank reported that markets priced 16 basis points of a possible quarter-point increase by year-end, although the annual core readings offered little basis for an immediate policy response.

Growth supplied the more favourable side of the outlook, with Royal Bank of Canada assistant chief economist Nathan Janzen and economist Abbey Xu describing “a relatively favourable combination of firming economic growth and underlying inflation close to target”.

Trade risks nevertheless complicated that view.

The RBC economists noted that new US duties on selected Canadian goods were due to take effect on 19 August, although their narrow coverage was unlikely to derail the broader recovery.

Image: USD/CAD, GBP/CAD, EUR/CAD and CAD/JPY around Canada’s July CPI release at 13:30 BST. At the Bank of Canada’s 2 September decision, policymakers will weigh firmer short-term core momentum against stable year-on-year gauges and renewed trade uncertainty.

Pound Sterling is pressing August highs as firmer yield spreads and fading bearish hedges support Scotiabank's bullish GBP/USD view. The Pound to Dollar (GBP/USD) exchange rate is pushing back towards its August highs, trading around 1.3545 early on Monday after reaching 1.3560 last week.

Scotiabank sees a stronger underlying backdrop for Sterling than the relatively modest price move suggests.

“The pound is up 0.3% vs. the USD and threatening a break of this week’s local high in the mid-1.35s,” the bank said.

Yield spreads are helping. Scotiabank notes that UK-US spreads have extended their recent recovery, offering fresh fundamental support for GBP at the same time as demand for protection against Sterling weakness has eased.

The options market is telling a similar story.

“Risk reversals are extending their recovery and fading the premium for protection against GBP weakness,” Scotiabank said, linking the move to “a sustained improvement in the market’s perception of moderating political risk.”

That gives the latest advance a broader base than simple Dollar weakness.

Image: GBP/USD one-month chart GBP/USD has recovered strongly from its late-July low below 1.33, with the pair now trading above its rising 20-day moving average and close to the top of its one-month range.

Bank of England communication has also remained supportive.

Scotiabank highlighted comments from BoE Chief Economist Huw Pill which “reaffirmed a call for higher rates”, helping to keep Sterling's rate backdrop constructive despite a relatively quiet UK data calendar.

Short-Term GBP/USD Outlook: 1.3600 Is the Next Test Scotiabank's technical view has turned firmly bullish.

“The RSI has climbed to a fresh local high in the lower 60s, threatening the July high,” the bank said. “The gains are suggestive of renewed bullish momentum and a potential break of the midweek high just below 1.3550.”

That level has effectively already come under pressure, with GBP/USD reaching 1.3560 during the latest advance.

Scotiabank sees additional resistance at 1.3600 and then 1.3650, while retaining a near-term trading range of 1.3480-1.3580.

Image: Pound-to-Dollar exchange rate performance over 2016 GBP/USD remains well below its January high near 1.3860, but the latest recovery has carried spot above both its 20-day and 50-day moving averages and back into positive territory for 2026.

The immediate question is whether Sterling can convert improving positioning and yield support into a clean move through the mid-1.35s.

Scotiabank's signals suggest the pressure is building.

A sustained break above 1.3550 would bring 1.3600 quickly into view, while 1.3480 marks the lower edge of the bank's preferred near-term range.

For Pound Sterling bulls, the balance has shifted from defending 1.35 to testing how far above it the market can go.

Exchange Rates UK Research Our currency coverage draws on live market data, official economic releases and published bank research.

EUR/USD rallies on Friday, erasing all the losses recorded earlier this week as broad-based weakness in the US Dollar (USD) lifts the Euro (EUR). At the time of writing, the pair trades around 1.1580 near its highest level since June 17.

The US Dollar weakens as the latest batch of US economic data tempers expectations of a near-term Federal Reserve (Fed) interest-rate hike. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 99.50, down 0.47% on the day.

US Retail Sales fell by 0.6% in July, missing expectations for a 0.1% increase and reversing the previous month’s 0.2% gain. Preliminary data from the University of Michigan (UoM) showed that the Consumer Sentiment Index fell to 51.0 in August from 55.2, while the Consumer Expectations Index dropped to 50.6 from 55.4.

The data follows this week’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports, which showed that price pressures eased for a second consecutive month, suggesting that the inflationary impact of the recent energy shock is fading.

According to the CME FedWatch Tool, markets now see around a 70% chance that the Fed will keep interest rates unchanged in September, a sharp shift from earlier expectations of an increase.

However, inflation risks remain tilted to the upside as uncertainty over the reopening of the Strait of Hormuz keeps Oil prices elevated. The Michigan survey’s one-year inflation expectation edged up to 4.3% from 4.2%, while the five-year measure held steady at 3.3%.

On the Euro side, markets widely expect the European Central Bank (ECB) to raise interest rates in September, which would mark its second hike this year.

Economists at Commerzbank expect the ECB’s September move to bring the deposit rate to 2.5%, noting that at this level “a level would be reached that Governing Council members view as the upper limit of the neutral interest rate—one that neither stimulates nor slows the economy and leads to medium-term inflation.”

Looking further ahead, Commerzbank argues that “toward the end of 2027, the ECB is likely to lower interest rates again,” as “inflation should gradually decline over the course of the coming year and come close to reaching the inflation target.”

ECB FAQs The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

The New Zealand Dollar (NZD) appreciates on Wednesday as the US Dollar (USD) loses ground across the board amid dwindling hopes of immediate Federal Reserve interest rate hikes. The NZD/USD pair has bounced up to session highs beyond 0.5880 at the time of writing after bouncing from 0.5820 lows on Thursday, with bulls eyeing two-month highs right above 0.5900.

