Track market-moving stories before they get noisy

A new trading week is underway, and the Canadian dollar continues to show signs of weakening momentum. This can be seen in recent USD/CAD price action, with the pair gaining nearly 0.7% over the last four trading sessions. Buying pressure around the pair has been supported primarily by two factors: expectations of a more aggressive Federal Reserve and an ongoing trade dispute that still shows few signs of resolution. Both developments appear to be weighing on the Canadian dollar's relative attractiveness and, as long as these conditions remain in place, buying pressure around USD/CAD could continue to play a relevant role in the sessions ahead.

Is the USD Becoming a Threat?
Since last week, expectations of a more aggressive Federal Reserve have continued to gain traction. This perception is largely driven by persistent inflationary pressures in the United States, a backdrop that could justify additional rate increases over the coming months. In fact, CME Group's probability tracker still assigns more than a 50% chance that interest rates will rise another 0.25% to the 4.25% area at the October 28 meeting.

The situation looks somewhat different at the Bank of Canada. Although policymakers continue to acknowledge inflation risks, there have not yet been equally strong signals pointing toward a more aggressive policy stance. Market expectations for the October 28 meeting remain broadly split between another rate hike and an unchanged decision, highlighting a greater degree of uncertainty surrounding the bank's next move. As a result, the Federal Reserve continues to stand out as the institution with the greatest potential to maintain a restrictive monetary policy over the coming months.

This divergence also has important implications for bond markets. Although 10-year bond yields in both countries have moved higher recently, the yield differential continues to favor the United States. While U.S. Treasury yields remain around the 5.00% area, Canadian bond yields continue to trade below 4.00%. This gap remains important because it supports the relative attractiveness of U.S. assets and could widen further if the Federal Reserve maintains a more aggressive stance than the Bank of Canada.

Source: TradingEconomics

This advantage is already beginning to show up in the performance of the U.S. dollar. Recent movements in the DXY, the index that measures the dollar against its main rivals, continue to reflect strength above the 100-point level. This suggests that demand for the U.S. dollar remains well supported, backed both by the appeal of the bond market and expectations of a more restrictive monetary policy. As a consequence, the Canadian dollar continues to struggle to regain lost ground consistently.

Source: TradingEconomics

Taking all of this into account, the difference in outlook between the two central banks continues to favor the U.S. dollar. As long as markets continue to price in a more aggressive Federal Reserve than the Bank of Canada, capital flows may continue to favor USD-denominated assets and limit a stronger recovery in the Canadian dollar. Under this scenario, buying pressure around USD/CAD could remain relevant during the coming sessions.

Is There Still No Progress in the Trade Dispute?
Since September 15, when revised 50% tariffs on selected Canadian products came into effect, there have been no significant developments pointing toward a quick resolution of the trade conflict. In addition, beginning on September 29, the United States may start applying import restrictions on products from sectors such as automobiles and dairy. On the Canadian side, the countermeasures announced on September 8 remain in place, including tariffs ranging from 15% to 50% on U.S. goods. So far, both countries have maintained firm positions, and negotiations have failed to alter the overall direction of the dispute.

This situation remains highly relevant for the Canadian dollar because the currency has repeatedly shown weakness whenever trade tensions escalate. Moreover, the conflict directly affects an economy where more than 70% of exports are destined for the United States, creating uncertainty around future growth prospects. Until more meaningful diplomatic progress emerges, caution is likely to remain a dominant theme around the CAD and could continue supporting buying pressure in USD/CAD over the coming weeks.

USD/CAD Technical Forecast

Source: StoneX, Tradingview

Bullish momentum starts to emerge: Over recent months, USD/CAD had been developing a medium-term downtrend that became one of the chart's most important technical structures. However, the recent recovery has already generated a meaningful break above this trendline. If buying pressure remains in place over the coming sessions, a more established bullish structure could begin to emerge in the short term.

 
RSI: The RSI remains above the 50 neutral level, a reading that reflects growing bullish momentum within the chart. As long as this dynamic remains intact, the bullish bias may continue strengthening over the coming sessions.

 
MACD: A similar picture can be observed in the MACD, whose histogram continues to trade above the 0 neutral line. This reading suggests that short-term moving averages continue to favor bullish price action and supports the possibility that the current upward bias remains relevant.

 
Key Levels:

1.40504 – Key Resistance: The last major upside barrier on the chart, coinciding with the most relevant 61.8% Fibonacci retracement level. Price action that manages to consolidate above this area could signal stronger bullish control and open the door to a more developed upward structure in the weeks ahead.

 
1.39406 – Near-Term Barrier: A level that coincides with the 50-period moving average and the 38.2% Fibonacci retracement zone. It remains the most important reference to monitor in the event of short-term bearish corrections.

 
1.38378 – Critical Support: This level represents the most important downside barrier on the chart as it coincides with the 200-period moving average. A move back toward this area could undermine the credibility of the recent recovery, revive concerns about a lack of direction, and favor the development of a broader consolidation range.

 
Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

The USD/CHF exchange rate continued its recent upward trend, reaching its highest level since June last year as the spread between the US and Swiss interest rates continues to widen. It jumped to 0.8262, up by over 8.7% from its lowest level this year.

The USD/CHF pair will be in the spotlight this week as the Swiss National Bank (SNB) delivers its interest rate decision on Thursday. Economists expect the bank to maintain interest rates at 0% in this meeting. 

This decision comes at a time when the Swiss economy is seeing modest inflation. A report showed that the headline consumer price index (CPI) rose 0.80% in August from 0.40% in July.

Swiss inflation is expected to continue rising because of the ongoing energy shock in the region. For example, diesel prices in the country have jumped to a record high of CHF 2.41, and the surge is continuing. Petrol prices have also continued rising this month because of the ongoing US-Iran war. 

Still, the SNB will likely maintain interest rates unchanged so that it can devalue its currency. As a net exporter, the central bank tends to prefer a weaker Swiss franc, since this makes its products relatively cheaper. 

The USD/CHF pair has also remained in an uptrend because of the relatively stronger US dollar. The greenback jumped after the Federal Reserve delivered its interest rate decision.

As was widely expected, Kevin Warsh and the team decided to hike interest rates by 0.25% to between 3.75% and 4%. Most importantly, officials signaled that they will continue hiking this year to combat the elevated inflation.

Traders on Polymarket and other prediction marketplaces suggest that the bank will hike either in its October or its December meeting. If this happens, it will bring rates to between 4% and 4.25%.

These actions have a major impact on the USD/CHF pair since the spread between the US and Switzerland will continue widening. This makes it one of the most popular pairs among carry trade investors.

A carry trade is a situation in which investors borrow money from a low-interest-rate currency and then invests in a high-rate one. This pair has become popular now that the US and Japan are hiking interest rates.

USD/CHF chart | Source: TradingView

The daily chart shows that the USD/CHF pair has been in a strong bull run in the past few months from a low of 0.7600 in February to a high of 0.8262. It formed an ascending channel and recently moved below its upper side. 

The pair is attempting to retest the crucial support level of 0.8207, its highest level on July 29. It remains above the 50-day and 100-day moving averages.

Therefore, the pair will likely continue rising as bulls target the key resistance level of 0.8350. This view will be confirmed if it moves above the upper side of the channel at 0.8300.

TL;DR: Australia’s Big Four banks now all expect a September RBA hike to 4.60%, but the real disagreement has shifted to how high the cash rate ultimately needs to go—a question AUD/NZD, already stretched near 1.25, won’t settle until October 28 CPI.

The Big Four Converge on September The debate over whether the RBA will hike in September is rapidly disappearing. Australia’s Big Four banks now all expect a 25bp increase, which would take the cash rate from 4.35% to 4.60%, the highest since 2011. NAB was already positioned for a September move. Westpac switched after Governor Michele Bullock’s September 18 parliamentary testimony, while CBA and ANZ followed on September 21.

What pulled the forecasts together wasn’t simply another strong inflation print. Bullock told the House Standing Committee on Economics that some of the upside inflation risks identified by the RBA were now “materialising.” She pointed to renewed increases in oil and related prices, an unresolved Middle East conflict, and the AI investment boom, which is strengthening activity in supply-chain economies while lifting prices for constrained technologies. July inflation had already left the RBA with little comfort, with headline CPI at 3.5% yoy and trimmed mean inflation at 3.6% yoy.

The change in oil is especially striking. CBA’s Belinda Allen noted that Brent was near US$80 when the bank previously changed its RBA view, compared with above US$100 more recently. That creates an immediate fuel-price effect and raises the risk that higher costs spread through the broader economy. Markets have followed the same logic: CBA estimates the probability of a September hike has risen from roughly 30% before July CPI to around 90%.

September Consensus Opens a Bigger Question: Is 4.60% Enough? The apparent consensus becomes much less convincing once the analysis moves beyond September.

Westpac and ANZ expect next week’s decision to be split, while CBA anticipates a unanimous hike. The distinction matters because it reveals different views about how strongly the Board itself believes additional restraint is needed. Westpac sees genuine room for disagreement over labor-market slack, labor-supply growth, and productivity. CBA sees a stronger consensus for action, while acknowledging the case for leaving rates unchanged isn’t one-sided.

The deeper split is over the destination. ANZ expects another hike in November, which would lift the cash rate to 4.85%. Its interpretation is important: September isn’t merely November brought forward. Instead, the latest inflation shock may mean the RBA ultimately needs a higher policy rate than previously assumed.

CBA and Westpac stop short of that conclusion. CBA sees increasing risk of a second move but hasn’t made it the base case, identifying a 1.0% or stronger September-quarter trimmed mean CPI increase as a result that could put November firmly into play. Westpac similarly regards another hike as possible but wants more evidence first. So while the Big Four now agree about September, the real argument has shifted from “when does the RBA hike?” to “how high does it ultimately need to go?”

Thursday’s Jobs Report Matters—Just Not in the Obvious Way That makes this week’s labor-market report more interesting than a simple “strong data equals hike” framework would suggest. Economists expect August unemployment to hold at 4.5%, with employment rising about 20.9k. CBA believes only a large downside surprise would probably be enough to change its September call. In other words, the jobs report is unlikely to determine whether the RBA moves next week.

Its importance lies further ahead. Australia’s labor market has been loosening gradually on the ABS trend measures: unemployment rose from 4.3% in March to 4.5% in July, underemployment from 6.0% to 6.4%, and underutilisation from 10.4% to 10.8%. Participation has remained firm, while employment has continued to grow. It’s the shape of a labor market developing more slack without falling into a sharp contraction.

That’s precisely what the RBA needs to watch as oil and AI-related price pressures hit the economy. The latest inflation threat isn’t primarily wage-driven. The question is whether those external cost pressures eventually feed into wages and become persistent second-round inflation. If labor-market loosening continues, the Board has more reason to believe a September hike can contain the shock. If slack stops building, ANZ’s 4.85% scenario becomes easier to justify.

Even then, jobs aren’t the decisive November gate. That role belongs to September-quarter CPI on October 28, only five days before the November 2–3 RBA meeting. CBA has explicitly identified trimmed mean inflation as the potential trigger for another increase, making October CPI the release most capable of resolving the disagreement now opening between ANZ and the more cautious CBA and Westpac views.

Thursday’s figures also deserve some methodological caution. The ABS will remove supplementary-survey adjustment factors for August and February releases beginning with this report, which it says could have a small impact on the variability of the August estimates. The sample also returns to eight rotation groups after July used seven. That makes the underlying trend more informative than overreacting to one seasonally adjusted monthly number.

ActionForex’s Technical View on AUD/NZD: Already Running With the RBA Story Markets aren’t waiting until September 29 to express the change in expectations. AUD/NZD has climbed to its highest level since April 2013 and is now trading around 1.245, putting the psychologically important 1.25 level within reach.

The cross is especially useful this week because it strips away much of the Dollar-specific noise embedded in AUD/USD. The US Dollar has its own catalysts, while the New Zealand Dollar has fewer major standalone events on the calendar. AUD/NZD therefore provides a relatively clean test of how far the RBA repricing can carry the Australian Dollar.

The problem is that the rally is becoming stretched just as the macro consensus becomes strongest. Daily RSI has risen above 80, while AUD/NZD is approaching a significant 1.25–1.26 resistance zone. The area contains a projection at 1.2534, another at 1.2608, and the psychological weight of the round-number zone itself:

38.2% projection of 1.0649 to 1.2283 from 1.1910 at 1.2534 161.8% projection of 1.0278 to 1.1489 from 1.0649 at 1.2608

That doesn’t yet make 1.25 a top. There’s no clear topping signal, and overbought momentum can persist in a strong trend. But the resistance cluster creates a natural place for some profit-taking, particularly with a September hike already heavily anticipated.

A retreat from the zone would remain corrective while 1.2274 support holds. A decisive move through 1.2608 would instead suggest traders are increasingly pricing the RBA story beyond September and toward a higher eventual policy rate.

September May Be the Easy Call The striking part of the current RBA debate is that agreement has arrived just as the more important uncertainty begins.

A September hike to 4.60% is now the common Big Four call. Thursday’s jobs figures can influence how policymakers think about second-round inflation, but they’re unlikely to settle the question of what happens next. That will require evidence on whether the external inflation shock is becoming embedded domestically.

For that, October 28 CPI is the real gate. Until then, the tension is visible in AUD/NZD itself: increasingly bullish Australian rate expectations have driven the pair toward 1.25, but they’ve also left it technically stretched. The next phase will determine whether 1.25–1.26 becomes a place to take profit—or merely another resistance zone overcome as markets start pricing 4.85%.

