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Euro: Fair value falls on oil and Fed pressure against US Dollar - ING

Key takeaways Hawkish Fed supports USD/JPY: The Fed’s rate hike and signal of further tightening reinforce the US dollar’s yield advantage over the yen. BoJ guidance is the key catalyst: A hike to 1.25% is largely priced in; Ueda must signal further tightening to sustain yen strength. Japan CPI composition matters: Stronger services and underlying inflation could support further BoJ hikes, while softer data may weaken the yen. 156.13/50 is key resistance: A break below 155.45 reinforces bearish reversal that may expose 154.47, 153.70 and 152.65/55; above 156.50 shifts focus to 157.20. Hawkish FOMC repricing reinforces the dollar’s yield advantage USD/JPY climbed towards an intraday high of 156.41 on Wednesday, 16 September 2026, during the US session, following the Federal Reserve’s 25-basis-point rate hike to 3.75%–4.00%, its first increase since 2023.

More importantly, the latest FOMC projections showed that 12 of 18 policymakers expect another rate hike before the end of 2026, while policy rates are projected to remain unchanged through 2027. The Fed also raised its 2026 core PCE inflation forecast to 3.4% and its estimate of the longer-run Fed funds policy rate to 3.2%.

Fed Chair Kevin Warsh reinforced the hawkish repricing by warning that inflation remains too high and that underlying price pressures have not improved meaningfully. The Fed funds futures market now assigns around a 90% probability of another Fed hike by year-end, lifting the US Dollar Index to a seven-week high.

This matters for USD/JPY because the US–Japan yield differential remains in a positive territory. Even if the Bank of Japan (BoJ) raises rates tomorrow, the yen may struggle to attract sustained demand unless markets also bring forward expectations for subsequent Japanese rate increases.

Japan CPI’s composition matters more than the headline Japan will release its latest inflation trend data for August before the BoJ’s monetary policy decision on Friday, 18 September 2026.

Japan’s core-core CPI, which excludes fresh food and energy, is expected to remain unchanged at 1.9% year-on-year in August.

For the BoJ, the more important question is whether inflation is becoming domestically sustainable rather than merely reflecting oil prices and currency weakness. Traders should focus on:

Services inflation and whether higher wages are feeding through to consumer prices. Measures excluding both fresh food and energy. Evidence that price increases are broadening beyond imported goods. Whether inflation expectations remain anchored around or above the BoJ’s 2% target. An upside CPI surprise accompanied by stronger services inflation would reinforce expectations of further BoJ tightening and may pull USD/JPY lower. On the other hand, a softer reading, driven by weak domestic demand, would give BoJ Governor Ueda more room to maintain a cautious policy stance.

The BoJ decision: the rate hike is not the real surprise The BoJ is widely expected to raise its policy rate by 25 basis points to 1.25%, which would be its highest level in 31 years. The move would follow June’s increase to 1.00% and continue the central bank’s gradual withdrawal from accommodative monetary policy.

Since the increase is already nearly fully priced in, the immediate yen reaction may prove short-lived. Governor Ueda’s press conference should be the more significant catalyst.

A hawkish message would include:

A clear signal that further rate increases are likely if the economic outlook remains intact. Greater concern over second-round inflation effects from energy prices and yen weakness. An indication that the policy rate remains below neutral and must move higher. Openness to another hike before the end of 2026, which implies an increased possibility of a back-to-back rate hikes, echoing similar remarks made by BoJ official Takata at the start of this month. Confidence that wage growth can sustain underlying inflation near 2%. Conversely, repeated emphasis on downside growth risks, weak consumption or the need to assess the impact of previous hikes would be interpreted as dovish. That outcome could allow USD/JPY to extend its post-FOMC rebound even if the BoJ delivers the expected increase.

So far, Japan’s short-term interest rate market has begun to price in a more hawkish BoJ, with a faster pace of monetary policy tightening, suggesting at least one additional increase by the end of 2026, and about 2.7 hikes in total, including Friday’s 18 September move, by March 2027.