Brown Brothers Harriman’s Elias Haddad highlights that “cooling US CPI and PPI inflation in July” have “trimmed the implied odds of a Fed rate hike in September to nearly 30%, the lowest since the June 17 FOMC decision.”

Haddad notes that this repricing “is keeping USD in check and lifting risk appetite despite the ongoing US-Iran conflict,” adding that “today’s US data releases are unlikely to shift the dial on Fed fund futures pricing.”

Technical Analysis: Key resistance is at the 0.5920 area

NZD/USD held above the 200-day SMA on Thursday and has bounced up strongly, trading at 0.5883 at the time of writing and honouring the upward trendline support from late-June lows.

Momentum indicators in the daily chart are neutral to bullish, with the Relative Strength Index (RSI) near 59 hinting at a constructive bias, while a slightly negative Moving Average Convergence Divergence (MACD) warns about the frail upside pressure.

Bulls are looking at the area between 0.5905 and 0.5920 where August 3 and 7 highs meet the 61.8% Fibonacci retracement of June's selloff. Further up, the 0.6000 area, where bulls were capped in May and early June, emerges as the next target.

On the downside, initial support, the area between the upward trendline, now at 0.5850, and the 200-day SMA at 0.5831, remains a significant challenge for bears. Below here, the late July lows, near 0.5760, would come into play.

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

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHFUSD-0.22%-0.31%-0.22%-0.31%-0.23%-0.54%-0.11%EUR0.22%-0.09%0.00%-0.13%0.00%-0.34%0.11%GBP0.31%0.09%0.11%-0.03%0.09%-0.22%0.21%JPY0.22%0.00%-0.11%-0.07%-0.01%-0.35%0.12%CAD0.31%0.13%0.03%0.07%0.07%-0.24%0.20%AUD0.23%-0.00%-0.09%0.00%-0.07%-0.32%0.13%NZD0.54%0.34%0.22%0.35%0.24%0.32%0.46%CHF0.11%-0.11%-0.21%-0.12%-0.20%-0.13%-0.46%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

EUR/USD stood at 1.1537 on Friday, with markets continuing to digest incoming economic data. Soft US inflation figures have reduced expectations of a Federal Reserve rate hike in September.

Data released on Thursday showed that producer prices were flat in July. Together with the benign CPI report, this suggests that inflationary pressures are not yet accelerating.

Markets are now pricing in a 35% probability of a 25-basis-point Fed rate hike in September, down from 55% a week earlier. Moderate inflation reduces the need for near-term policy tightening.

Recent data also suggest that the initial inflationary impact of the Middle East conflict and high energy prices may be easing. However, uncertainty surrounding a potential agreement and the reopening of the Strait of Hormuz continues to pose risks to the inflation outlook.

Technical analysis

On the H4 chart of EUR/USD, the market continues to trade within a consolidation range, currently extending between 1.1511 and 1.1545, with the upper boundary being tested from below. The consolidation range around the 1.1546 level is nearing completion. An upside breakout would suggest a corrective move towards 1.1570, followed by a decline to 1.1492. A direct downside breakout would open the way for a move towards 1.1492, with scope for the trend to extend to 1.1400. The MACD indicator supports this scenario, with its signal line below zero and pointing downwards, reflecting continued bearish momentum.

On the H1 chart, the market has completed an upward move to 1.1543. A consolidation range is currently forming below this level. A move lower towards 1.1492 is expected, followed by a move higher to 1.1536, and then a continuation of the downward trend to 1.1400, with scope for a further decline to 1.1330. The Stochastic oscillator confirms this scenario, with its signal line below 80 and trending downward towards 20, indicating increasing short-term downside pressure.

ConclusionEUR/USD remains range-bound as markets assess the implications of softer US inflation data, which have reduced the likelihood of a September Fed rate hike from 55% to 35%. Producer prices were flat in July, adding to evidence that inflationary pressures are moderating. The initial impact of the Middle East conflict and high energy prices appears to be fading. However, uncertainty over a potential US–Iran agreement and the reopening of the Strait of Hormuz still poses risks. Technically, the pair may see a short-term corrective move towards 1.1570 before resuming its broader bearish trend towards 1.1492 and potentially 1.1400. The near-term direction will depend on further US economic data and geopolitical developments.

Rabobank's Senior FX Strategist Jane Foley discusses EUR/USD dynamics in light of shifting Fed rate hike expectations and Oil-related safe haven flows into the Dollar. Foley expects choppy range trading in EUR/USD with a modest medium-term upward bias, highlighting Eurozone vulnerability as an energy importer. Rabobank's updated forecasts see EUR/USD around 1.15 in one month and 1.15–1.16 over 3–6 months.

Range-bound pair with mild upside bias"While oil and the DXY dollar index largely moved in the same direction from late January and into the spring, this appeared to break down in June. In our view, this was likely linked to a run up in market speculation regarding the prospects of Fed rate hikes in late spring, which appeared to take over from safe haven demand as the primary source of USD support in this period. Fed rate hike speculation has recently suffered a setback on the back of recent US data releases."

"Even though the July US CPI inflation data was in line with expectations, the market slightly pared back its expectations for a Fed rate hike. In line with this the DXY dollar index weakened a little on the news, although it subsequently shifted back towards the top end of its dull August range. The release of softer than expected US payrolls data last week likely provided a filter through which many investors judged yesterday’s US CPI inflation release, since a softer labour market will reduce the risk of second round price effects."