Key Takeaways All four major Australian banks now expect a September 25bp RBA hike to 4.60%, up from roughly 30% market probability before July CPI to around 90% now. The real disagreement has shifted beyond September: ANZ expects a follow-up November hike to 4.85%, while CBA and Westpac see it as a risk, not yet their base case. Thursday’s jobs report is unlikely to change the September call itself; its importance lies in showing whether labor-market slack keeps building, which affects the case for a second hike. September-quarter CPI on October 28, just five days before the November RBA meeting, is the real gate that will resolve whether the cash rate stops at 4.60% or needs to go further. AUD/NZD is testing 1.25-1.26 resistance (1.2534 and 1.2608 projections) with daily RSI above 80; a retreat would stay corrective above 1.2274, while a break of 1.2608 would signal markets are pricing the RBA story beyond September.

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Summary:

The USD/INR now has a strong resistance at 96.00, site of what now looks like a defense zone for the Reserve Bank of India post-Fed. Current Setup Bias: Cautiously bullish USD/INR above 95.45.
Despite remaining structurally bullish, USD/INR weakened slightly this Friday after Brent crude fell to $103/barrel. The rupee had initially traded at a seven-week low around 96.10–96.20 following the Fed’s rate hike and a spike in oil prices to $109 in Monday’s Asian session. However, the markets are reassessing the Fed decision, and a pullback in US bond yields has allowed the pair to retreat toward 95.75–95.80.  The pair has closed the week at 95.8630 per dollar, down about 0.3% for the week.

The key development is the formation of a defense zone for potential Reserve Bank of India interventions at 96.00. Reports indicate that India’s apex bank has intervened several times at this zone to prevent sharp, disorderly rupee depreciation.

Primary Drivers for the USD/INR 1. The Fed Hike

The Federal Reserve’s 16 September rate hike and hawkish dot plot added a fundamental tailwind to the US Dollar. The resultant rise in US Treasury yields has created dollar demand, which is a negative for emerging market FX. Watch the US Dollar Index as it responds to the rate hike.

2. INR is Vulnerable to Higher Oil Prices

India’s heavy dependence on energy imports renders the country and its currency vulnerable to higher prices. Higher crude prices raise India’s import costs and pressurize the trade balance. This week’s spike to $109 drove the rupee down to 96.00, while Friday’s drop to $103 provided modest relief for the INR.

3. RBI Intervention

Various reports indicate some level of RBI intervention at the 96.00 price level. Per Reuters, state-run banks are also selling USD, drawing attention to 96.00 as the key intervention point. This makes the area a key psychological resistance level.

USD/INR Forecast Scenarios Base case→ Consolidation: The modest decline in USD/INR has placed it within the 95.40–96.10 range. The pair is expected to trade within this range as traders reassess the Fed dot plot and oil price direction.

Bull case→ Breakout: Price needs to clear 96.10 to indicate that the intervention barrier is no longer valid. This scenario is more likely if Brent crude retests the $110 price mark or rises above it, and US Treasury yields push back above 5.00%.

Bear case→Rupee recovery: if price maintains a sustained breakdown of 95.45 based on falling oil prices and declining US bond yields, rupee recovery could pick up pace towards 94.00.

An additional headwind comes from the new near-term capital inflows that will follow the listing of the fully subscribed $2.3 billion NSE IPO.

Near Term Price Catalysts 1. Brent crude: This remains the most important variable dictating the rupee’s value
2. US Treasury yields: A renewed push above the 5% mark makes a case for additional USD/INR strength.
3. RBI intervention: The 96.00 price level is now the key price mark to beat. If new demand overwhelms the aggressive dollar selling at this level, a further upside push ensues.
4. Indian monetary policy: Higher oil prices have brought about imported inflation, especially in a country which is heavily energy dependent like India. Markets are now pricing in the potential for an RBI rate hike after months of easing. Reuters indicates that traders have priced in an additional 80bps of RBI hikes over the next 12 months, starting in October. This is a developing situation to watch.

Technical Outlook The 96.00 price level is now a key technical barrier. A break above this level unlocks access to the 96.50 resistance (24 July high). If the advance continues beyond this point, the 96.99 resistance becomes the next upside target.

Fig 1: USD/INR daily chart showing key price levels (snapshot: 18 September 2026) On the flip side, rejection at 96.00 will first test the 95.24 support. If the bulls fail to defend this barrier, the 94.29 upper boundary of the support zone around the 61.8% Fibonacci retracement of the 8 April to 20 May upswing becomes the next support target.

Unanimous Fed hike clears a high bar for hawks
Updated forecasts point to stronger growth, lower unemployment, sticky inflation
Dot plot validates higher-for-longer pricing across the curve
Front-end yields surge, driving sharp bear flattening of US curve
EUR/USD breaks to multi-month lows
After telling markets to figure out the appropriate level for the funds rate themselves, Kevin Warsh and the FOMC duly delivered at the September meeting, hiking rates for the first time in more than three years, as expected, while doing enough to validate the extremely hawkish shift in market pricing seen heading into the decision.

That helped support the US dollar, which ripped higher against a number of the majors, including the euro. With the technical picture for EUR/USD deteriorating sharply, we look at the key levels to watch heading into the weekend.

Fed clears a high bar
Coming into the September FOMC meeting, markets had set a high bar for the Fed to match following the significant hawkish shift in rate expectations over the past month after Warsh’s Jackson Hole speech.

To his credit, Warsh not only met those expectations by following through with a rate hike, but managed to bring the entire FOMC with him. That included influential members such as New York Fed President John Williams, who had been delivering notably dovish commentary heading into the meeting, along with Governor Christopher Waller.

The unanimous vote was the first clear sign that the decision was at least as hawkish as markets had expected, and perhaps even more so.

Stronger growth, lower unemployment, firmer inflation

Source: LSEG

That view was enhanced further by the Fed’s updated economic projections, which upgraded growth this year and next while simultaneously seeing unemployment significantly lower than projected three months earlier in both years.

Importantly, the FOMC also lifted its 2026 core PCE inflation forecast a tenth to 3.4%, and still has it sitting above its 2% target through 2028, even with a far more hawkish rate profile delivered in the accompanying dot plot.

Faster growth, lower unemployment and persistently high inflationary pressures, especially in the near term. That was an entirely hawkish message.

Rates seen staying higher for longer
While Warsh once again declined to provide his own rate forecast, the remaining 18 FOMC participants overwhelmingly saw the need for higher rates moving forward.

Of those 18 participants, only two saw rates remaining at current levels through year-end. Twelve pencilled in one further 25bp hike, while four saw the case for another 50bp of tightening.

The message remained hawkish further out. The median funds rate was also projected to remain above 4% at the end of 2027, while the longer-run dot was nudged up a tenth to 3.2%, reinforcing the message that policy rates may need to remain higher for longer.

Source: LSEG

While the updated median dot plot path was not as aggressive as what markets had priced heading into the meeting for this year and next, it was hawkish enough to validate the broader direction of travel. Markets not only maintained that hawkish pricing but added to it in response, with another three hikes now expected by June next year.

Undoubtedly, the broader message from the dots was hawkish. But once the dust settles, it may be difficult for the Fed to out-hawk what is already priced into the curve unless we see clear evidence of renewed strength in labour market conditions and another acceleration in inflation over the coming months.

That’s not out of the realms of possibility, but it’s also not the base case. That may eventually create downside risk for the US dollar and front-end Treasury yields, something to keep in mind when assessing directional risks for markets that are heavily influenced by those markets.

Warsh sees little sign of restriction
To ram home the point, Warsh delivered an unequivocally hawkish message in the press conference. He said he would be “hard pressed to describe broad financial conditions as restrictive”, a view he said was widely shared by the Committee, before adding that the September hike had “removed a dose of accommodation”.

Read between the lines, that suggests Warsh does not regard current policy as being particularly restrictive even after the hike. It also leaves the impression that his own stance may be more hawkish than the median FOMC member, even if he declined to provide any guidance.

Front end takes the brunt

Source: LSEG

The reaction in US rates was entirely as you would expect, with yields lurching higher across the curve, led by the front end. Two-year yields rose 13.2bp from immediately before the decision, compared with 11.4bp for five-year yields, 7.6bp for tens and just 3.3bp for the 30-year.

The net result was a sharp bear flattening of the Treasury curve, with the 2s–30s differential narrowing from 72.3bp immediately before the decision to 62.5bp afterwards. With the selloff heavily concentrated at the front end, long-dated yields remained beneath the highs seen earlier this month.

Source: LSEG

On the back of the lift in yields across the curve, the US dollar also strengthened rapidly, placing pressure on all G10 FX names, including the euro.

EUR/USD downside pressure builds

Source: TradingView

Heading into the FOMC meeting, EUR/USD was already under pressure, losing support at 1.1577 early in the week before settling into a range between the 50-day moving average underneath and the 100-day moving average overhead.

However, on the back of the hawkish hike, the pair was sent sharply lower, hitting levels not seen since late July while simultaneously slicing beneath support at 1.1480.

That’s now the immediate level to watch overhead and can be used as a reference point when establishing potential setups depending on price action around it. If we were to see a retest of 1.1480 and failure, it may provide an opportunity to establish shorts with a tight stop above the level for protection, seeking lower levels.

Those to watch underneath include former downtrend resistance running from the January highs, found today around 1.1420, followed by a much more pronounced support zone beginning around the 38.2% Fibonacci retracement of the January 2025 to January 2026 low-high move and extending down to the June 24 swing low around 1.1325. A breach of the latter would add to the risk of a far deeper unwind back towards support at 1.1200.

If EUR/USD were to reverse back above 1.1480 and hold there, the option is also available to establish longs with a tight stop beneath the level for protection. The 50-day moving average comes across as the first potential upside target, found today around 1.1535.

However, longs are the least preferred of the available options right now, a message backed up by the oscillators, which continue to suggest increasing downside pressure. RSI (14) continues to trend lower and is sitting just above oversold territory around 33, while MACD has now flipped negative after already staging a bearish crossover in late August.

That favours, in the short term, selling into strength and downside breaks.

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Summary:

USD/CAD has advanced for five straight sessions despite oil near $100, as Fed hike bets, rising US Treasury yields near 5% and safe-haven demand from Middle East tensions outweigh traditional oil support CAD The upward momentum could be disrupted Federal Reserve sounds less hawkish, oil prices rise significantly, tensions in the Middle East ease, or if there are positive developments in trade talks between the US and Canada. Traders can position for ongoing dollar strength or potential reversals after the Fed's decision. Meanwhile, energy assets should benefit from high crude prices, no matter how currencies fluctuate in the short term. The foreign exchange market isn’t following its usual historical patterns right now. Even as crude oil prices have rebounded sharply, the US dollar (USD) has strengthened for five consecutive days against the Canadian dollar (CAD).

West Texas Intermediate crude has climbed to $100 a barrel or higher, a level not seen since May. This jump is partly due to supply worries in the Middle East. Yet, this goes against the usual pattern because higher oil prices typically strengthen the Canadian dollar, a currency often tied to commodity prices. As of early European trading session, the USD/CAD pair had hit an intraday high of 1.3939, the highest in nearly four weeks.

Why the Dollar Is Outperforming Several factors are contributing to the US dollar’s stronger performance. The market widely anticipates a 25-basis-point interest rate hike by the Federal Reserve at its upcoming meeting. This would be the first hike in over two years. Higher energy prices are also affecting what people expect inflation to do.

In August, US consumer prices went up 3.4% compared to last year, and prices for producers are also climbing. The interest you get on 10-year US Treasury bonds has gone above 5%, which is the highest it’s been since 2007. This rise widens the interest rate gap in favour of the US dollar.

Additionally, the continued climb in US Treasury yields makes dollar-denominated assets more appealing than Canadian government bonds. This yield difference pulls international investment toward the US dollar, overriding the advantages Canada gets from higher oil revenues. Geopolitical tensions also factor in.

Heightened tensions between the US and Iran, fighting near the Strait of Hormuz, and supply problems like a shut-down Saudi pipeline have both helped push up oil prices and the US dollar. At the same time, the Bank of Canada is likely to keep its interest rates as they are because core inflation is close to its 2% goal. This makes the US look better from a money policy perspective.

What Could Disrupt USD/CAD’s Upward Momentum? A few developments could shift the USD/CAD pair’s current upward trend. The Federal Reserve’s upcoming decision and its statement will be central to this.

If the Fed takes a less aggressive stance, or if policymakers signal the energy price shock is temporary, that could temper rate hike expectations and ease pressure on US yields.

Also, if US inflation or job numbers come in weaker than expected, leading people to believe the Fed might cut rates again, the difference in yields would shrink and could slow down USD/CAD’s rise.

A bigger jump in oil prices, significantly improving Canada’s trade balance, would also strongly support the Canadian dollar. This holds especially true if Middle East supply risks grow without a corresponding rise in global risk aversion.

Conversely, if tensions ease significantly, lowering oil prices and cutting safe-haven demand, the effects might be mixed. However, a clear drop in yields would likely help the Canadian dollar.

Opportunities for Traders This unusual market dynamic presents distinct opportunities. Traders betting on continued US dollar strength can watch Federal Reserve communications and yield trends for signs of more upside in USD/CAD. They’ll likely use resistance levels around 1.3930 as important reference points.

Meanwhile, those expecting a reversal might look for entry points during any post-Fed pullback, especially if oil prices stay high and support Canada’s economic fundamentals. Energy producers and related companies, of course, stand to gain from sustained high crude prices no matter what short-term currency shifts occur.