The positive gap of the US-Japan implied policy rate curve spread that derives from the difference of short-term interest rate futures of the US and Japan, respectively, has started to narrow; the gap for October 2026 has decreased to 2.76% from 2.90% in September 2026 and a steady narrowing to 2.69% in December 2026, plus a shift down from 2.81% printed three months ago in the same period (see Fig. 1).

Fig. 1: US-Japan policy rate curve spread as of 17 Sep 2026 (Source: MacroMicro). The information presented is historical information, and past performance is not indicative of future performance.

In a nutshell, BoJ better not disappoint such hawkish repricing of Japan’s interest rate trajectory.

Let’s now focus on the short-term (1 to 3 days) technical analysis of USD/JPY

USD/JPY’s rally stalling at a key inflexion zone Fig. 2: USD/JPY medium-term trend as of 17 Sep 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.

Fig. 3: USD/JPY minor trend as of 17 Sep 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance.

The 2.3% rally seen over the past one week from the 8 September 2026 intraday low of 152.89 has hit an inflexion zone of 155.03/156.73, which is the pullback resistance of the former neckline support of the key “Head & Shoulders” reversal configuration (see Fig. 2).

In addition, the hourly RSI momentum indicator has flashed a bearish divergence after hitting the overbought zone on Wednesday, 16 September 2026, increasing the likelihood of a bearish reversal for USD/JPY at this juncture.

Watch the 156.13/50 key short-term pivotal resistance on the USD/JPY, and a break below the 155.45 near-term support (downside trigger) may set off a minor bearish reversal sequence to expose the next intermediate supports at 154.47, 153.70 and 152.65/55 (see Fig. 3).

However, a clearance with an hourly close above 156.50 invalidates the bearish scenario for a squeeze up to test the 157.20 medium-term pivotal resistance (also the 20-day moving average).

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USD/CAD: Strong recovery approaches key Fibonacci resistance

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Key takeaways Hawkish Fed supports USD/JPY: The Fed’s rate hike and signal of further tightening reinforce the US dollar’s yield advantage over the yen.BoJ guidance is the key catalyst: A hike to 1.25% is largely priced in; Ueda must signal further tightening to sustain yen strength.Japan CPI composition matters: Stronger services and underlying inflation could support further BoJ hikes, while softer data may weaken the yen.156.13/50 is key resistance: A break below 155.45 reinforces bearish reversal that may expose 154.47, 153.70 and 152.65/55; above 156.50 shifts focus to 157.20. Hawkish FOMC repricing reinforces the dollar’s yield advantage USD/JPY climbed towards an intraday high of 156.41 on Wednesday, 16 September 2026, during the US session, following the Federal Reserve’s 25-basis-point rate hike to 3.75%–4.00%, its first increase since 2023.

More importantly, the latest FOMC projections showed that 12 of 18 policymakers expect another rate hike before the end of 2026, while policy rates are projected to remain unchanged through 2027. The Fed also raised its 2026 core PCE inflation forecast to 3.4% and its estimate of the longer-run Fed funds policy rate to 3.2%.

Fed Chair Kevin Warsh reinforced the hawkish repricing by warning that inflation remains too high and that underlying price pressures have not improved meaningfully. The Fed funds futures market now assigns around a 90% probability of another Fed hike by year-end, lifting the US Dollar Index to a seven-week high.

This matters for USD/JPY because the US–Japan yield differential remains in a positive territory. Even if the Bank of Japan (BoJ) raises rates tomorrow, the yen may struggle to attract sustained demand unless markets also bring forward expectations for subsequent Japanese rate increases.

Japan CPI’s composition matters more than the headline Japan will release its latest inflation trend data for August before the BoJ’s monetary policy decision on Friday, 18 September 2026.

Japan’s core-core CPI, which excludes fresh food and energy, is expected to remain unchanged at 1.9% year-on-year in August.