"If Fed rate hike speculation continues to be pared back, in line with RaboResearch’s view, the USD will be exposed to potential downside pressures. That said, the uncertainties regarding the re-opening of the Strait of Hormuz remain a USD supportive factor. At the start of the Iran war, the market was positioned short of USDs."

"By contrast, in these circumstances we would expect the market to remain wary of rebuilding long EUR positions. This view stems from the expectation that the Eurozone is more vulnerable to growth and inflation headwinds derived from its stance as an energy importer. Thus, while we see scope for some downside potential for the USD coming from a reduction in Fed rate hike expectations, we expect these to be contained by safe haven demand, until further clarity regarding the Strait of Hormuz emerges. Consequently, we expect choppy range trading to dominate EUR/USD through the rest of the year."

"We continue to favour choppy range trading in EUR/USD in the months ahead with a modest medium term upward bias. We have pushed up our 1-month forecast to EUR/USD1.15 from 1.14 and expect the 1.15-1.16 range to dominate on a 3-to-6-month view."

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

The New Zealand Dollar (NZD) underperforms its major currency peers, trading 0.45% down at around 0.5830 against the US Dollar (USD) during the European trading session on Thursday. The antipodean faces sharp selling pressure as downwardly revised Reserve Bank of New Zealand (RBNZ) two-year inflation expectations in the third quarter this year have raised doubts over expectations of interest rate hikes.

Earlier in the day, RBNZ Q3 inflation expectations for the two-year timeframe arrived lower at 2.34% Year-on-Year (YoY) from prior projections of 2.53% released in the previous quarter this year.

Lower New Zealand (NZ) inflation expectations are expected to raise doubts over expectations of an interest rate hike by the RBNZ at the September policy meeting.

Earlier, financial markets were seen confident about the RBNZ raising policy rates in September.

RBNZ seen retaining hawkish bias despite mixed labour dataAccording to TD Securities, the latest labour market figures, while mixed, are unlikely to derail the Reserve Bank of New Zealand’s tightening bias. The bank argues that “despite the mixed report today, we believe the RBNZ has the room to hike again by 25bps in September given that economic activity continues to recover in Q3,” suggesting policymakers can look through near-term labour market noise as long as the broader recovery remains intact.

Meanwhile, the US Dollar (USD) holds onto Wednesday’s gains, driven by ongoing Middle East tensions.

On the domestic front, both the United States (US) headline and core Consumer Price Index (CPI) cooled down, as expected, in July, which could dampen the strength in the US Dollar.

NZD/USD Technical Analysis

NZD/USD extends its correction to near the downward-sloping trend line at 0.5827 after slipping below the 20-period Exponential Moving Average (EMA), which is at 0.5842.

The Relative Strength Index (RSI) around 50.1 points to neutral momentum after the recent pullback from the 0.5890 area.

On the topside, the intraday high at 0.5870 is the immediate resistance, which needs to be broken decisively to revisit the August 7 high at 0.5907. On the downside, first support is seen at the upward-sloping trendline break level at 0.5827; a failure there would likely expose the pair to a deeper correction toward 0.5800, followed by the July 29 low at 0.5761.

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

RBNZ FAQs The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.

The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.

Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.

In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.

NZD/USD volatility sits near two-decade lows Kiwi swaps price aggressive RBNZ tightening Two-year inflation expectations headline crucial RBNZ survey AUD/NZD probes potential bullish breakout NZD/USD bullish momentum fading fast The Survey That Could Shift RBNZ Pricing The Kiwi has been unbelievably quiet in August, but that calm may be living on borrowed time. Volatility is sitting near the lowest levels seen in two decades, Kiwi rates markets are heavily priced for further RBNZ tightening, and today brings the release of a survey that has historically carried meaningful implications for interest rates.

The RBNZ’s Survey of Expectations is probably the most important New Zealand release most have never heard of. Two-year inflation expectations are the number to watch, with a meaningful deviation carrying the potential to jolt the Kiwi out of its funk.

Markets Have Priced Plenty of Hikes Ahead of its release, swaps traders continue to expect a relatively aggressive monetary policy tightening cycle from the RBNZ, even after the modest pullback sparked by the soft New Zealand employment report earlier this month. Implied pricing puts the probability of a hike at the September meeting at 88%, with roughly 3.7 further hikes priced by June next year and close to five by August, on top of the first increase of the cycle delivered last month.

Source: RBNZ, FOREX.com, Bloomberg

That is far steeper than the path implied by the RBNZ’s May forecasts. From the 2.25% OCR prevailing at the time, its track implied around 3.3 hikes by the middle of next year. That differential suggests the hurdle for a further hawkish repricing is high, meaning a modest increase in inflation expectations later today may not be enough. If we were to see a retracement in inflation expectations, it could prove far more meaningful for Kiwi rates and currency.

RBNZ Reaction Function Is More Sensitive to Falls The survey provides several measures of inflation, but it’s the two-year reading that tends to be more influential when it comes to monetary policy. It is more reflective of medium-term price pressures, rather than capturing near-term volatility in food, energy and other prices. Two-year expectations rose to 2.53% in the May survey, putting them well above the 2% midpoint of the RBNZ’s 1–3% inflation target.

Source: RBNZ, FOREX.com

What’s interesting is that the historical relationship is not especially mechanical when expectations rise. Increases of at least 10bp, 15bp and 20bp while two-year expectations were above 2% were followed by a hike at the next meeting only 32%, 27% and 36% of the time respectively. It was only when the increase reached 30bp or more that the response became noticeably more hawkish, with the RBNZ hiking in 60% of cases, although that is based on only five observations.