In the end, the Federal Reserve’s upcoming decision will likely determine if this trend continues or if energy prices and currency differences find a more balanced relationship.

What’s the main near-term catalyst for the USD/CAD pair?

The Federal Reserve’s September policy decision and statement will set the tone for rate expectations, Treasury yields, and the US dollar’s strength against the loonie.

How do higher oil prices usually affect the Canadian dollar?

As a major crude exporter, Canada’s currency usually strengthens when oil prices climb. That’s because energy exports boost the terms of trade and increase demand for the loonie.

What opportunities come from this divergence?

Traders might prepare for the dollar to keep strengthening or for a reversal after the Fed meeting. Meanwhile, energy assets could gain from higher crude prices, regardless of how the currency shifts in the short term.

A Fed hike is already heavily priced in, leaving its message on further tightening crucial to ING's near-term Euro forecast. The Euro to US Dollar exchange rate (EUR/USD) slipped to 1.1540 on Tuesday, leaving ING's short-term target of 1.150 around 40 pips away.

Latest — Exchange Rates:

Euro to Dollar (EUR/USD): 1.1541 (-0.06%)

Pound to Dollar (GBP/USD): 1.347191 (-0.22%)

Dollar to Yen (USD/JPY): 155.08324 (+0.44%)

Monday's 0.44% decline accounted for most of the pair's roughly 0.5% fall since Friday's close, as higher US short-term yields, expensive oil and weaker risk appetite supported the Dollar.

ING sees scope for the move to extend if Wednesday's Federal Reserve decision reinforces those pressures.

Its models put EUR/USD near fair value, with a slight bias towards undervaluation, but the bank says equities and short-term interest rates currently exert a particularly strong influence.

ING's Francesco Pesole warns that "a risk-off, hawkish hike by the Fed tomorrow could easily take the pair to our 1.150 short-term target."

Image: EUR to USD rate 48hr chart The Fed's guidance matters beyond September Futures put the chance of a September hike at around 93% early Tuesday, following the stronger monthly US core inflation reading that helped shift expectations last week.

We think further Dollar gains will depend heavily on whether the Fed encourages markets to price additional hikes beyond September.

A cautious message could instead limit the currency's advance, even if policymakers raise rates.

BNP Paribas also expects initial Dollar strength, with a separate year-end EUR/USD forecast of 1.14.

"We expect Fed hikes to temporarily offset structural headwinds and support the dollar. EUR/USD would target 1.14 by end-2026, before the dollar's structural downtrend resumes toward 1.20 by end-2027, although political and fiscal risk may weigh on the euro next year."

For the immediate outlook, ING also identifies improving Gulf news as a potential trigger for a Dollar pullback.

An easing of the oil shock would reduce one source of pressure on the Euro.

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

TL;DR: GBP/JPY enters a back-to-back central-bank week with three independent arguments for a rebound—the BoE’s hawkish bloc has little room to retreat, a fully priced BoJ hike may give Yen no new information, and the pair is oversold at a two-layer technical support zone—creating an asymmetric setup where the bullish threshold is lower than the bearish one.

Three Independent Arguments, One Cross GBP/JPY enters a back-to-back central-bank week with three independent forces pointing toward a potential rebound. The Bank of England’s widening hawkish bloc leaves limited room for a materially dovish shift, while the Bank of Japan may struggle to deliver anything beyond a rate increase already reflected in Yen. At the same time, GBP/JPY is oversold and attempting to establish a floor within a layered technical support zone.

None of the three arguments guarantees the pair has completed its decline from 219.56. Together, however, they create an asymmetric setup. A Sterling-supportive BoE assessment and a non-committal BoJ would reinforce a technical rebound that requires only a break of minor resistance at 209.01. Renewed downside acceleration would require a decisive breach of substantially deeper support at 206.10.

That makes GBP/JPY more than a convenient way to combine two central-bank meetings. It’s the cross where separate UK and Japanese policy risks compound rather than offset each other.

Yen Has Run Ahead of the BoJ’s Likely Message Yen has risen sharply this month ahead of the BoJ’s September 18 meeting. However, the move in the currency appears more aggressive than the additional near-term tightening embedded in the rates market.

A September increase from 1.00% to 1.25% is already fully priced. The OIS-implied rate for the October 30 meeting stands at approximately 1.28%, only marginally above the level the September hike alone would produce. That implies roughly a 10–15% probability of another increase at the immediately following meeting.

Markets are therefore not genuinely positioned for back-to-back hikes, despite broader expectations that the BoJ will tighten faster than previously assumed. The near-term curve points instead toward a September move followed by a pause.

Takuji Aida, a reflationist adviser to Prime Minister Sanae Takaichi, provides a useful reference point. Aida brought his own forecast for the next BoJ increase forward to September, but expects the subsequent hike in January 2027. He then anticipates a return to an approximately six-month pace. His forecast supports further normalization while stopping well short of an uninterrupted sequence of rapid increases.

The Hike May Offer Yen Little New Information The principal risk for Yen isn’t that the BoJ fails to raise rates. It’s that the expected hike arrives without an incremental signal about what follows.

Bank of Japan Governor Kazuo Ueda is expected to avoid committing to a timetable for another increase. He could repeat the conditional message delivered in July that the BoJ could move faster if economic and inflation conditions warrant. But conditional optionality wouldn’t constitute new forward guidance.

That distinction matters because Yen has already benefited from the buildup toward the September hike and the continuing possibility of intervention. If the BoJ delivers the expected move but offers no clearer guidance, investors would receive confirmation of an event already priced, rather than a fresh reason to extend Yen’s advance.

The result could be a sell-the-fact reaction. This is a near-term event-risk argument, not a rejection of the broader BoJ tightening cycle. The same Reuters panel shows that 89% of economists expect the policy rate to reach at least 1.50% by the end of March 2027, while 62% expect at least 1.75% by mid-2027. Medium-term normalization can remain intact even if Yen retreats after Friday’s decision.

The BoE’s Hawkish Bloc Has Little Room to Retreat Sterling approaches the Bank of England’s September 17 meeting with a different asymmetry. The expected decision is another hold, but the Monetary Policy Committee’s voting pattern has become progressively more hawkish.

Bank of England Chief Economist Huw Pill was the sole member to support a hike in April, producing an 8–1 vote. External Monetary Policy Committee member Megan Greene joined him in June, narrowing the majority to 7–2. External Monetary Policy Committee member Catherine Mann then joined the dissent in July, producing a 6–3 split.

The progression is more informative than the expected headcount alone. Each of the past three meetings added one official to the hawkish camp. For any member of the dissenting trio to return to a hold vote in September would require a reversal of recently expressed policy conviction rather than a routine fluctuation in the vote.

The energy backdrop raises that hurdle. The July dissent already cited the inflation uncertainty created by developments in the Middle East. With oil now above $100 and higher than it was at the July meeting, the most obvious external inflation risk has intensified rather than faded.

That doesn’t make a hike this week the base case. It does, however, reduce the likelihood that the dissenting bloc will shrink or that the committee will collectively sound more relaxed about inflation.

With No New Forecasts, the Minutes Carry the Signal An unchanged 6–3 vote would protect Sterling against a dovish repricing, but it might not provide a strong new bullish catalyst because markets already expect the dissenting trio to hold its position.

The more important test will be the language used by the six-member majority. September brings no new Monetary Policy Report, leaving the BoE without a fresh set of growth and inflation projections. The next full forecast round won’t arrive until November 5.

That makes the minutes the principal vehicle through which neutral members can signal whether higher energy costs have changed their assessment. A stronger emphasis on second-round inflation risks, wage transmission, or the possibility of further tightening would indicate concern is spreading beyond the established hawkish minority. More balanced language that stresses the growth consequences of higher oil prices would limit the Sterling response.

The vote establishes a relatively firm floor beneath Sterling expectations. The majority’s description of the risks will determine whether the meeting also provides an upside catalyst.

Why GBP/JPY Is the Cleaner Expression Sterling’s reaction may be less straightforward against the Dollar. If the Fed’s own projections validate a broader US tightening cycle, higher US yields could offset or dominate a hawkish BoE message. GBP/USD would therefore require investors to judge two potentially supportive rate stories at once.

EUR/GBP captures the BoE side of the argument but lacks the complementary Japanese event risk. GBP/JPY combines both elements: limited room for a dovish BoE surprise and the possibility that a fully priced BoJ hike fails to give Yen another incremental boost.

The expected moves are modest rather than dramatic. The BoE doesn’t need to signal an imminent hike, and the BoJ doesn’t need to abandon its normalization path. GBP/JPY would benefit if the BoE preserves its hawkish pressure while the BoJ declines to endorse a rapid follow-up move.

Mild Sterling upside risk and mild Yen downside risk therefore compound on the same cross.

ActionForex’s Technical View on GBP/JPY: A Two-Layer Support Structure The technical case was established independently of the central-bank analysis, but it arrives at a similar conclusion.

GBP/JPY’s fall from 219.56 reached a temporary low at 207.06 last week. That low sits inside a near-term support cluster formed by the falling channel floor around 207.25 and the 100% projection of the decline from 219.56 to 209.55, measured from 217.45, at 207.44.

A second and more important layer stands at 206.10. This represents the 38.2% retracement of the entire advance from 184.35 to 219.56. The resulting structure is therefore not a single narrow confluence zone, but two adjacent layers: initial support at 207.06–207.44 and medium-term protection at 206.10.

Momentum conditions support the possibility of stabilization. Daily RSI has fallen to approximately 28.86, placing it in oversold territory. On the four-hour chart, RSI has recovered to around 43.7 after dropping below 30. The four-hour MACD is also recovering from deeply negative territory and displays bullish divergence against price.

Those signals don’t confirm a bottom is in place. They indicate downside momentum is losing force as the pair tests an important support structure.

The Rebound Has the Lower Technical Threshold The base case is for a corrective rebound from the current area, possibly after one more brief dip. Confirmation would require a break above 209.01 minor resistance, which would turn the near-term bias upward.

The first objective would then be the 55-period EMA on the four-hour chart, currently around 210.13. A firm break above that average would open the 38.2% retracement of the decline from 219.56 to 207.06, at 211.83.

Such a move would remain corrective. GBP/JPY wouldn’t need to establish a full bullish reversal or recover the entire decline from 219.56 for the rebound thesis to work.

The bearish threshold is more demanding. A decisive break below 206.10 would invalidate the two-layer support structure and suggest the decline is accelerating. The next downside projection would then be the 161.8% extension of 219.56 to 209.55 from 217.45, at 201.25.

This creates an important structural asymmetry. The rebound requires GBP/JPY to clear minor resistance at 209.01. The bearish continuation scenario requires a decisive break of deeper medium-term support at 206.10.

How the BoE–BoJ Sequence Maps Onto the Chart Both technical thresholds will remain live across the Thursday–Friday central-bank sequence.

A stable 6–3 BoE vote accompanied by firmer language from the majority would increase the probability of GBP/JPY testing 209.01. If the BoJ then delivers its fully priced hike without offering a clearer timetable for the next move, a sell-the-fact reaction in Yen could provide the additional push needed to break that resistance.

The opposite sequence would threaten the support structure. A softer BoE assessment, particularly if one of the three hawks returns to a hold vote, would weaken Sterling’s policy support. If the BoJ then signals another increase could arrive substantially sooner than the curve currently implies, GBP/JPY could retest 207.06 and ultimately challenge 206.10.

The technical setup didn’t arise because of the fundamental argument. Its importance comes from reaching the same conditional conclusion independently: the pair has a lower barrier to initiating a corrective rebound than to confirming another accelerated decline.

Three Reasons, One Conditional Base Case GBP/JPY enters the central-bank sequence with three reasons to rebound. The BoE’s increasingly hawkish voting pattern limits the scope for a dovish surprise. The fully priced BoJ hike may struggle to deliver an incremental catalyst for further Yen strength. The pair itself is oversold and attempting to stabilize above a two-layer support structure.

The case remains conditional. A break above 209.01 would provide the first confirmation and open 210.13, followed by 211.83. A decisive break below 206.10 would overturn the setup and expose 201.25.

For now, the fundamental and technical risks converge around a rebound from the current area or after one more brief decline. That convergence—not simply the presence of two central-bank meetings—is what makes GBP/JPY the cross to watch.

Key Takeaways The BoE’s hawkish dissent has widened for three consecutive meetings (8-1 to 7-2 to 6-3), making it politically harder for any dissenter to revert to a hold vote in September. A September BoJ hike to 1.25% is fully priced, but the OIS curve implies only a 10-15% chance of a follow-up move in October, leaving Yen little new information to trade on. Neither central bank has fresh forecasts this meeting; the BoE’s minutes and the BoJ’s press conference tone will carry more signal than the decisions themselves. GBP/JPY sits at a two-layer support structure (207.06-207.44 and 206.10), with daily RSI oversold at 28.86 and 4H MACD showing bullish divergence. The setup is asymmetric: a break above 209.01 confirms a rebound toward 210.13 and 211.83, while only a decisive break of the deeper 206.10 support would open 201.25.

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.

UBS expects further Yuan gains through mid-2027, with strong exports supporting the currency despite low inflation and an unfavourable rate gap. The US Dollar to Chinese Yuan (USD/CNY) exchange rate closed Friday near 6.7083, extending a year in which the pair has fallen more than 4%.

UBS expects that decline to continue, forecasting 6.60 for December 2026 and March 2027, followed by 6.50 in June and September.

Reaching 6.50 would mean another 3.1% fall in USD/CNY, equivalent to approximately 3.2% appreciation in the Yuan's Dollar value.