For the BoJ, the more important question is whether inflation is becoming domestically sustainable rather than merely reflecting oil prices and currency weakness. Traders should focus on:

Services inflation and whether higher wages are feeding through to consumer prices.Measures excluding both fresh food and energy.Evidence that price increases are broadening beyond imported goods.Whether inflation expectations remain anchored around or above the BoJ’s 2% target.An upside CPI surprise accompanied by stronger services inflation would reinforce expectations of further BoJ tightening and may pull USD/JPY lower. On the other hand, a softer reading, driven by weak domestic demand, would give BoJ Governor Ueda more room to maintain a cautious policy stance.

The BoJ decision: the rate hike is not the real surprise The BoJ is widely expected to raise its policy rate by 25 basis points to 1.25%, which would be its highest level in 31 years. The move would follow June’s increase to 1.00% and continue the central bank’s gradual withdrawal from accommodative monetary policy.

Since the increase is already nearly fully priced in, the immediate yen reaction may prove short-lived. Governor Ueda’s press conference should be the more significant catalyst.

A hawkish message would include:

A clear signal that further rate increases are likely if the economic outlook remains intact.Greater concern over second-round inflation effects from energy prices and yen weakness.An indication that the policy rate remains below neutral and must move higher.Openness to another hike before the end of 2026, which implies an increased possibility of a back-to-back rate hikes, echoing similar remarks made by BoJ official Takata at the start of this month.Confidence that wage growth can sustain underlying inflation near 2%.Conversely, repeated emphasis on downside growth risks, weak consumption or the need to assess the impact of previous hikes would be interpreted as dovish. That outcome could allow USD/JPY to extend its post-FOMC rebound even if the BoJ delivers the expected increase.

So far, Japan’s short-term interest rate market has begun to price in a more hawkish BoJ, with a faster pace of monetary policy tightening, suggesting at least one additional increase by the end of 2026, and about 2.7 hikes in total, including Friday’s 18 September move, by March 2027.

The positive gap of the US-Japan implied policy rate curve spread that derives from the difference of short-term interest rate futures of the US and Japan, respectively, has started to narrow; the gap for October 2026 has decreased to 2.76% from 2.90% in September 2026 and a steady narrowing to 2.69% in December 2026, plus a shift down from 2.81% printed three months ago in the same period (see Fig. 1).

Fig. 1: US-Japan policy rate curve spread as of 17 Sep 2026 (Source: MacroMicro). The information presented is historical information, and past performance is not indicative of future performance. In a nutshell, BoJ better not disappoint such hawkish repricing of Japan’s interest rate trajectory.

Let’s now focus on the short-term (1 to 3 days) technical analysis of USD/JPY

USD/JPY’s rally stalling at a key inflexion zone Fig. 2: USD/JPY medium-term trend as of 17 Sep 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance. Fig. 3: USD/JPY minor trend as of 17 Sep 2026 (Source: TradingView). The information presented is historical information, and past performance is not indicative of future performance. The 2.3% rally seen over the past one week from the 8 September 2026 intraday low of 152.89 has hit an inflexion zone of 155.03/156.73, which is the pullback resistance of the former neckline support of the key “Head & Shoulders” reversal configuration (see Fig. 2).

In addition, the hourly RSI momentum indicator has flashed a bearish divergence after hitting the overbought zone on Wednesday, 16 September 2026, increasing the likelihood of a bearish reversal for USD/JPY at this juncture.

Watch the 156.13/50 key short-term pivotal resistance on the USD/JPY, and a break below the 155.45 near-term support (downside trigger) may set off a minor bearish reversal sequence to expose the next intermediate supports at 154.47, 153.70 and 152.65/55 (see Fig. 3).

However, a clearance with an hourly close above 156.50 invalidates the bearish scenario for a squeeze up to test the 157.20 medium-term pivotal resistance (also the 20-day moving average).

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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.

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GBP/USD struggles around a 6-week low ahead of the BoE rate decision
GBP/USD has fallen to a six-week low, with a stronger dollar following the hawkish Fed hike, as attention turns to the Bank of England's interest rate decision at 12:00 BST today.