The reaction has been considerably stronger since 2020. Increases of at least 20bp while two-year expectations were above 2% were followed by a hike at the next meeting in 60% of cases, while all three increases of 30bp or more were followed by a hike.

Source: RBNZ, FOREX.com

More interesting is what happens when inflation expectations fall, particularly when the decline takes the two-year measure back towards the RBNZ’s 2% target midpoint. Historically, that has produced a much stronger reaction function at the following policy meeting than an equivalent increases in expectations.

When two-year expectations fell but remained between 2.00% and 2.25%, the RBNZ did not hike at the next meeting in any observation across more than two decades of data. When they finished between 2.25% and 2.50%, the next-meeting hike rate was just 9%. By contrast, when expectations fell but remained above 2.50%, the RBNZ still hiked 36% of the time.

Kiwi Volatility Goes Cold

Source: LSEG, FOREX.com

While there’s been plenty of political instability in New Zealand over the past week, there's been almost none in the Kiwi. NZD/USD has been remarkably subdued, with 10-day realised volatility falling to 4.1% annualised, putting it in roughly the bottom 1% of observations going back two decades!

A decline in inflation expectations, particularly back towards the RBNZ’s 2% target midpoint, could force traders to rethink the aggressive tightening path and weigh on the Kiwi as a result. 

NZD/USD Downside Risk Starts to Build

Source: TradingView

You can see visually how quiet NZD/USD has been over the past fortnight. What has piqued my interest is the pair breaking lower from what resembles a wedge structure in the wake of the US July inflation report, pushing down to test 0.5860, a level that has acted as both support and resistance earlier this year.

The message from the oscillators suggests upside momentum is fading fast. RSI (14) has been setting sequentially lower highs and lower lows and now sits only marginally above the neutral 50 level. MACD has also staged a bearish crossover, although it remains in positive territory. Combined with the recent price action, that suggests the bears may be slowly gaining the upper hand.

If the breakdown extends through 0.5860, attention shifts to the confluence of the 100 and 200-day moving averages, horizontal support around 0.5825 and the uptrend dating back to the late-June low. That is the key downside support zone to watch. A break beneath it would open the door for a deeper retracement towards the 50-day moving average, 0.5762, 0.5747 and 0.5724.

If the price manages to push back into the former compression structure, 0.5900 is the level to watch overhead. A move above there that sticks may encourage bulls to look for a run towards 0.5920, which has previously acted as support, followed by 0.5992.

AUD/NZD Bulls Eye Breakout

Source: TradingView

The price action in AUD/NZD is arguably more interesting, with a firming in RBA rate hike pricing seeing the cross rebound strongly from beneath support at 1.1935. You can’t help but notice the price is now testing the upper end of a structure that resembles a falling wedge, which is a bullish continuation pattern. Having come after a very strong rally over the past year, it suggests the pair may be on the cusp of breaking out and retesting the highs set earlier this year.

The upper boundary of the structure kicks in around 1.2053, which also coincides with horizontal resistance. A break of that level would put the 50-day and 100-day moving averages into play for bulls, with the latter marking an area where the pair stalled in late July after another rebound. A move back above the confluence of the 100-day moving average with 1.2115 resistance would improve the probability of a run towards the recent highs.

If the upper boundary of the structure holds, we may see a potential retracement back towards 1.2000, a level that capped gains previously earlier this month. Beyond that, 1.1935 and the lower boundary of the compression structure, found today around 1.1900, are the next downside levels to watch, along with the key 200-day moving average located just beneath.

Mirroring the rebound seen over the past two weeks, the oscillators have turned more constructive for the bulls. RSI (14) is setting higher highs and higher lows and now sits marginally above the neutral 50 level. MACD has also staged a bullish crossover but remains negative, although it is pushing back towards positive territory. It is still a mixed signal, more neutral in nature, but it does suggest the bears no longer have it their own way.

Referenced assets

Key takeaways Sterling stays firm: GBP/USD remains in a short-term uptrend above 1.3479 after breaking above its medium-term descending trendline post-NFP.US CPI is the key catalyst: A hotter-than-expected core CPI could revive Fed-hike bets and pressure GBP/USD, while softer inflation may extend sterling’s rally.1.3479 is pivotal support: Holding above it keeps 1.3547, 1.3580 and 1.3643 in focus; a break below exposes 1.3440 and 1.3400. The sterling pound has been one of the best-performing major currencies against the US dollar in the past five trading sessions.

The USD/GBP cross rate has tumbled by 0.38% (a 0.38% gain for GBP against USD) at the time of writing, slightly above USD/CAD, which recorded a 0.56% loss over the same period (see Fig. 1).

Fig. 1: 5-day rolling performances of USD against major currencies as of 12 Aug 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.

Fig. 1: 5-day rolling performances of USD against major currencies as of 12 Aug 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance. Macro divers: inflation trajectory versus Fed pricing Market sentiment remains closely tied to incoming inflation data as investors gauge whether the Federal Reserve will resume rate hikes later this year. Following recent mixed labour market signals, pricing for the September FOMC decision sits close to a coin toss (based on latest data from the CME FedWatch tool, the Fed funds futures market is only pricing in a 48.1% chance of a 25-bps hike, down from around 70% chance a week ago).