The forecast also maintains the path discussed in our August analysis of UBS's Yuan outlook, when export conversions and the PBoC's tolerance for gradual appreciation were central to the argument.

Exports support the Yuan despite subdued inflation Fresh Chinese trade figures strengthen the external-demand case.

Exports rose 25% year-on-year in Dollar terms during August, supported by overseas demand for high-tech and AI-related products.

Those receipts provide a potential source of Yuan buying when exporters convert foreign earnings, although the timing and scale of conversions matter.

Domestic prices tell a quieter story.

The National Bureau of Statistics recorded annual consumer inflation of just 0.8% in August, with food prices still 1.4% below a year earlier.

UBS forecasts Chinese growth of 4.5% this year and 4.6% in 2027, alongside average inflation of only 0.6% in both years.

Image: USD to CNY exchange rate 2026 chart The US$/CNY forecast needs more than interest-rate support UBS's Yuan call sits alongside expectations for higher US policy rates by December and a small reduction in China's policy rate by June 2027.

That would leave interest-rate differentials working against the Yuan over much of the forecast horizon.

Our reading is that export-related flows, broader Dollar weakness and continued policy tolerance must carry more of the appreciation argument.

The risk is that Beijing becomes less comfortable with currency strength if it starts squeezing exporters while domestic demand remains subdued.

A move towards 6.60 would keep UBS's year-end forecast on course, but reaching 6.50 requires those supports to endure into 2027.

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

Stronger core inflation favours MUFG’s bearish Euro scenario, with the bank now expecting a September Fed hike and EUR/USD closing below 1.16. The Euro to Dollar (EUR/USD) exchange rate closed Friday near 1.1599, down 0.10% on the day, as stronger US core inflation reinforced expectations of a Federal Reserve rate increase.

MUFG’s downside scenario points towards 1.14, approximately 1.7% below that close.

Before Friday’s inflation release, the bank outlined two possible paths: a Fed hold alongside further ECB tightening could lift EUR/USD towards 1.20, while a September Fed hike could push it towards the bottom of its 1.14-1.18 range.

“The performance of EUR/USD may increasingly hinge on the Fed’s policy response,” MUFG’s Lee Hardman said.

Core inflation strengthens the case for a hike The August CPI release showed core prices rising 0.3% on the month, accelerating from July’s 0.2% increase and exceeding the 0.2% consensus.

Headline prices rose 0.4%, with gasoline accounting for more than a third of the increase.

Annual core inflation nevertheless eased to 2.4% from 2.5%, making this a setback in monthly momentum rather than an acceleration across every measure.

Market estimates put the probability of a September hike around 85-90% after the release.

MUFG subsequently changed its own Fed forecast:

“As a result, we now expect the Fed to hike rates by 25bps in September.”

Image: EUR/USD 48-hr chart ECB tightening still offers the Euro support Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September, while projecting inflation above target through 2028.

That supported the argument for further European tightening explored in our earlier EUR/USD outlook.

We believe Friday’s CPI weakens the case for the Euro to benefit from an ECB tightening cycle while the Fed stands aside.

However, with a US hike already heavily anticipated, its delivery alone may offer limited additional Dollar support.

MUFG’s rates strategists acknowledge that markets have already priced in much of the expected tightening and may have gone too far.

A move towards 1.14 therefore remains conditional on how the Fed’s decision and guidance change expectations for subsequent meetings.

Euro Prices: This Week  USDEURGBPJPYCADAUDNZDCHFUSD +0.13%-0.08%-1.75%+0.24%+0.46%+1.16%+0.79%EUR-0.13% -0.21%-1.87%+0.12%+0.33%+1.03%+0.67%GBP+0.08%+0.21% -1.67%+0.33%+0.54%+1.24%+0.88%JPY+1.78%+1.91%+1.70% +2.03%+2.24%+2.96%+2.58%CAD-0.24%-0.12%-0.33%-1.99% +0.21%+0.91%+0.55%AUD-0.46%-0.33%-0.54%-2.20%-0.21% +0.70%+0.33%NZD-1.15%-1.02%-1.23%-2.87%-0.90%-0.69% -0.36%CHF-0.79%-0.66%-0.87%-2.52%-0.54%-0.33%+0.36%  The FX heat map compares how Euro (EUR) has performed against a basket of major currencies over the past week. The largest move was against the Japanese Yen, where Euro recorded its sharpest decline. Data comparing prices today (12/09/2026 12:07 UTC) and daily close on 05/09/2026.

To read the table, choose the base currency from the left-hand column and then move across to the quote currency along the top row. For example, the GBP row and USD column shows the weekly percentage move in GBP/USD.

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

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Summary:

USD/CAD rose toward 1.3870 on Friday, extending its advance for a third consecutive session as the Canadian Dollar weakened alongside falling oil prices. US CPI inflation held at 3.4% year over year in August, while monthly core CPI rose a stronger-than-expected 0.3%. WTI crude oil fell more than 4% below $100, adding pressure on the oil-sensitive Canadian Dollar. USD/CAD rose toward 1.3870 on Friday after briefly reaching 1.3882 following the release of the latest US Consumer Price Index (CPI) report. The currency pair is heading for a third consecutive session of gains as falling oil prices weigh on the Canadian Dollar (CAD), while the US Dollar struggled to hold its initial post-CPI advance.

US headline inflation remained at 3.4% year over year in August, matching market expectations and unchanged from July. On a monthly basis, the Consumer Price Index increased 0.4%, accelerating from the previous 0.1% increase. The underlying inflation figures were slightly firmer. Core CPI rose 0.3% month over month, above the 0.2% forecast, although annual core inflation eased to 2.4% from 2.5%.

US Dollar Struggles to Hold Gains After CPI The US Dollar initially strengthened after the CPI report as markets reacted to the stronger-than-expected monthly core inflation reading. However, the move quickly lost momentum.

Annual headline inflation remained unchanged at 3.4%, while annual core inflation continued to moderate. That reduced the case for a significantly more hawkish repricing of Federal Reserve interest-rate expectations.

For USD/CAD, the result left the US Dollar providing only part of Friday’s upside. Weakness in the Canadian Dollar has become the more important driver of the pair.

Why Is the Canadian Dollar Falling Today? The Canadian Dollar is falling today as crude oil prices retreat sharply, weakening one of the currency’s traditional sources of support. West Texas Intermediate (WTI) crude fell more than 4% to around $95.90 per barrel, dropping back below the closely watched $100 level after recently reaching a four-month high.

The decline in oil has weighed heavily on the Canadian Dollar, given Canada’s position as a major crude exporter. That relationship has helped USD/CAD continue higher even as the US Dollar surrendered part of its immediate post-CPI gains.

Oil Price Falls Below $100, Weighing on Canadian Dollar Oil has become a particularly important catalyst for the USD/CAD exchange rate following the sharp volatility in energy markets. WTI crude fell approximately 4.6% on Friday after encountering strong selling pressure above $100.

Lower oil prices can weigh on Canada’s trade outlook and reduce demand for the Canadian Dollar, making sharp movements in crude particularly relevant for USD/CAD. The latest oil selloff therefore leaves the Loonie under pressure despite the relatively limited reaction of the broader US Dollar to the inflation report.

US CPI Keeps Fed Rate Outlook in Focus Friday’s US CPI report provided a mixed inflation signal ahead of the Federal Reserve’s September policy meeting. Headline CPI increased 0.4% month over month and remained at 3.4% annually. Meanwhile, the stronger 0.3% monthly core reading suggests underlying inflation pressures have not disappeared.

However, annual core inflation slowing to 2.4% prevents the report from delivering an entirely hawkish signal. The data follows Thursday’s stronger producer inflation figures and last week’s resilient US employment report, leaving the Fed interest-rate outlook a key driver for the US Dollar heading into next week’s decision.

USD/CAD Forecast: Oil Weakness Keeps 1.3900 in Focus The near-term USD/CAD forecast remains supported around 1.3870, primarily as falling oil prices continue to pressure the Canadian Dollar. The pair reached 1.3882 following the CPI release, putting the 1.3900 area within reach if Canadian Dollar weakness continues.

However, the US Dollar’s inability to hold its initial CPI-driven gains could limit the upside. A recovery in crude oil could also provide some relief for the Loonie.

For now, oil prices and shifting Fed rate expectations remain the main catalysts for USD/CAD, with the pair maintaining its recent upward momentum near 1.3870.

Why is USD/CAD rising today?

USD/CAD is rising as the Canadian Dollar weakens alongside falling oil prices. The pair also briefly benefited from a stronger US Dollar following the August CPI report.

Why is the Canadian Dollar falling today?

The Canadian Dollar is under pressure after WTI crude oil fell more than 4% and dropped below $100 per barrel. Canada is a major oil exporter, making the Loonie sensitive to large movements in crude prices.

How does US CPI affect USD/CAD?

Higher-than-expected US inflation can support the US Dollar if it increases expectations for tighter Federal Reserve policy. However, USD/CAD is also heavily influenced by Canadian economic conditions and oil prices.

Nordea expects further ECB increases in December and March, while Scotiabank sees scope towards 1.1700 if EUR/USD clears resistance.
The Euro to Dollar (EUR/USD) exchange rate recovered from a sharp fall below 1.1600 on Thursday as investors assessed US producer-price inflation and the European Central Bank’s latest rate increase.

At the time of writing, EUR/USD was trading around 1.1624, down 0.09% against the previous close, having rebounded from an intraday low near 1.1595.

Image: EUR/USD intraday chart showing immediate reation to the US PPI and ECB rate hike

Economists at Nordea believe the ECB has further tightening ahead, despite policymakers declining to commit to their next move.

“We maintain our baseline of two further 25bp rate hikes at quarterly intervals, with the next one in December and the second in March 2027.”

That path would take the deposit rate from 2.50% to 3.00%, providing potential support for the Euro through higher returns on euro-denominated assets.

Nordea sees more tightening behind cautious ECB language
The ECB raised its three key interest rates by 25 basis points, matching the increase Scotiabank had described as fully priced before the announcement.

Its monetary policy statement projected inflation at 3.0% this year and 2.5% in 2027, with the latter revised higher.

“We are not pre-committing to a particular rate path,” the ECB said.

Scotiabank had expected a forceful endorsement of further near-term tightening as recovering oil prices threatened broader price pressures.

Nordea reads the inflation projections as evidence that September’s increase will be followed by others.

“A very extended period of inflation above target strongly supports the case for more rate hikes.”

However, Nordea also notes that markets have moved to price a faster tightening path than its own forecast, leaving scope for those expectations to reverse if December remains the likeliest next move.

We believe that limits how much support the Euro exchange rates can draw from further hikes alone: their timing, and whether expectations move beyond what is already priced, will matter.

US inflation keeps the Dollar side of the trade unsettled
The US producer-price figures showed core prices, excluding food and energy, rose 0.2% in August, easing from July’s 0.3% increase, with annual inflation at 4.6%.

Headline prices increased 0.4% on the month and 5.4% annually as energy prices jumped 4.2%.

The slower monthly core reading offers encouragement, but persistent price pressure leaves the FED’s response an important constraint on Euro gains.

The recovery keeps Scotiabank’s case for a EUR/USD move towards 1.1700 in focus.

Its pre-release technical assessment nevertheless identified an obstacle just above current levels.

“The 200 day MA (1.1634) continues to offer resistance on a closing basis, and we continue to highlight the absence of any major resistance ahead of the local high around 1.17.”

A close above 1.1634 would strengthen the case for another attempt at 1.1700, while a renewed fall through the session’s 1.1595 low would undermine the recovery.

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Summary:

The dollar's bullish momentum against the rand has picked up again. Markets are now expecting fewer steep rate cuts from the US Federal Reserve, driven by rising crude oil prices and persistent global inflation worries. Key risks include any de-escalation that brings down oil prices, expectations for US rate hikes could also diminish if economic data there softens. Strong gold and platinum prices would certainly help the rand. The USD/ZAR pair looks set to break through its multi-week resistance at 16.20. However, a hawkish South African Reserve Bank might intervene, or a rebound in commodity exports could curb any further dollar gains. The USD/ZAR currency pair climbed for three straight trading days, hitting the 16.04 area in early September 10, 2026 trading, after trading around 15.96-15.99. Despite the rand’s general strength lately, this recent short-term rise is worth watching.

Market participants are watching to see if this rise can break past 16.20, a recent technical resistance point.

Why Is the Dollar Strengthening? A few things are making the dollar stronger right now. Rising global inflation expectations, mainly due to higher crude oil prices, are a big factor. Brent crude futures, now over $100 a barrel thanks to heightened geopolitical tension in the Middle East, have renewed worries about ongoing price hikes in major economies.

This energy price shock prompted bond markets to rethink central bank interest rate plans. Investors are now expecting fewer aggressive interest rate cuts from the Federal Reserve. That’s boosting US Treasury yields and pulling capital looking for safety into dollar assets.

Earlier, US nonfarm payrolls rose by 162,000 in August, much more than the roughly 55,000 economists had predicted. The unemployment rate stayed at 4.1%, and figures from earlier months were also revised higher.

This employment data shifted market sentiment, contradicting the disinflationary outlook Fed Governor Christopher Waller had mentioned just the day before, when he suggested a possible pause in September.

As a result, traders are rethinking the likelihood of an interest rate hike. The CME FedWatch tool now shows about a 62% chance of a 25-basis-point Fed rate increase at the September 15-16 meeting. That’s a notable jump from roughly 50% before the jobs report.