The central bank is expected to leave interest rates unchanged at 3.75%, where they have been since December last year.

The decision comes as inflation has risen to 3.1%, but service sector inflation and underlying inflation remained unchanged in August. The labour market is weakening, which is also helping to offset some of the inflationary pressures stemming from the Middle East conflict.

The question is how long the Bank of England will be able to maintain this stance, given that oil and gas prices are rising sharply and are now above the adverse scenario set out by the central bank in July.

Therefore, officials are expected to set the stage for a hike in November, which could be the first of several.

The vote is expected to be 3-6-3 in favour of holding, the same as in July. A more hawkish vote could help to support the pound.

The meeting comes after the Federal Reserve hiked rates by 25 basis points and adopted a hawkish stance at its meeting yesterday, lifting the U.S. dollar to a six-week high.

The 25-basis-point hike to 3.75%-4.00% was forecast. The dot plot points to at least one more rate hike this year.

GBP/USD forecast – technical analysis

GBP/USD broke down below the ascending channel, taking out the 200 EMA and falling to 1.3380. This, combined with the RSI below 50, keeps sellers hopeful of further downside.

Attention will turn to 1.3340, the horizontal support, and 1.3270, the July low. A break below here opens the door to the 1.3200 support zone.

On the upside, immediate resistance is seen at the 200 EMA at 1.3430, with a rise above here exposing the 50 EMA at 1.3490. Should buyers rise above 1.3500, this would create a higher high towards 1.3650.

USD/JPY in focus after a hawkish Fed hike ahead of the BoJ meeting
USD/JPY jumped to a two-week high above 156.00 on Wednesday, before easing back slightly to 158.0 at the time of writing.

The jump came following the Federal Reserve's hawkish hike, lifting the U.S. dollar to a six-week high.

The Federal Reserve raised interest rates by 25 basis points as expected, and delivered its first hike since 2023. However, policymakers also lifted their inflation and growth forecasts, while the dot plot pointed to more hikes this year.

Sixteen of 18 policymakers supported at least one more rate hike this year, with four of those supporting two more rate hikes.

This has prompted markets to price in three additional hikes by the middle of next year.

Attention is now turning to the Bank of Japan, and the hawkish Fed position threatens to keep the U.S.-Japan rate gap wide, even as the Bank of Japan is expected to hike rates as well this week.

The yen weakened by around 1% overnight in the wake of the Fed move. This reversal comes after a sharp rally earlier this month, fuelled by expectations of intervention, faster BoJ monetary policy tightening and the unwinding of some yen-funded carry trades.

For the yen to remain supported, the BoJ will not only need to hike rates but also deliver a hawkish message in order to limit the damage to the currency. Failure to do so, and a disappointment from the BoJ, could see the 160 level come back into focus.

A 25-basis-point rate hike is almost fully priced in, meaning that the focus is firmly on BoJ Governor Ueda's post-decision conference for clues over the pace of additional tightening.

Should the yen weaken back towards the 160 level, it could put intervention risk back on the table.

USD/JPY forecast – technical analysis

USD/JPY's recovery from the 153.00 low has run into resistance at the 156.30 level. The price still trades below its 50, 100 and 200 EMAs in a bearish picture.

Buyers would need to extend the recovery above the 200 EMA at 157.80 and the 50 EMA at 158.20 to put the price on a firmer footing. From here, attention would turn to the 160 resistance zone.

Support is seen at 155.40, with a break below here opening the door to 154.65 before attention would turn back towards 153.00.

XAUUSD clawing back losses XAUUSD continues to grind higher, with a slight pullback caused by the recent interest rate hike. A break above the daily resistance of 4300 indicates that XAUUSD sentiment remains bullish.

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EUR/USD falls as market sentiment favours the US Dollar

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EUR/USD is trading around 1.1459 on Thursday, close to a seven-week low. The US dollar remains supported by the Federal Reserve’s first interest rate increase in three years and signals that further monetary tightening could follow later this year.