Hot CPI scenario (Core YoY > 2.5%): A surprise to the upside, driven by core goods price pass-throughs, would likely trigger a hawkish repricing in US short-term Treasury yields. This would provide a strong tailwind for the US Dollar Index, exposing GBP/USD to a rapid downward repricing toward the 1.3400 psychological level (also near the 20- and 200-day moving averages).Soft CPI scenario (Core YoY ≤ 2.5%): Confirmation of easing services inflation and softer shelter costs would give the Fed breathing room. A softer dollar would reinforce risk appetite, pushing GBP/USD above near-term hurdles toward multi-month highs.Let’s now decipher the near-term (1 to 3 days) outlook on the GBP/USD from a technical analysis perspective

Oscillating within minor ascending channel after a bullish breakout ex-post NFB

Fig. 2: GBP/USD minor trend as of 12 Aug 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.

Fig. 2: GBP/USD minor trend as of 12 Aug 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance. The price action of GBP/USD has cleared a significant medium-term hurdle after staging a bullish breakout ex-post the US NFP release (a major risk event on Friday, 7 August 2026), above its former descending trendline resistance from the 28 January 2026 high/52-week high.

In addition, it continues to oscillate within a minor ascending channel in place since the 29 July 2026 low of 1.3279, with a current bullish momentum reading on the hourly RSI (see Fig. 2).

These observations suggest that GBP/USD is oscillating within a short- to medium-term uptrend.

Watch the 1.3479 key short-term pivotal support to maintain a near-term bullish bias for the next intermediate resistances to come in at 1.3547, 1.3580 and 1.3643 (also a Fibonacci extension).

On the flip side, a failure to hold and an hourly close below 1.3479 invalidates the minor bullish impulsive up-move sequence, triggering a minor corrective decline towards the next intermediate supports at 1.3440 and 1.3400.

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About the Author

Kelvin Wong Senior Market Analyst

Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities.

Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets.

In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.

Based in Singapore, Kelvin Wong is a well-established senior global macro strategist with over 15 years of experience trading and providing market research on foreign exchange, stock markets, and commodities.

Passionate about connecting the dots in the financial markets and sharing perspectives around trading and investment, Kelvin Wong is an expert in using a unique combination of fundamental and technical analyses, specializing in Elliott Wave and fund flow positioning, to pinpoint key reversal levels in the financial markets.

In addition, over the last ten years, Kelvin has conducted numerous market outlook and trading-related seminars, as well as technical analysis training courses, for thousands of retail traders.

USD, USD/JPY Talking Points: The long-term USD/JPY carry trade is still swinging USD trends across the FX market. At root of the USD/JPY trade are rate expectations and as high US CPI forced expectations higher over the past two months, USD/JPY bulls drove a rally that eventually brought out coordinated intervention. Over the past four years some of the largest moves in USD/JPY have been sparked by US CPI rather than interventions and that puts even more interest behind tomorrow’s release.

The Bank of Japan and the US Treasury Department took their swing at USD/JPY two weeks ago, but since then, bulls have been clawing back. This puts perhaps even more importance on tomorrow’s US CPI report as rates markets still widely-expect the US to lift rates later this year, with an approximate 80% probability priced-in for at least one 25 bp hike.

Even September is looking like a coin flip, and that’s largely owed to the spike in CPI seen earlier this summer on the back of the war in Iran. As oil prices rallied, inflation followed, and there’s been a growing chorus of Fed-speakers that sound as though they’re warming to the idea of tightening policy, looking to avoid a repeat of the disaster in 2021 that saw the FOMC dismiss inflation as ‘transitory’ until, eventually, they had no choice but to hike aggressively in 2022.

US CPI Prints Since Jan 2021

Chart prepared by James Stanley

Rates Markets Right now rates markets are highly expecting a rate hike from the Fed later this year, which would fly in the face of President Trump’s strategy in which he wanted to install a Fed Chair that would cut rates. So far, Warsh has sounded more hawkish than dovish but as I shared after the last FOMC meeting, it seems as though he’s doing that to keep markets from just expecting that he’s going to cut rates whenever he can. If they did think that Warsh was a dove, that could give upward momentum to US Treasury Yields, such as we’ve seen, and that could complicate the picture for the US Treasury Department that has a considerable amount of debt coming due over the next four months and then more over the next year.

This is likely why he keeps saying that the market will adjust rates based on the preponderance of data rather than waiting for the Fed to do so. Nonetheless, that expectation still leans towards wide expectations for the Fed to hike, and this comes with numerous market responses such as a stronger USD, a stronger USD/JPY, etc. And if we do see those rate hike odds price out, then, reasonably, there could be a shift in price action for those markets, as well.

At this stage hike in September is a veritable coin flip.

CME Fedwatch Odds for September Chart prepared by James Stanley; data derived from CME Fedwatch US CPI is Important for USD/JPY, Which is Important for the USD and FX Market Some of the largest moves in USD/JPY over the past four years have been fueled by a US CPI release.

In October of 2022, when the Fed was hiking aggressively to tame the ‘transitory’ inflation that turned out to be not so transitory, USD/JPY was in a near-parabolic like state. To the point where Japanese officials were beginning to worry about the possibility of hyperinflation. So, they tried to step in at 145 and that largely failed, as the intervention merely prodded a pullback that USD/JPY bulls bid, eventually driving price up to 150.00.

At that point, the BoJ was forced to act, after a high of 151.95 traded. They intervened on a Friday ahead of the weekend and, again, price retreated to support before buyers piled back in.

But this time, as price re-approached that 150.00 handle that was previously defended, bulls began to back away. They still held and even bought at support, but as bounced showed up they came in with lower-highs.

What ultimately drove a reversal was the US CPI print on the morning of November 10th, 2022. That was when markets got warm to the idea that perhaps the Fed was getting a handle on inflation, and maybe they would soon be able to stop hiking and, perhaps even eventually cut rates. US CPI was 7.1% at the time and core was at 6.3% so this was still a distant prospect – but the possibility of change was enough to convince longs to bail on positions given that the theoretical cap on upside at the time, at 150.00 made chasing prices higher a less attractive setup.