South Africa’s domestic economy has remained relatively stable. Inflation dropped to 4.3% in July, and the South African Reserve Bank has kept its monetary policy tight. Gold prices, which historically support the rand because of South Africa’s exports, are still high.

But even with these local positives, they haven’t quite offset the dollar’s recent global strength.

Prospects for A Near-Term Break Above 16.20 Technical analysts have flagged 16.20 as an important level to watch for a near-term move. If the pair were to break above it and stay there, we’d likely need to see the dollar keep gaining strength, yields rise further, or a big jump in risk aversion that hits the rand harder than other currencies.

Right now, the pair is trading below that mark. For weeks, it’s mostly stayed in a tight range around or under 16.10. An immediate, decisive jump past 16.20 just doesn’t seem very likely.

Still, longer-term forecasts from various models point to lower USD/ZAR levels by the end of the quarter and beyond. This reflects expectations for the dollar to moderate and for commodity prices to remain favorable for South Africa.

Risks to the Upward Momentum This upward trend isn’t without risks. For example, if Middle East tensions ease significantly, lower oil prices would help calm inflation worries and take some pressure off US yields.

Also, if upcoming US economic data comes in weaker than expected, that could temper interest rate hike expectations and weaken the dollar.

An interest rate hike by the South African Reserve Bank (SARB) on September 23 would directly support the rand. Strong gold and platinum prices would also boost South Africa’s export earnings.

South Africa’s municipal elections on November 4 bring political uncertainty, which might sway the currency up or down.

What has driven the recent three-session rise in USD/ZAR?

The dollar’s recent strength against the rand comes from a few places. Higher US yields, oil prices nearing $100 amid Middle East tensions, and increasing expectations for more Fed rate hikes.

Could this upward move easily push past 16.20?

To break that level, the dollar would need sustained strength or new “risk-off” pressure. Its current momentum probably isn’t enough for a significant push on its own.

What are the main risks that could reverse the dollar’s gains?

Several things could pull the dollar back down lower oil prices if tensions ease, softer US economic data reducing hike expectations, or strong gold prices giving the rand a boost.

The Euro (EUR) trades in a tight range at around 1.1640 against the US Dollar (USD) during the European trading session on Thursday. The major currency pair consolidates as investors await the European Central Bank’s (ECB) monetary policy decision, which will be announced at 12:15 GMT.

In the policy meeting, the ECB is widely anticipated to hike its Deposit Facility Rate by 25 basis points (bps) to 2.5%. Firm ECB interest rate hike expectations underscore the monetary policy statement and President Christine Lagarde’s press conference as key triggers for the euro’s next move.

Analysts at Danske Bank expect the ECB to deliver another modest tightening step at its upcoming meeting, noting that “in the euro area, the ECB will announce its deposit rate” and that “we expect the ECB to raise policy rates by 25bp, bringing the deposit rate to 2.50%, in line with consensus and market pricing.” They anticipate that President Lagarde will “retain full optionality over the future rate path and provide no firm guidance,” stressing that they “do not expect Lagarde to rock the boat materially, but keeping all options open, which should limit the market reaction in our view.”

On the US Dollar front, investors await the United States (US) Producer Price Index (PPI) data for August, which will be published at 12:30 GMT. The US headline PPI is expected to come in higher at 5.3% Year-on-Year (YoY) from 4.7% in July. The core PPI – which excludes volatile food and energy items – rose by 4.6% YoY, stronger than the previous reading of 4.2%.

EUR/USD Technical Analysis

In the daily chart, EUR/USD trades at 1.1637. The pair maintains a near-term bullish bias as price holds above the 20-day exponential moving average (EMA) at 1.1609, suggesting underlying demand remains intact. The Relative Strength Index (RSI) around 58 keeps a positive tilt without yet signaling overbought conditions, hinting that buyers still have some room to extend the advance while the short-term trend stays constructive.

On the downside, initial support is provided by the 20-day EMA at 1.1609, and a daily close below this level would ease the current bullish pressure and open the door to a deeper corrective pullback. As long as EUR/USD defends this moving average on closing bases, the broader technical structure favors further consolidation with an upside bias, with any dips likely to attract fresh buying interest rather than signaling a decisive trend reversal.

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

Economic Indicator ECB Rate On Deposit Facility One of the European Central Bank's three key interest rates, the rate on the deposit facility, is the rate at which banks earn interest when they deposit funds with the ECB. It is announced by the European Central Bank at each of its eight scheduled annual meetings.

Read more.

Next release: Thu Sep 10, 2026 12:15

Frequency: Irregular

Consensus: 2.5%

Previous: 2.25%

Source: European Central Bank

The Canadian Dollar (CAD) trades sideways at around 1.3810 against the US Dollar (USD) during the European trading session on Thursday. The Loonie pair consolidates as investors await the United States (US) Producer Price Index (PPI) data for August, which will be published at 12:30 GMT.

Investors will closely track the US PPI data as it is expected to influence the overall inflation outlook and eventually Federal Reserve (Fed) interest rate expectations.

According to estimates, the US headline inflation at the factory level accelerated to 5.3% Year-on-Year (YoY) from 4.7% in July. The core PPI – which excludes volatile food and energy items – is also expected to arrive higher at 4.6% YoY against the previous reading of 4.2%.

Signs of price pressures accelerating at the producer level would prompt expectations of interest rate hikes by the Fed in the near term.

Currently, the CME FedWatch tool shows the odds of the Fed hiking interest rates at the policy meeting next week are 61.2%.

Going forward, investors will also focus on the US Consumer Price Index (CPI) data for August, which will be released on Friday.

USD/CAD Technical Analysis

In the daily chart, USD/CAD trades at 1.3808, holding below the 20-day Exponential Moving Average (EMA) at 1.3854 and just under the 61.8% Fibonacci retracement at 1.3818, which together cap the upside and reinforce a mildly bearish near-term tone.

The Relative Strength Index (RSI) at 41.7 hovers below the neutral 50 line, suggesting weak upside momentum as the pair consolidates beneath these clustered resistances.

On the topside, immediate resistance is aligned at the 61.8% retracement at 1.3818, followed by the 20-day EMA at 1.3854, with further barriers at the 50% retracement near 1.3901 and then 1.3983 and 1.4085, corresponding to the 38.2% and 23.6% retracement levels. On the downside, initial support emerges at the 78.6% retracement around 1.3701, ahead of a more significant floor at the 100% retracement near 1.3551, where buyers would be expected to show stronger interest if the decline extends.

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

Economic Indicator Producer Price Index (YoY) The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

Read more.

Canadian bank strategists expect USD/CAD rallies to attract sellers, with support near 1.3720 ahead of a possible retreat towards 1.3500-1.3550. The US Dollar to Canadian Dollar (USD/CAD) exchange rate edged higher on Wednesday after two consecutive daily declines, as traders assessed fresh US restrictions on Canadian goods.

At the time of writing, USD/CAD was up 0.12% at 1.3795, recovering some of Tuesday’s 0.20% fall.

Latest — Exchange Rates:

Dollar to Canadian Dollar (USD/CAD): 1.37947 (+0.12%)

Pound to Canadian Dollar (GBP/CAD): 1.870651 (+0.26%)

Euro to Canadian Dollar (EUR/CAD): 1.606438 (+0.28%)

Foreign exchange strategists at Scotiabank expects the broader decline to resume, with improving Canadian Dollar fundamentals supporting its bearish view of the pair.

“USD support is 1.3715/35 ahead of the decline back to the 1.3500/50 region.”

That puts the bank’s first support area at 1.3715-1.3735, followed by a potential move towards 1.3500-1.3550.

Trade restrictions draw a muted response Washington’s latest measures will ban certain Canadian dairy products, motorcycles and most alcoholic beverages from September 29, following Canada’s retaliatory tariffs on US goods.

Scotiabank reported little immediate currency reaction to the announcement, following a similarly restrained assessment of President Trump’s weekend comments about Canada’s exchange rate.

“If the White House does have a beef with the low CAD, some further clarity is required.”

The bank’s estimated fair value for USD/CAD has edged down to 1.3736, below the current market rate.

This is a model estimate of equilibrium rather than a dated exchange-rate target, but its direction supports Scotiabank’s assessment that underlying Canadian Dollar drivers are improving.

Image: USD to CAD exchange rate 3-month chart The Canadian bank argues that last week’s failed US Dollar recovery established firm resistance in the low-to-mid 1.39 area.

“Trend momentum is USD-bearish across short-, medium-, and long-term studies, meaning that moderate USD gains (through the mid-1.38s) are likely to draw selling interest.”

We think that makes the response to a rebound towards 1.3850 particularly useful in judging this prediction.

Renewed selling there would reinforce Scotiabank’s call, while a sustained recovery into the 1.39 area would challenge its expectation that the downtrend is resuming.

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

The EUR/JPY cross trades in negative territory near 178.50 during the early European trading hours on Wednesday. The Japanese Yen (JPY) edges higher against the Euro (EUR) as a slew of hawkish comments from the Bank of Japan (BoJ) policymakers have cemented views that the BoJ will raise interest rates this month.  

BoJ board member Hajime Takata said last week that the central bank could take a more aggressive approach than expected. Takata further stated that a 25-basis-point hike “is not necessarily set in stone,” and that generally speaking, back-to-back rate hikes would be a possibility, too.

The BoJ is set to raise its policy rate to 1.25% from the current 1.0% at its September policy meeting, signaling an acceleration in the pace of rate hikes. This would raise the interest rate to its highest level in about 31 years and follow a rate hike in June. 

Yen funding role questioned as rising JGB yields unsettle cross-border flowsStrategists at Rabobank argue that the “clear problem relates to the use of the JPY as a funding currency,” with markets now asking “whether there is room for the recent rapid unwind of JPY shorts to accelerate nearterm.” They add that an “appreciating JPY would bring fresh uncertainly over whether domestic Japanese investors would have less incentive to look for opportunity abroad,” a debate that has been sharpened by the rise in JGB yields, which has “already made this a topical theme.” Rabobank also notes that “the market has suspected that the US Treasury has been worried about large Japanese insurers potentially selling US government debt for JGBs for some time,” underscoring how shifts in Japan’s rate environment could reverberate through global fixed income positioning.

Technical Analysis: EUR/JPY keeps a bearish vibe amid oversold RSIIn the daily chart, EUR/JPY extends its corrective slide and holding decisively below key moving averages, which keeps the near-term bias firmly bearish. Price is lodged beneath the 20-day simple moving average (the middle Bollinger band) and the 100-day simple moving average, underscoring a market that remains capped by medium-term trend resistance. The Relative Strength Index (14) has dropped to around 22, deep in oversold territory, hinting that while downside pressure persists, the selloff could be at risk of fatigue if sellers fail to press decisively lower.

On the topside, initial resistance is seen at the lower Bollinger band near 179.00, with a recovery above this barrier needed to ease immediate selling pressure. Further up, the next hurdle is located at the 180.00 psychological level, en route to the Bollinger mid-line at 183.82 and the 100-day SMA at 184.70.

On the flip side, the November 10, 2025 low of 177.17 acts as an initial suppot level for the cross. Any follow-through selling below this level could pave the way to the November 4, 2025 low of 176.09, followed by the October 21 low, 2025 of 175.35.

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

Japanese Yen FAQs The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

The Japanese yen is dominating the start of the week, with USD/JPY extending its decline below 155 and trading towards 153. Thin liquidity around the US holiday likely exaggerated the initial move, but the follow-through suggests this is more than just a liquidity event.

The move still looks primarily like a yen story rather than a broad rejection of the US dollar. Markets are increasingly focused on the prospect of a more hawkish Bank of Japan, alongside expectations that Japan’s GPIF could increase its allocation towards domestic assets. That combination is encouraging investors to unwind yen-funded carry trades and rebuild exposure to Japanese assets.

From a technical perspective, USD/JPY remains firmly inside its descending channel. The break below 155.00 has weakened the structure further, with 152.00 now the next meaningful support area. That level marked an important floor earlier in the year. A decisive break below it would bring 150.00 into view.

For now, trying to fade the yen rally looks risky. Even if the short-term fundamental move appears stretched, carry-trade unwinding can become self-reinforcing: a stronger yen forces leveraged positions to reduce exposure, which creates further yen buying and adds momentum to the move.

The bigger question is whether this yen strength can continue if the Federal Reserve tightens policy next week.

The broader dollar backdrop remains more constructive than USD/JPY currently suggests. Strong US payrolls and Brent crude trading close to $100 per barrel both argue against an aggressively dovish Fed, yet markets are still pricing only around 15 basis points of tightening for September. That leaves scope for US yields and the dollar to reprice higher if incoming inflation data remain firm.

US equity futures are pointing towards a softer reopening today. In an otherwise light calendar, weaker risk sentiment could provide some support to the dollar, although probably not enough on its own to reverse the current yen momentum.

The main event for the week is therefore Friday’s US CPI report. A hotter inflation print would strengthen the case for Fed tightening and could challenge the current USD/JPY sell-off. A softer number, however, would remove one of the dollar’s remaining supports and potentially allow the move towards 152 and 150 to continue.

The EUR/USD enters a potentially decisive week with monetary policy on both sides of the Atlantic once again driving the currency pair. The European Central Bank is widely expected to raise interest rates on September 10, while the release of U.S. inflation data on September 11 could determine whether the Federal Reserve follows with a rate hike of its own next week.

The ECB decision is largely anticipated, meaning the market reaction could depend less on the 25-basis-point move itself and more on the central bank’s guidance about what comes next. In the United States, meanwhile, the August consumer-price index could change expectations for the September 15-16 Federal Reserve meeting. That creates scope for increased volatility in the EUR/USD pair, particularly because the FX pair seems to be consolidating after a rebound.