The FOMC unanimously raised the federal funds target range by 25 basis points to 3.75–4.00%, in line with market expectations. Fed Chair Kevin Warsh noted that inflation remains too high. Data released last week also showed that core inflation accelerated more sharply than expected in August.

Meanwhile, Donald Trump has once again called on social media for interest rates to be cut rapidly to 1% or lower, although he did not directly criticise Warsh. Against this backdrop, markets continue to focus primarily on the Federal Reserve’s own guidance and the likelihood of further rate increases.

The Bank of England is due to announce its interest rate decision today, with rates expected to remain unchanged. Meanwhile, markets expect the Bank of Japan to raise rates on Friday.

Geopolitical pressure has eased somewhat as oil prices have fallen on hopes that Saudi Arabia can restore supplies through the East-West pipeline. This has provided some relief from inflation concerns, although it has not materially changed the broader hawkish outlook for monetary policy.

EUR/USD technical analysis

On the H4 EUR/USD chart, the market has completed a downward move towards 1.1453. A corrective rebound towards 1.1494 cannot be ruled out in the short term.

Once this correction is complete, the main scenario envisages another decline towards 1.1417.

The MACD indicator supports a short-term correction. Its signal line remains below zero and is near its recent lows, suggesting that the current downward momentum may be approaching a temporary pause.

On the H1 EUR/USD chart, the market has completed another move lower towards 1.1453. A consolidation range is currently forming above this level.

Today, a move higher towards 1.1494 is expected as part of the correction.

The Stochastic oscillator supports this scenario. Its signal line is above 20 and is pointing firmly upwards towards 80, indicating potential for further short-term recovery.

EUR/USD outlook EUR/USD remains under broader pressure as the Federal Reserve’s rate increase and the prospect of further monetary tightening continue to support the US dollar.

From a technical perspective, the pair could first stage a corrective rebound towards 1.1494. Once this move is complete, the main bearish scenario points to a renewed decline towards 1.1417.

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Analysts at ING forecast a EUR/USD recovery to 1.160 by December, but RBC expects two more Fed hikes after Wednesday's quarter-point increase. The Euro to US Dollar exchange rate (EUR/USD) fell below 1.15 after the Federal Reserve raised interest rates, trading near 1.1462 late Wednesday, down 0.65% on the day.

Latest — Exchange Rates:

Euro to Dollar (EUR/USD): 1.1462 (-0.65%)

Pound to Dollar (GBP/USD): 1.33817 (-0.67%)

Dollar to Yen (USD/JPY): 156.22388 (+0.61%)

The Fed's unanimous quarter-point increase took its target range to 3.75%-4.00%.

Its median projections imply another hike this year, followed by unchanged rates through 2027.

ING and RBC split over further tightening RBC expects two additional hikes in 2026, fully reversing last year's insurance cuts.

It points to the Fed's higher growth and inflation projections and lower unemployment forecasts as evidence of policymakers' concern about persistent price pressures.

Image: EUR/USD intraday chart shing reaction to fed hike However, RBC questions how much tighter borrowing conditions can achieve:

"We acknowledge that three rate hikes are unlikely to meaningfully move the dial on what is primarily supply-driven inflation."

The bank warns that higher rates could further squeeze lower- and middle-income consumers already struggling with energy bills and debt.

ING's economists expect weaker hiring, subdued wage growth and eventually cheaper energy to make this a one-off hike.

Its currency strategists nevertheless see little reason to oppose the Dollar's immediate advance:

"As long as energy prices remain firm, we see little reason to fade the current USD appreciation trend."

ING sees scope for further losses towards support at 1.1330-1.1360, where the June decline found a floor, but its central forecast still anticipates a recovery.

"We target 1.150 for end-September and a modest bump to 1.160 by year-end."

The pair has already fallen below the 1.150 target ING highlighted before the decision.

ING's 1.160 year-end call depends heavily on improving Gulf energy flows and a rapid fall in oil prices.

We think RBC's rate outlook would make ING's Euro recovery harder to achieve.

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

Gold falls to near $4,250 after Fed delivers rate hike