That market reversed by about 2,000 pips over the course of around two months, with bulls ultimately getting back in the driver seat in January. They, again, drove right back to the same 151.95 level. And, again, it was a below-expected US CPI print in November that shook the branch of the carry trade. This time, it was a mere 23.6% retracement of that prior rally with bulls getting control in December and going right back up to the same 151.95 spot.

In April of 2024, hope was beginning to fade on rate cuts and on April 10th, the morning of a US CPI print, above expected data dashed rate cut hopes – and this time, USD/JPY broke out as the stops above 151.95 provided rocket fuel for longs, and the pair made a firm run up to the next big figure at 160.00.

The Bank of Japan, again, intervened, and that brought about a week of weakness to USD/JPY but that same 151.95 level provided a launch pad for bulls to get back in the driver seat, with price trickling back-above 160.00 shortly after.

The next intervention, in July of 2024, saw the BoJ take a different approach. This time, they waited until the morning of a US CPI print and the combination of the two forces, with inflation coming in below expectations and markets finally getting the confirmation they needed that the Fed could probably cut rates that year, sparked a dizzying reversal – and not just in USD/JPY, as the high-flying AI trade came under fire, as well.

USD/JPY Daily Chart Chart prepared by James Stanley; data derived from Tradingview Why USD/JPY is So Sensitive to US CPI The carry trade is driven by rate differentials, and those are largely driven by inflation. With central banks tasked with monitoring inflation, drops that lead to lower rate expectations or even just fewer rate hikes could be enough to compel longs to close positions, such as we saw in November of 2022 or 2023, or again in July of 2024.

And because the USD/JPY trade is still up more than 50% from early 2021 levels, then logically there’s a large built-in position on the long side of the pair, which means selling in USD/JPY can lead to USD-weakness elsewhere, such as we saw with the EUR/USD rally in Q3 of 2024, or even the bullish move in EUR/USD two weeks ago.

--- written by James Stanley, Senior Market Analyst, Global Macro

The Reserve Bank of Australia held the cash rate at 4.35%, with all nine board members voting to leave policy unchanged. The decision itself was expected. The more useful signal came from why the Bank chose to pause.

Inflation is still too high, but consumer spending, housing and the labour market are beginning to cool. After three rate hikes this year, the RBA now wants to see how much of that tightening is still working through the economy before deciding whether another increase is needed.

That leaves the RBA in an awkward middle ground: not enough evidence to hike again immediately, but not enough disinflation to declare the tightening cycle finished. For AUD, the next move is therefore a confirmation story rather than a simple hawkish-rate story.

The RBA is pausing to assess, not declaring victoryThe latest statement suggests the RBA believes tighter policy is starting to have a real effect. Trimmed mean inflation remains elevated, but softer consumer spending, cooler housing conditions in some capital cities and a softer labour market all point to demand losing some momentum.

That is why the hold should not be read as a dovish pivot. The Bank can keep policy restrictive while waiting for the lagged effect of earlier hikes. If inflation remains sticky, or global energy risks keep price pressures elevated, the option of another hike remains open.

For AUD, this is supportive at the margin, but it is not a one-way bullish signal. The currency still has to prove that the RBA backdrop is strong enough to overcome resistance and whatever the US dollar does next.

AUD/USD now has to clear 0.704-0.708AUDUSD is now testing the 0.704-0.708 resistance area on the daily chart. Price has pushed into a previous high range, but the latest candles are beginning to stall and momentum has failed to confirm the higher high.

From here, the US side of AUDUSD becomes the next immediate driver, with US CPI due tomorrow on 12 August.

A hotter US inflation print would make it harder for AUDUSD to break higher. The first pullback references sit near the channel midline around 0.700 and the lower channel area near 0.695. A clean channel failure would expose the larger 0.683-0.687 support zone.

A cooler US CPI print would give the pair more room to break above 0.708. If price can close above that area and hold it on a retest, the next references are around 0.718 and then 0.723-0.727.

Fundamentally, the RBA is in a much more comfortable position than earlier in the year.

Softer housing activity, lending, consumer spending and labour conditions suggest its previous hikes are beginning to cool demand, which should gradually ease inflation pressure. Technically, AUDUSD may also be forming bearish divergence at resistance. 

RBNZ shows a hawkish policy is not enoughThe RBNZ offers a useful warning against treating a hawkish central bank as an automatic bullish currency signal. It raised the Official Cash Rate to 2.50% on 8 July and said further increases are likely, although the timing remains uncertain.

Even so, NZD/USD remains below its long-running weekly downtrend and beneath the 0.603-0.612 resistance area. The pair has not converted renewed RBNZ tightening into a structural breakout of its trendline resistance.

That makes NZD/USD a control case for the RBA story. Domestic policy can support a currency, but relative growth, commodity exposure, the US dollar and existing price structure still decide how much of that support reaches the exchange rate.

AUD/NZD may be reaching a turning pointRemoving the US dollar from the equation, the RBA may finally be starting to see its aggressive tightening cycle pay off.

Housing activity and new lending have cooled, consumer spending has slowed, and labour conditions have softened, giving the Bank more reason to pause and assess the impact of the three hikes delivered between February and May.

The RBNZ, on the other hand, is at a much earlier stage. It only restarted tightening in July, raising the OCR to 2.50%, with further hikes still likely. That timing gap matters because Australia may now be moving into the later stages of its tightening cycle just as New Zealand begins applying more pressure.