Daily EURUSD Chart - Source: ActivTraderECB and Fed policy divergence could drive EUR/USD volatilityEurozone inflation accelerated to 3.3% in August from 2.9% in July, according to Eurostat’s preliminary estimate, marking its highest level since September 2023. The increase was largely driven by energy prices, with energy inflation accelerating to 14.3% from 10.3%. Core inflation, however, eased slightly to 2.4% from 2.5%. 

This release has strengthened expectations that the ECB will continue tightening monetary policy despite the risk that higher energy costs could weigh on economic activity. All 65 economists surveyed by Reuters expected the ECB to raise its deposit rate by 25 basis points to 2.50% on September 10.

The hike itself, therefore, should not come as a major surprise to markets. Instead, traders are likely to concentrate on ECB President Christine Lagarde’s communication and the updated economic projections. The key question is whether the ECB considers September’s increase the end of the tightening cycle or whether it leaves the door open to additional hikes. This distinction could prove important for the EUR/USD’s trajectory. 

Reuters’ latest economist poll found that 91% of respondents expect the deposit rate to finish 2026 at 2.50%, while 78% expect it to remain there through the middle of 2027. Interest-rate markets, however, have been more hawkish and have been pricing the possibility of another increase.

The energy shock makes the ECB’s communication particularly important. Continued geopolitical tensions and elevated oil and gas prices could keep headline inflation above target for longer, potentially forcing policymakers to maintain a restrictive stance. Economists surveyed by Reuters now expect eurozone inflation to return to the ECB’s 2% target only toward the end of 2027.

For the euro, a clearly hawkish ECB could therefore provide support, particularly if policymakers signal that another rate increase remains possible.

The other side of the EUR/USD equation is the Federal Reserve.

The U.S. August employment report has already complicated the picture. Nonfarm payrolls increased by 162,000 in August, significantly exceeding expectations, while the unemployment rate remained at 4.1%. Additionally, the change for July was revised up, from -23,000 to +21,000. The stronger labour-market figures pushed market expectations for a September Fed hike higher. Reuters reported that fed funds futures were pricing a roughly 57% probability of an increase late on Friday.

That leaves the August CPI report as a potentially decisive catalyst. The U.S. Bureau of Labor Statistics is scheduled to publish the figures on Friday, September 11. July CPI showed annual inflation at 3.4%, while core inflation stood at 2.5%. Economists surveyed by Reuters expect August CPI to rise 0.4% month-on-month, with core CPI increasing 0.2%.

A hotter-than-expected inflation reading could reinforce expectations for a September Fed hike and potentially strengthen the dollar. Conversely, evidence that underlying inflation is continuing to moderate could reduce the probability of immediate tightening, weighing on the dollar and potentially supporting the EUR/USD.

The CPI report arrives only days before the Fed’s September 15-16 meeting, leaving little room for markets to ignore the data. Fed Governor Christopher Waller has already indicated that he would favour keeping rates unchanged if the upcoming inflation figures confirm that price pressures are cooling.

EUR/USD daily technical outlookThe pair has recovered significantly from its summer lows, rebounding by roughly 3.13% from around 1.1355. This recovery allowed the EUR/USD to break above the Ichimoku cloud on the daily chart. However, the rebound has lost momentum around the 1.1674 area. The EUR/USD is currently trading near 1.1611 and appears to have entered a consolidation phase, with the pair broadly confined between resistance around 1.1674 and support near 1.1559.

Daily EUR/USD Chart - Source: ActivTraderThis range could become particularly important as the ECB and U.S. CPI approach. A sustained break above 1.1674 would represent a significant technical development. It would indicate that buyers have regained control after the recent consolidation and could open the way toward higher levels.

A break below 1.1559, by contrast, would weaken the current bullish structure and suggest that the recent recovery is losing momentum. Such a move could expose the pair to further downside as traders reassess the sustainability of the summer rebound.

Momentum indicators provide a relatively neutral signal at present. The 14-period Relative Strength Index is around 53.94, keeping it slightly above the key 50 threshold but without real moment or heading towards overbought territory. The RSI has also struggled to extend higher after approaching an ascending support trendline that has developed from the oversold low reached at the end of June. This suggests that neither buyers nor sellers currently have a decisive advantage.

The Ichimoku configuration nevertheless remains worth monitoring. The earlier move above the daily cloud improved the medium-term technical picture, but the failure to establish a sustained move above 1.1674 means confirmation is still lacking. For traders, the coming economic events could therefore provide the catalyst needed to break the current range.

Source: MorningStarA hawkish ECB combined with softer-than-expected U.S. inflation would represent the clearest bullish combination for the EUR/USD. Such a scenario could increase expectations for further ECB tightening while simultaneously reducing the probability of a near-term Fed hike, narrowing the expected interest-rate differential between the euro and dollar.

The opposite combination would be potentially bearish for the pair. A hawkish ECB that is fully priced in, followed by stronger-than-expected U.S. inflation, could revive expectations for Fed tightening and strengthen the dollar. In that scenario, the 1.1559 support level could come under significant pressure.

There is also a third possibility: both central banks could deliver hawkish signals. If the ECB raises rates but signals that September could be its final move, while U.S. inflation remains elevated, the dollar could regain an advantage despite the ECB’s tightening. 

The ECB decision may establish the initial direction, but U.S. inflation could ultimately determine whether the pair breaks out of its current range. With EUR/USD trading close to the middle of the 1.1559-1.1674 range, the market seems to be waiting for a catalyst. The key levels to watch: 1.1674 on the upside and 1.1559 on the downside. A decisive break of either boundary could provide a stronger signal about the next directional move. 

Until then, traders should expect potentially intraday swings around the ECB decision, U.S. PPI and Friday’s CPI release. With monetary-policy expectations finely balanced on both sides of the Atlantic, the EUR/USD could be particularly sensitive to even relatively small surprises in the data.

The yen has continued to gain relevance during recent trading sessions and, over the last four trading days, USD/JPY has declined by nearly 3.6%, highlighting the strength currently being displayed by the Japanese currency against the U.S. dollar. This selling pressure has remained in place as markets continue digesting recent updates regarding Japan's currency interventions while also maintaining expectations of a more aggressive Bank of Japan. As long as these factors remain dominant, downside pressure on USD/JPY could continue to be an important feature of the market in the sessions ahead.

Is Intervention Risk Returning to Japan?
The most important short-term development behind the yen's recent strength relates to the latest confirmations regarding Japan's efforts to support its currency through direct intervention.

Recent data revealed that Japan carried out a record intervention program during August. International reserves declined by approximately $76.6 billion, marking the largest monthly drop seen in recent years and falling from July's peak of $1.287 trillion in total reserves. As a result, markets have interpreted a significant portion of this decline as being linked to yen-buying operations.

In addition, the Ministry of Finance confirmed that approximately $98.6 billion was deployed in currency interventions through August 26, including operations conducted in coordination with the United States. This information is particularly important because it confirms that intervention threats are no longer merely theoretical but are instead supported by figures directly released by the Japanese government.

The market's interpretation has been straightforward: Japanese authorities remain willing to sell dollars and buy yen aggressively whenever they believe the currency is under excessive pressure. Consequently, this confirmation has increased expectations that intervention could continue to play an important role in the months ahead, helping reinforce demand for the yen over the short term.

Alongside this situation, expectations of a more restrictive monetary policy from the Bank of Japan also remain important. Markets are currently assigning more than a 62% probability to a rate increase at the September 17 meeting, taking the benchmark rate from 1.00% to 1.25%. This reflects continued expectations that Japan will gradually move away from the ultra-low interest rate environment that has characterized its monetary policy for decades.

Source: centralbankwatch

Taking all of this into account, the outlook surrounding the yen appears to have changed significantly compared with previous weeks. Expectations of additional interventions and a more aggressive Bank of Japan are helping support interest in the Japanese currency. On one hand, markets continue to consider the possibility of renewed yen purchases by authorities. On the other, higher interest rates improve the relative attractiveness of yen-denominated investments. As long as these factors remain in place, downside pressure on USD/JPY could continue to be an important feature of the short-term outlook.

Could the U.S. Dollar Become a Threat?
At the same time, it is important to recognize that the main obstacle to further yen strength could remain the U.S. dollar. This issue gained importance after last Friday's NFP report, which delivered employment figures well above expectations and once again supported the possibility of a more aggressive Federal Reserve.

Although this dynamic has not yet translated into a significant recovery in the dollar itself, it could become a relevant factor over the coming weeks. For now, the DXY Index continues to trade around the 98-point area without registering meaningful declines and remains relatively stable near the lows established in recent weeks.

Part of this lack of reaction may be explained by the U.S. market holiday, which tends to reduce both activity and volatility across financial markets.

Source: TradingEconomics

The key point to monitor is whether expectations of a more hawkish Federal Reserve begin translating into a more meaningful recovery in the dollar. If that occurs, part of the yen's recent advance could begin to face resistance. Under such a scenario, USD/JPY could move into a more balanced trading environment, particularly if both central banks continue progressing toward more restrictive policy settings over the coming months.

 

USD/JPY Technical Outlook

Source: StoneX, Tradingview

A Potential Trendline Begins to Take Shape: The recent decline in USD/JPY has led to the formation of a sequence of increasingly lower lows on the chart, a development that is beginning to shape a potential bearish trendline. As long as selling pressure remains dominant, this structure could continue to strengthen and become the most important technical pattern to monitor in the weeks ahead.

 
MACD: The MACD histogram continues to move below the neutral 0 line, indicating that the average strength of short-term moving averages remains tilted toward the downside. As long as this behavior persists, bearish momentum could continue dominating market activity.

 
RSI: A similar dynamic can be seen in the RSI, which continues to move lower below its neutral threshold. However, it is also worth noting that the indicator has now fallen below the 30 oversold level. This suggests that selling pressure may be becoming excessive in the short term and could create room for temporary bullish corrections over the coming sessions.

 
Key Levels:

158.235 – Key Resistance: This level coincides with the 200-period Simple Moving Average and represents the most important upside barrier on the chart. Price action returning toward this area could challenge the formation of the current bearish structure and favor a broader phase of consolidation during the weeks ahead.

 
155.928 – Nearby Barrier: This area corresponds to the nearest retracement zone on the chart and stands as the primary reference point for potential short-term bullish corrections.

 
152.441 – Key Support: A support area not seen since February and currently the most important downside barrier within the market. A move toward this level could reinforce the dominant bearish bias and further confirm the downtrend structure that has emerged during recent sessions.

 
Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

The USD/JPY and DXY charts are approaching defining support levels, creating a conflict between short-term weakness, long-term bullish continuation risks, and the risk of a broader structural bearish shift.

Several factors are contributing to volatility risks across both charts:

Rising U.S. Treasury yields: The U.S. 10-year Treasury yield recently reached a new 2026 high near 4.8%, widening the interest-rate differential between the United States and Japan 
Bank of Japan rate-hike expectations: Markets are pricing in the possibility of a 25-basis-point rate hike at the BOJ meeting scheduled for September 17–18. This expectation is providing short-term support for the yen.
Crude oil and geopolitical risks: Crude oil prices have broken above a 7-month resistance level, increasing concerns about supply disruptions and inflation. This could support the dollar through safe-haven demand, although persistently higher oil prices could also raise concerns about global growth.
As of September 7, the fundamental and technical picture remains tilted towards geopolitical risks. Short-term dollar weakness is visible, but the broader risk narrative continues to support the possibility of renewed dollar strength if inflation, yields, and geopolitical tensions remain elevated.

DXY Price Outlook: Monthly Time Frame — Log Scale

Source: TradingView

Despite the DXY breaking below its 2026 uptrend, signaling short-term weakness, the longer-term structure remains tilted to the upside.

The key downside levels I am watching align with the Fibonacci retracement levels of the 2026 uptrend: 98.50, 98, 97 and 95.50. The 95.50 area is the defining barrier between a structural breakdown of the 18-year uptrend and a potential continuation of the longer-term bullish structure.

On the upside, reclaiming the 2026 uptrend near 100.30, followed by a move above 101 and 101.70, would restore the dollar’s strength against major markets. Such a move could lift the DXY toward new 2026 highs and add further pressure on Japanese officials facing persistent yen weakness.

This situation could become more critical if the interest-rate differential between the United States and Japan continues to widen.

Key DXY Scenarios
Bullish scenario: A recovery above 100.30, followed by a breakout above 101 and 101.70, would signal renewed dollar strength and support a move toward new yearly highs.

Bearish scenario: A sustained breakdown below 98.50 and 98 would increase the risk of a deeper correction toward 97 and 95.50. A clear break below 95.50 would confirm a more significant structural shift and challenge the long-term bullish trend.

USD/JPY Price Outlook: Weekly Time Frame — Log Scale

Source: TradingView

Technically, USD/JPY is breaking below a 3-month support level, signaling short-term yen strength while simultaneously approaching an uptrend support zone that has been in place since 2023.

Key Patterns and Scenarios in Focus
The breakdown below the April 2025–July 2026 channel points to short-term weakness and aligns with the Fibonacci retracement levels of that advance.

Price action is currently testing a breakdown below 154.80, the 38.2% retracement level. A sustained move below this level could target 152, corresponding to the 50% retracement, followed by 149 near the 61.8% retracement level.

The 149 area could become an important zone for a potential long-term rebound, aligning with the golden ratio, the broader 2023–2026 uptrend and increasingly oversold momentum conditions.