If that gap starts to narrow, so could Australia’s relative rate advantage. That raises the risk that AUDNZD is approaching a turning point rather than simply extending higher.

The idea that AUD may weaken against the NZD is supported technically as well. 

The pair has tapped a major trendline resistance extending from 2019 with almost perfect precision. The current pullback could still form a bull-flag consolidation, but failure to recover would leave room for a deeper retracement towards roughly 1.162-1.169, where the trading volume weighted average price anchored from the start of the rally sits.

USD/CAD trades on the back foot on Monday even as the US Dollar (USD) regains some ground after weakening last week following softer-than-expected US Nonfarm Payrolls (NFP) data. Attention now turns to Wednesday’s US Consumer Price Index (CPI) report. At the time of writing, the pair trades around 1.3932, near its lowest level in two months.

The Canadian Dollar (CAD) draws support from stronger-than-expected domestic labour data and rising Oil prices. West Texas Intermediate (WTI) trades around $80.37 per barrel, up 5.20% on the day.

USD/CAD dip below 1.40 puts focus on US CPI and Fed pricingAccording to TD Securities, the latest payrolls data “broke USD/CAD below 1.40,” as the sharp reaction to the contrasting US and Canadian labour market outcomes underscored that “the market remains focused on both central-bank divergence and Canada's domestic outlook.” On the Canadian side, the bank notes that “recent developments in the Canadian economy have evolved broadly in line with our forecasts,” and that while the data surprise is “briefly pushing USD/CAD below the 1.40 support level,” they “think the bearish USD momentum may not sustain unless US CPI also surprises lower to allow market to price out near-term Fed rate hiking odds.”

From a technical perspective, USD/CAD has formed a series of lower highs and lower lows since briefly rising above 1.4200 in late June. The pair holds below the 1.4000 psychological mark and the 50-day Simple Moving Average (SMA) at 1.4075, keeping the near-term bias tilted to the downside.

Momentum indicators also favour sellers. The Relative Strength Index (RSI) sits near 33, approaching oversold territory, while the Moving Average Convergence Divergence (MACD) indicator stays in negative territory.

On the downside, the 100-day SMA near 1.3916 offers initial support, followed by the 200-day SMA around 1.3853. A decisive break below the latter could open the door to a deeper decline.

On the topside, the 1.4000 psychological mark acts as immediate resistance, followed by the 50-day SMA at 1.4075. A recovery above this moving average would ease the bearish pressure.

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

Canadian Dollar Price Today The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHFUSD0.10%-0.24%0.72%-0.06%0.05%0.10%0.20%EUR-0.10%-0.33%0.61%-0.17%-0.04%-0.00%0.10%GBP0.24%0.33%0.97%0.17%0.31%0.33%0.44%JPY-0.72%-0.61%-0.97%-0.80%-0.69%-0.68%-0.52%CAD0.06%0.17%-0.17%0.80%0.06%0.18%0.25%AUD-0.05%0.04%-0.31%0.69%-0.06%0.02%0.15%NZD-0.10%0.00%-0.33%0.68%-0.18%-0.02%0.11%CHF-0.20%-0.10%-0.44%0.52%-0.25%-0.15%-0.11% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).

Friday’s US employment report was the first of four major pieces of economic data due before the Federal Reserve’s September meeting. The figures delivered a significant downside surprise, prompting markets to scale back expectations of a September rate hike to around 44%, from above 55% ahead of the release. Yet, the data hasn’t materially changed the USD/JPY forecast much. The pair has already recovered towards the levels seen before the payrolls release, trading close to 159.00. That leaves the pair once again within striking distance of the psychologically important 160.00 level. Unless upcoming US data deliver further negative surprises, or Japanese authorities step back into the market, USD/JPY could once again test that threshold.

The next major catalyst is US inflation, with CPI due later this week. At the same time, developments in oil markets remain important, particularly as uncertainty surrounding the Strait of Hormuz continues to complicate the inflation outlook.

Oil remains a key variable for the dollar outlook Crude oil prices continue to find support from the uncertainty surrounding shipping through the Strait of Hormuz. Although Donald Trump has indicated that Washington is “semi-negotiating” with Iran, the language suggests that economic pressure remains central to the strategy rather than an immediate move towards military escalation.

There have also been reports that Iran and Oman are edging towards an understanding over a shipping route through the Strait. However, any meaningful and sustained reopening of the waterway is likely to depend on wider progress in US-Iran negotiations.

A prolonged disruption to energy flows should keep inflationary pressures elevated. That could make it harder for the Fed to ease policy, even if we see further data weakness, potentially providing an underlying source of support for the greenback.

The Fed’s data-dependent approach puts CPI in the spotlight The latest market reaction reinforces just how important incoming economic data have become for the dollar. Rather than relying heavily on oil prices alone, markets are increasingly being forced to assess individual data release through the Fed’s evolving reaction function.

That shift follows Federal Reserve Chair Kevin Warsh’s decision to move away from providing firm forward guidance. His recent messaging has left greater room for incoming data to reshape expectations around monetary policy.

There are still several important data points to come before the September 16 FOMC meeting: another payrolls report and two further CPI releases, including this week’s figures.

Inflation is particularly important because of Warsh’s admission that the Fed has consistently gotten it wrong and is looking to address it. As a result, any surprises in CPI or other inflation data like PPI could generate much larger moves in the dollar than we have seen from Friday’s jobs report alone.

This also helps explain why the weak payrolls figures did not trigger a sustained collapse in USD/JPY. Markets still have several opportunities to reassess the Fed outlook before September.