Bearish scenario: A clear breakdown below 149 would confirm broader structural weakness and increase the risk of a deeper correction in USD/JPY.

Bullish scenario: Holding above 149 would preserve the broader bullish structure. On the upside, reclaiming the 2026 uptrend boundaries near 158.40, 161 and 164 would restore USD/JPY strength and expose the upper channel boundary near 170.

Short-term weakness, the potential for long-term dollar strength and persistent geopolitical risks are shaping the outlook for USD/JPY and the DXY.

The next major catalysts include the U.S. CPI report on Friday, the BOJ meeting on September 17–18 and the FOMC meeting on September 16. The reaction in Treasury yields and the direction of crude oil prices will remain critical in determining whether the current weakness develops into a deeper structural decline or becomes another correction within a broader bullish trend.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

The NZD/USD pair trades in negative territory near 0.5875 during the early European trading hours on Monday, pressured by a firmer US Dollar (USD). Traders raise their bets on a US Federal Reserve (Fed) rate hike in the September policy meeting following stronger-than-expected US jobs data. 

The US Bureau of Labor Statistics (BLS) showed on Friday that US Nonfarm Payrolls (NFP) climbed by 162K in August, versus an upwardly revised rise of 21K prior. This figure came in above the market consensus of 56K. Meanwhile, the Unemployment Rate held steady at 4.1% during the same period. Fed funds futures are now pricing in roughly a 60% probability of a hike, according to the CME FedWatch tool.

A dovish hike from the Reserve Bank of New Zealand (RBNZ) could undermine the New Zealand Dollar (NZD). The RBNZ decided to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 2.75% last week. RBNZ Governor Anna Breman stated that it’s likely there will be a further increase, but policymakers want to take time to assess the impact of the increases to date.

RBNZ continues gradual tightening as inflation risks monitoredAnalysts at Commerzbank note that the RBNZ delivered a widely anticipated move, with the central bank raising the Overnight Cash Rate (OCR) by 25bp to 2.75% “as expected,” and reiterating that “a gradual removal of monetary stimulus was appropriate to return inflation sustainably to the target.” The bank highlights that while headline CPI remains elevated, largely on the back of Middle East-related fuel costs, most core inflation measures are still within the RBNZ’s 1–3% band, suggesting that the pace of any further tightening will hinge on the “persistence” of inflation pressures and the strength of the domestic recovery.

Technical Analysis: NZD/USD extends consolidation the near termIn the daily chart, NZD/USD sits between nearby structural bands, holding above the 100-day moving average (MA) while still trading below the Bollinger middle band. This configuration, together with a 14-day Relative Strength Index (RSI) hovering around a neutral 48, suggests a consolidative near-term tone, with price caught in a range rather than showing a clear directional break.

On the topside, initial resistance is seen at the Bollinger middle band around 0.5910. The next upside target is located at the Bollinger upper band further up near 0.5985. 

On the downside, the 100-day MA at about 0.5845 offers the first layer of support, ahead of the Bollinger lower band clustered just below 0.5830, which would need to give way to signal a deeper corrective move. A break below this level could expose the July 27 low of 0.5771. 

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

New Zealand Dollar FAQs The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

TL;DR: Thursday’s ECB hike to 2.50% is almost fully priced, but economists overwhelmingly expect it to be the last move while markets price roughly two more hikes within a year — and EUR/GBP is testing a major resistance cluster at 0.8610–0.8617 at exactly the moment that disagreement needs resolving.

The Hike Is Almost Certain. What Comes After It Is Not. Calling Thursday’s ECB meeting a non-event because a 25bp hike is already almost fully priced misses the part of the meeting that actually matters.

There’s little disagreement over the immediate decision. Markets assign roughly a 95% probability to a rate increase from 2.25% to 2.50%, while all 65 economists in the latest Reuters poll expect the same move. But beyond September, the consensus breaks apart sharply.

Economists overwhelmingly think Thursday will mark the end of the tightening campaign. Rates markets do not. Some 91% of economists expect the deposit rate to finish 2026 at 2.50%, while 78% see it still there through the middle of 2027. OIS pricing, by contrast, implies around 72bp of cumulative tightening over the coming 12 months — roughly three hikes in total, including the one expected this week.

That leaves close to two additional moves embedded in the curve beyond Thursday. So the real question isn’t whether the ECB hikes. The hike is priced. The rate path is not. And EUR/GBP has arrived at a particularly awkward place for that disagreement to be resolved.

EUR/GBP Is Testing More Than Just Another Resistance Level The pair has recovered from 0.8453 into a resistance zone where several independent technical methods converge.

On the daily chart, the broader cycle runs from the October 2024 base around 0.8221 through the rally to 0.8863, followed by a decline that developed through lower highs before stalling at 0.8453. That low wasn’t technically random. The 61.8% retracement of the entire 0.8221–0.8863 advance sits around 0.8466, almost exactly where the decline eventually found support. That strengthens the significance of 0.8453 as a potential medium-term turning point.

But proving a bottom exists is very different from proving a new uptrend has begun. EUR/GBP has now reached the 0.8610 area, and this is where the recovery faces its first serious test. Three separate forms of daily resistance converge there.

First is horizontal structure. EUR/GBP previously consolidated around 0.8610 on two occasions during the decline, giving the zone clear historical significance. Second is the 38.2% retracement of the 0.8863–0.8453 decline, which also comes in almost exactly at 0.8610.

The weekly chart raises the bar further. The 55-week EMA currently sits around 0.8617, leaving EUR/GBP facing a broader resistance cluster between roughly 0.8610 and 0.8617. That matters because the pair isn’t simply approaching a level where one technical method happens to suggest resistance — several different structures are saying much the same thing. It will probably take real fundamental conviction to clear them.

Momentum Has Already Started to Hesitate The higher-timeframe momentum picture is still constructive. Daily RSI is around 61, leaving considerable room before overbought territory, while daily MACD has crossed higher and is holding above zero. There’s no obvious daily exhaustion signal.

The four-hour chart, however, is beginning to tell a different story. EUR/GBP reached 0.8607 last week, effectively tagging the lower edge of the resistance cluster, but momentum failed to confirm the move. Four-hour MACD shows bearish divergence, as the latest price high wasn’t accompanied by a matching momentum peak. Four-hour RSI is only around the upper-50s.

The rally hasn’t stalled because EUR/GBP is already deeply overbought. It has stalled because momentum is fading exactly where substantial resistance should be expected. That makes the current setup genuinely two-sided. A rejection would fit the existing structure. But there’s still enough higher-timeframe momentum for a sufficiently strong catalyst to force a breakout. Thursday’s ECB projections could provide that catalyst.

Economists and Markets Are Making Different Bets The ECB announces its decision on Thursday, September 10, at 1215 GMT, followed by President Christine Lagarde’s press conference at 1245 GMT.

The expected hike itself is close to settled. The latest Reuters poll, conducted between August 31 and September 3, found all 65 economists expecting a 25bp increase to 2.50%. That conviction has risen steadily: 83% expected a September hike in the previous poll, compared with 72% before the July meeting, when the ECB ultimately held rates unchanged.

But the firm consensus around September masks a much bigger disagreement about what comes next. Economists largely see this as the second and final move of what would be the ECB’s shortest tightening campaign in 15 years. Markets are leaving the door much wider open.

OIS pricing late Sunday put Thursday’s hike probability at 94.8%, equivalent to around 23.7bp of tightening. Yet the curve discounts approximately 72.1bp over the next 12 months. October itself carries only around a 40% probability of another move, while December is somewhat higher at roughly 44%, consistent with the possibility that the ECB could skip October and wait for the next major projection round.

But the exact meeting doesn’t matter as much as the cumulative message. Investors are effectively saying September probably won’t be enough. Economists are saying it probably will. Thursday’s projections need to begin telling markets which side has the stronger case.

The June Forecasts Already Included the Iran Shock This is why simply seeing higher inflation forecasts on Thursday wouldn’t automatically be hawkish. The ECB’s June projections were already constructed after the Iran war had become a major economic shock.

On June 11, the ECB raised the deposit rate from 2.00% to 2.25%, the main refinancing rate from 2.15% to 2.40%, and the marginal lending rate from 2.40% to 2.65%. The central bank explicitly tied the decision to the conflict and its effects on commodity markets.

Its June staff projections put headline inflation at 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028. Core inflation excluding energy and food was projected at 2.5%, 2.5%, and 2.2%. GDP growth was seen at 0.8%, 1.2%, and 1.5% over the same three years.

Compared with March, the direction was already stagflationary: inflation forecasts moved higher while growth was revised lower, with the ECB linking both changes to the war’s effects on energy prices, real incomes, and confidence. So Thursday isn’t about whether the ECB has suddenly discovered an energy shock. It’s about whether that shock is proving more persistent or more broad-based than the ECB assumed in June.

Headline Inflation Says One Thing. Core Inflation Says Another. The latest inflation data make that question unusually clean. Eurozone headline inflation accelerated from 2.9% in July to 3.3% in August, putting it above the ECB’s 3.0% full-year projection for 2026. But the increase was driven overwhelmingly by energy.

Underlying measures moved the other way. Core CPI eased from 2.5% to 2.4%, while services inflation slowed from 3.3% to 3.0%. That divergence is the heart of Thursday’s policy debate.

If headline inflation is rising because the conflict has pushed up energy prices, while core and services inflation continue to cool, the ECB is dealing primarily with a supply shock. Higher rates can’t produce more oil or reopen shipping routes. They matter only if those higher energy costs begin feeding into wages, services prices, and inflation expectations. So far, the latest data don’t clearly show that second-round process taking hold.

That’s why the economist consensus can simultaneously accept a September hike and reject the need for several more afterward. The ECB can respond to the immediate inflation risk without concluding that a prolonged tightening campaign is necessary.

The complication is that supply shocks don’t always stay clean. Persistent increases in visible fuel, diesel, and food costs can influence inflation expectations. If households and workers start building those costs into wage demands, and companies begin passing them into broader prices, the distinction between an energy shock and underlying inflation becomes much less comfortable. Thursday’s projections should show whether the ECB thinks Europe is moving closer to that point.

Three Forecast Tests Matter More Than the 25bp Hike 1. Headline Inflation: How Big Is the Revision? A higher 2026 headline inflation forecast would hardly be surprising after August inflation reached 3.3%. The more important question is what kind of revision the ECB makes.

A modest increase confined mainly to 2026 could amount to little more than technical acknowledgement of higher energy prices already visible in the data. That wouldn’t, by itself, justify another two hikes after September. A larger revision extending meaningfully into 2027 would carry more significance, implying the ECB sees the inflation shock lasting longer than anticipated in June.

2. Core Inflation: The Real Hawkish Test The core projections are much more important. In June, the ECB forecast core inflation at 2.5% in 2026, 2.5% in 2027, and 2.2% in 2028.

If that path is unchanged or revised slightly lower, the central bank would effectively be confirming that underlying inflation hasn’t materially deteriorated despite the increase in energy-driven headline CPI. That would strongly reinforce the “September and done” argument.

A meaningful upward revision would carry a completely different message. It would suggest policymakers see evidence — or at least a growing risk — that the supply shock is beginning to bleed into more persistent inflation dynamics. That’s the kind of surprise that could justify the extra tightening currently embedded in the market curve.

3. Growth: How Much Damage Is the Shock Doing? The June growth projections provide the other side of the equation. The ECB expected GDP growth of 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028.

Private-sector consensus remains broadly aligned with the first two numbers, suggesting no obvious reason for a large revision based purely on the growth data available so far. But the intensifying conflict creates clear downside channels through energy costs, weaker household purchasing power, and confidence.

If the ECB cuts growth further while raising inflation, Thursday becomes more complicated rather than simply more hawkish. Higher inflation alongside weaker growth strengthens the policy trade-off. That’s why markets need to look beyond the headline forecast revision and ask what exactly is driving it.

Scenario One: The ECB Confirms This Is Still Mainly a Supply Shock The cleanest EUR-negative outcome would be straightforward. Headline inflation is revised modestly higher, but core inflation stays broadly unchanged or eases. Growth stays close to the June path or receives a moderate downgrade.

That would tell markets the ECB still sees much of the inflation deterioration as energy-driven rather than evidence of a broader inflation resurgence. It would also validate the dominant economist view that Thursday’s hike can be the last.

This is where the asymmetric market risk becomes important. September itself doesn’t need to be repriced lower — the 25bp increase can happen exactly as expected. The adjustment would come from the additional tightening priced beyond September. With around 72bp embedded over the next year, the curve has significant room to remove future hikes without challenging Thursday’s move at all.

That would be a genuinely EUR-negative outcome. For EUR/GBP, rejection from the 0.8610–0.8617 resistance cluster would then have both technical and fundamental backing. The more important bearish confirmation would come below 0.8545. A break there would strengthen the view that the rebound from 0.8453 was corrective rather than the start of a durable trend reversal, exposing 0.8453 again. A renewed break of that low would reopen the broader decline from 0.8863.

Scenario Two: The ECB Validates the Market’s Hawkish View The bullish EUR scenario requires more than an energy-driven headline revision. Core inflation would need to move higher as well, or the projections and Lagarde’s communication would need to show the ECB is becoming more concerned about second-round inflation pressure.

The press conference could be just as important as the forecasts here. The ECB has repeatedly emphasized that it isn’t pre-committing to a particular rate path and will decide meeting by meeting. If that language stays essentially intact while Lagarde makes little effort to push back against the roughly two additional hikes markets are pricing beyond September, investors could interpret the meeting as tacit confirmation that the tightening cycle still has room to run.

That would give EUR/GBP the kind of Euro-specific catalyst needed to challenge the current technical ceiling. A decisive break through 0.8610–0.8617 would be the first important signal that the decline from 0.8863 completed at 0.8453. The next immediate objective would be the upper boundary of the descending daily channel around 0.8644. A sustained break there would make the recovery from 0.8453 look increasingly like a genuine reversal rather than another rebound within the broader decline.

Scenario Three: The ECB Solves Nothing The third outcome may be the easiest to imagine and the hardest to trade. Headline inflation is revised higher. Growth is cut. Core inflation moves too little to settle whether the shock is genuinely spreading.

That would leave the ECB facing essentially the same two-sided problem it described in June: upside inflation risk and downside growth risk at the same time. In that environment, markets may struggle to decide whether the extra tightening already priced into the curve is justified.

EUR/GBP could reject again from 0.8610 without generating enough downside conviction to break 0.8545. And if that happens, the technical stalemate simply survives another day. Friday’s UK data could then become the tie-breaker.

Friday’s UK GDP Matters Most If the ECB Leaves a Draw The ONS releases July monthly GDP on Friday, September 11, alongside the trade balance, industrial and manufacturing production, construction output, and the NIESR monthly GDP tracker.

The broader UK growth picture is modest rather than collapsing. GDP growth slowed from 0.6% q/q in Q1 to 0.4% in Q2, while the IMF forecasts 1.0% growth for 2026 and the OECD 0.9%.

That gives Friday’s releases clear Sterling relevance. But they shouldn’t displace Thursday’s ECB meeting as the central driver of this setup. If the ECB convincingly validates further tightening, EUR/GBP may already be testing or breaking resistance before the UK numbers arrive. If the ECB instead reinforces the “one and done” view, the Euro could already be retreating from resistance, leaving UK data as a secondary confirmation or counterweight. Friday becomes most important under the mixed scenario, where Thursday fails to provide enough conviction to resolve either side of the technical range.

ActionForex’s Technical View on EUR/GBP: The Market Has Already Drawn Its Own Line EUR/GBP is approaching Thursday with an unusually clean combination of fundamental and technical uncertainty. The rate decision itself is almost known. The projections are not.

Economists overwhelmingly think 2.50% will mark the end of the ECB’s tightening campaign. Rates markets are effectively pricing another two moves beyond September. That disagreement is now meeting a technical structure that also demands resolution.

At 0.8610–0.8617, EUR/GBP faces horizontal resistance, a major Fibonacci retracement, the descending daily trendline, and the 55-week EMA. Four-hour momentum has already begun to fade around the zone, but the daily recovery hasn’t yet exhausted itself. The pair therefore needs conviction, not merely another expected rate hike.

If Thursday shows headline inflation is hotter but underlying inflation remains contained, the additional tightening embedded in the curve has room to unwind. Rejection from resistance would then gain a clear fundamental explanation, with 0.8545 becoming the critical downside trigger.

If the ECB lifts the core inflation path and leaves markets comfortable pricing further tightening, the Euro could finally gain enough support to break the resistance cluster. That would shift attention toward 0.8644 and strengthen the case that 0.8453 marked a more durable bottom.

And if the projections split the difference, Friday’s UK GDP may have to finish the job. Either way, dismissing Thursday because the hike is already priced misses the real trade.

The hike is priced. The rate path is not. And EUR/GBP is sitting exactly where that difference starts to matter.

Key Takeaways Thursday’s ECB hike to 2.50% is nearly certain, but economists (91% see 2.50% through year-end) and markets (72bp priced over 12 months) disagree sharply on what comes after it. Core inflation (2.4% in August) and services inflation (3.0%) are both cooling even as headline inflation rises to 3.3% on energy, making the core forecast path the real hawkish test. EUR/GBP faces a genuine resistance cluster at 0.8610-0.8617, where horizontal structure, a 38.2% retracement, and the 55-week EMA all converge. An unchanged or lower core inflation path would validate the “September and done” view and favor rejection toward 0.8545 and then 0.8453. A higher core inflation path, or a press conference that doesn’t push back on further tightening, would open a break toward 0.8644, with Friday’s UK GDP as the tie-breaker if Thursday leaves the question unresolved.

Currency analysts remain bullish on the AUD/USD exchange rate but wants a retreat to 0.7080-0.7000 before rebuilding long positions. The Australian Dollar is trading above the level where JPMorgan wants to buy it.

Latest — Exchange Rates:

Australian Dollar to Dollar (AUD/USD): 0.720395 (+0.04%)

Pound to Australian Dollar (GBP/AUD): 1.876283 (-0.13%)

Euro to Australian Dollar (EUR/AUD): 1.612118 (-0.17%)

AUD/USD closed near 0.7204 on Friday after reaching 0.7214, leaving the pair roughly 1.7% above the desk’s first preferred entry and 2.8% above the bottom of its buying zone.

JPMorgan is not abandoning its constructive view.

The desk simply considers the current level unattractive for adding exposure.

“We have been bullish on AUD for well-trodden reasons, but with the pair generally struggling at these levels, we have been waiting for a pullback towards 0.7080/00 before topping up on longs.”

The preferred strategy is to rebuild long positions around 0.7080, with 0.7000 representing the deeper end of the zone.

That makes this a pullback call rather than a forecast that AUD/USD must fall permanently.

The distinction matters after the stronger US payroll report.

A firm Dollar response to US data could provide the retreat JPMorgan was waiting for without necessarily invalidating the bank’s broader Australian Dollar view.

Before the release, the desk had already shown reluctance to chase the pair near 0.72.

“NFPs are today, although with Waller drawing attention to next week’s CPI, I am a little less inclined to chase a surprise print today.”

The payroll surprise has shifted attention towards US inflation and the durability of Federal Reserve tightening expectations.

If those expectations strengthen, AUD/USD could be forced back towards JPMorgan’s entry levels.

Image: Australian dollar vs US Dollar chart for last 48 hours of the week. The 48-hour chart nevertheless shows that the Australian Dollar absorbed the payroll release relatively well.

AUD/USD briefly dropped below 0.7190 but recovered to close around 0.7204, near the upper end of its 0.7159-0.7214 range.

Why JPMorgan still likes the Australian Dollar The bank’s constructive stance has been supported by Australian rate expectations, resilient demand for commodity currencies and investor flows.

“AUDUSD moved above 0.72 for a second time this week while NZDUSD got a look above 0.59, although both have been trickling lower since London sat down.”

JPMorgan also reported real-money demand for the currency.

“Flow-wise, RM were large buyers of oz and, to a lesser extent, NZD yesterday, whereas systematics were LHS in AUD.”

The risk for prospective buyers is that 0.7080 never trades, leaving the bullish view without an entry.

The opposite risk is that a break below 0.7000 reflects more than a routine Dollar correction.

Between those outcomes, JPMorgan’s message is clear: stay constructive, but make the market come to the preferred price.

Suspected intervention helped drive USD/JPY sharply lower
September BOJ hike now fully priced
Payrolls revived September Fed hike expectations
CPI and PPI dominate this week’s US calendar.
USD/JPY moves remains tightly linked to US Treasury yields
USD/JPY suffered its largest weekly loss since late July as we entered September, hit by relatively dovish remarks from senior Fed officials and possible intervention from the Bank of Japan on behalf of the Japanese government.

However, an unusually strong August payrolls report in the United States on Friday managed to resuscitate not only rate hike pricing for the Fed’s meeting the week after next, but also stall what had been an abrupt move lower in the pair.

With a strong and strengthening relationship with gyrations in US bond yields, how the Fed rate outlook evolves this week will likely determine where USD/JPY finishes up on Friday.

Inflation Data Set to Drive Fed Pricing
Thursday’s PPI and Friday’s CPI reports stand out as the known knowns most likely to impact USD/JPY this week.

Both will not only help shape expectations for what core PCE may print at later this month, but could go a long way to determining whether the Fed begins a new tightening cycle in September.

Source: TradingView

The timing is especially important given conflicting messages from senior Fed officials over the past week. Chair Kevin Warsh struck a hawkish tone at Jackson Hole, making it clear he remained uncomfortable with inflation and that the Fed still had work to do if price pressures failed to ease sufficiently. Governor Michael Barr also sounded relatively hawkish, reinforcing the sense that another hike remained firmly on the table.

But that messaging was subsequently tempered by New York Fed President John Williams, who said the case for a September hike “isn’t yet firm”, and Governor Christopher Waller, who said he would support keeping rates unchanged if August inflation continued to cool.

With the Fed now in blackout ahead of the September meeting, it will therefore leave the data to do the talking.

At the very least, the core figures probably need to print in line with expectations, if not a touch above, to really cement the case for a September hike. If that happens, you’d expect market pricing to follow, with the probability of a move currently sitting just shy of two in three.

The underlying detail will also matter, particularly in areas of the economy that are more heavily influenced by domestic factors, such as services inflation excluding housing and energy services.

If the core readings undershoot, market pricing for a September hike would likely ratchet lower, leaving December as the more likely candidate as the Fed and markets have more time to assess incoming economic data.

While history suggests the more volatile market reaction normally comes following CPI, PPI arrives first on this occasion, meaning it could provide markets with a strong steer on whether upside or downside inflation risks are prevalent heading into Friday.

Treasury Auctions Enter the Spotlight
Another area of note on the US calendar will be Treasury supply, with three, 10 and 30-year auctions scheduled across the week. They arrive at a time when there’s already plenty of unease around Fed credibility and the size of the US deficit.

US President Donald Trump’s threat on Friday to impose tariffs on countries if the Fed doesn’t cut rates could, at the margin, dissuade international investors from participating in those auctions.

We also get the Treasury’s monthly budget statement on Friday. If that delivers another ugly deficit print, as we saw in the July figures, it could place renewed upward pressure on Treasury yields.

Contrary to what you might normally expect from renewed fiscal concerns, given the strong positive relationship between USD/JPY and moves in US Treasury yields over recent weeks, any renewed move higher in yields from weak auction demand or another poor budget print could also help generate upside in the pair.

Source: Bloomberg

Japan Data Must Back the Hawkish Shift
On the Japanese side of the ledger, the impetus to sustain the strengthening in the yen seen last week will come down to key wages and upstream PPI data released during the week.

There’s been a distinct hawkish repricing of the Japanese rates outlook over the past couple of weeks, with a September hike now fully priced and an over 80% probability attached to a follow-up move in December.

Source: TradingView

It will be left to those reports, along with the detail in the final read of Q2 GDP released on Tuesday, to justify those expectations. If we see weakness relative to market expectations, it runs the risk of pushing BOJ policymakers back towards a more cautious stance on the cadence of policy tightening.

The detail in the GDP report will also be important. The initial release was soft beneath the headline, with weakness in household consumption especially prominent.

Even though the report now comes across as a little like ancient history, stronger underlying detail would still help build confidence in the virtuous cycle the BOJ wants to see between strengthening wage pressures, firmer demand and self-sustaining inflationary pressures. At the margin, that will be another important consideration for the rates outlook.

US Rates Link Tightens
Despite the hawkish repricing of the Japanese rates outlook, the correlation matrix below continues to point to a very strong linkage between USD/JPY and outright movements in US Treasury yields.

Source: TradingView

Over the past five days, the correlation with the US 2-year yield sits at 0.80, rising to 0.89 with the US 10-year and 0.76 with the 30-year. That compares with just 0.26 for the US-Japan 2-year yield spread and -0.46 for the 10-year spread over the same period.

So even though Japan’s rates outlook has undergone quite a major hawkish transition recently, the message from the matrix remains one where the US rates outlook, along with the implications further out the curve, continues to have a vice-like grip on movements in USD/JPY.

It’s also worth pointing out that we’re seeing an unusual positive correlation between USD/JPY and both VIX and MOVE, which is contrary to what you’d normally expect given the yen’s status as a funding currency for carry trades. At the same time, the inverse relationship with risk assets has persisted and strengthened, with the five-day correlation with S&P 500 futures sitting at -0.94.

What’s also notable is that the damage higher energy prices had been doing to the yen appears to have weakened. That relationship had been driven by concerns around Japan’s energy security and the deterioration in its terms of trade, yet the yen managed to strengthen last week even as energy prices continued to rise.

USD/JPY Respects the Range

Source: TradingView

While the question as to whether the BOJ was instructed to intervene last week remains unanswered, despite the violence of the bearish unwind, USD/JPY continues to be respectful of known technical levels, providing something akin to a blueprint for traders to focus on.

The immediate range in focus is 156.68 on the topside and 155.50 on the downside, with the former coinciding with the low set on August 7, while the latter is the top of a zone that has sparked some savage bounces over the course of this year.

While the overall message from the oscillators continues to favour selling into strength and downside breaks, with RSI (14) still sitting at 34 and MACD remaining beneath the signal line in negative territory, the rapid increase in downside momentum looks to have reversed slightly thanks to the strong payrolls print last Friday.

My view is therefore to place greater emphasis on price action rather than holding a specific directional bias in the near term. While we entered this range at rapid velocity from above, you can’t dismiss the fact we’ve seen some big bounces from this zone in the past.

On the topside, above 156.68, the levels to keep an eye on are 158, which has acted as both support and resistance for periods this year, and 159.50, another similar level above that.

Underneath, 155.50 down to 155 has been the support zone where bids have been lurking this year. A clean break beneath the lower rung of that zone could bring 154 into play, which has acted as both resistance and support for periods this year, along with 152.09, 151.50 and a more prominent support level at 151.