What is expected from CPI data? US CPI is now arguably the most important event on this week’s calendar. The previous CPI report had certainly surprised to the downside. Headline inflation slowed more sharply than expected to 3.5% from 4.2%, while core CPI eased to 2.6%. This time, economists expect moderate weakness. Headline CPI is expected to rise 0.1% month-on-month, taking the annual rate to 3.4%. Core CPI is forecast to increase 0.2% on the month, leaving annual core inflation at 2.5%.

The question now is whether we will see that moderation, and if so, whether it is enough to trigger further dovish repricing in US dollar. But as mentioned, alongside data it is also the developments in oil prices which will determine whether expectations for a tighter Fed are rebuilt or continue to unwind.

Why the yen is struggling to capitalise on softer US data In theory, the yen should be among the clearest beneficiaries of weaker US economic data because USD/JPY remains highly sensitive to the interest-rate differential between the two economies.

Yet the yen continues to face selling pressure, even following intervention episodes. The USD/JPY sold of sharply in late July as both the US and Japanese authorities jointly intervened in the foreign exchange market to support the yen. Such coordinated action is unusual and suggests that the US Treasury may be taking a more active role in attempts to stabilise the currency.

However, intervention alone is unlikely to deliver a durable change in the direction of USD/JPY. Foreign exchange intervention can disrupt positioning, reduce excessive volatility and alter market psychology. What it generally cannot do is permanently overturn a powerful macroeconomic trend.

Even growing expectations of a September Bank of Japan rate increase have so far struggled to generate a sustained reversal in the pair.

This is partly because the interest-rate gap with the US remains wide enough to keep carry-trade demand for the dollar alive.

Softer US data may improve the fundamental case for a stronger yen, but positioning and yield differentials can continue to work in the opposite direction – especially if oil prices remain elevated for longer.

USD/JPY forecast: 160 remains firmly on the radar Technically and fundamentally, USD/JPY remains caught between competing forces. The pair has already recovered to above 158.50, effectively returning to the area where it traded before Friday’s payrolls shock.

That recovery suggests the market has not yet fully embraced a sustained dovish repricing of the Federal Reserve. With the USD/JPY now also back above the 200-day average, the near-term path of least resistance is no longer to the downside.

Source: TradingView.com The path ahead is therefore likely to remain volatile. A return towards 160.00 remains a realistic possibility, particularly if US inflation proves sticky or oil prices remain elevated. 160.50 is the next obvious resistance followed by 162.00.

Meanwhile, if support around 158.00 area gives way and price moves below the 200-day again, then in the case, a return to 157.00 and possibly 156.00 will become likely. For that to happen, you’d feel US CPI will have to be quite weak this week. 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

GBP/USD enters the week of 10–14 August near 1.3500 – its highest level since 15 July. Sterling is building on the momentum from a sharp decline in the dollar following a weak US labour market report, which reduced expectations of a Federal Reserve rate hike in September. Further support has come from the drop in oil prices: cheaper energy is easing inflation risks and reducing pressure on the UK economy.

Geopolitics remains a key factor. Donald Trump announced progress in negotiations between Iran and Oman regarding the Strait of Hormuz, although no final agreement has yet been reached. A further decline in oil prices would reinforce expectations that the Bank of England can maintain a gradual approach to monetary policy. At its last meeting, the regulator left rates unchanged, and Andrew Bailey confirmed that the disinflation process continues.

The main event for sterling this week will be Thursday’s preliminary GDP estimate for the second quarter. The economy is expected to grow by 0.2% quarter-on-quarter, down from 0.6% previously, with the annual rate projected at 1.6% versus 0.9%. June GDP is forecast to rise by 0.1%. Stronger-than-expected data would support GBP/USD, while a marked slowdown could put renewed pressure on the pound.

On the US side, the key release will be July inflation data on Wednesday, with core CPI expected at 2.5% year-on-year and headline CPI at 3.4%. Thursday brings PPI, followed by retail sales and the University of Michigan’s preliminary consumer sentiment index on Friday. Weak inflation and consumer figures could weigh heavily on the dollar and support further GBP/USD gains, while sustained price pressures would strengthen the case for Fed tightening.

Technical Analysis

On the H4 GBP/USD chart, a wide consolidation range is forming around the 1.3470 level. An upside breakout would open the way for a move towards 1.3522 and then 1.3535. A downside breakout would suggest a move towards 1.3436, and a break below this level would open the way for the trend to extend to 1.3190. The MACD indicator supports this scenario, with its signal line above zero and pointing downwards.

On the H1 chart, the market has formed a compact consolidation range around the 1.3470 level, currently extending between 1.3434 and 1.3500. A move lower towards 1.3470 is expected, followed by a move higher to 1.3535. The Stochastic oscillator confirms this scenario, with its signal line below 50 and pointing downwards. In the short term, a decline towards 20 is expected, followed by a rise towards 80.

Conclusion GBP/USD has started the week on a strong footing, trading near its highest level since mid-July. The pound has benefited from a weaker dollar following soft US labour market data and falling oil prices, which have eased inflation concerns and reduced expectations of aggressive Fed tightening. Geopolitical progress regarding the Strait of Hormuz has also supported risk sentiment. Markets will now focus on UK GDP data on Thursday and US inflation figures on Wednesday, both of which will provide important clues about the policy outlook for the BoE and Fed. Technically, the pair appears poised for further upside towards 1.3535, with near-term direction hinging on this week’s key data releases. A break below 1.3436 would shift the outlook to bearish, exposing the 1.3190 level.

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