Track market-moving stories before they get noisy

USD/CAD is attempting to extend its recovery on Tuesday as traders look beyond Canada’s hotter July inflation report and turn their attention to an increasingly important US-Canada trade deadline. The pair was trading around 1.3897 at the time of writing, having recovered from a recent low near 1.3850. The rebound puts the psychological 1.3900 level back in focus after USD/CAD spent much of August under selling pressure.

The Canadian dollar initially benefited from Monday’s inflation figures, but that support has faded as investors assess whether the increase in headline CPI is enough to materially alter the Bank of Canada interest rate outlook. More importantly, currency markets are now preparing for Wednesday’s deadline for potentially steep US tariffs on Canadian goods, making trade policy a significant near-term risk for the loonie.

Canada CPI Hits 3.0%, but Core Inflation Tells a Different Story Canada’s annual inflation rate accelerated to 3.0% in July from 2.8% in June, reaching the upper end of the Bank of Canada’s 1% to 3% inflation-control range. The increase was largely driven by gasoline prices, which jumped 25.7% year over year, while higher travel costs also contributed to the rise. On a monthly basis, CPI increased 0.5%. However, the underlying inflation picture was considerably less concerning.

The Bank of Canada’s closely watched CPI-trim measure stood at 1.9%, while CPI-median was 2.0%. Inflation excluding food and energy was also 1.9%, suggesting the acceleration in headline prices has not yet developed into broad-based inflationary pressure.

That distinction matters for the Canadian dollar outlook. A headline CPI reading of 3.0% would normally strengthen expectations for tighter monetary policy and potentially support the loonie. However, contained core inflation gives the Bank of Canada more room to wait before making its next move, particularly while the economy faces substantial uncertainty from US trade policy.

As a result, Monday’s inflation report has not been enough to prevent USD/CAD from recovering.

US-Canada Tariff Deadline Becomes the Next USD/CAD Catalyst Attention has now shifted firmly toward trade negotiations between Washington and Ottawa. The United States has threatened to impose 50% tariffs on roughly $20 billion of Canadian imports beginning Wednesday, representing a potentially significant escalation in the trade dispute between the two countries.

Canadian Prime Minister Mark Carney spoke with US President Donald Trump on Tuesday as officials continued last-minute negotiations aimed at preventing the tariffs from taking effect. However, significant disagreements remain, particularly around automobiles and existing US tariffs on Canadian goods. For USD/CAD, the outcome could overshadow Monday’s inflation data.

A last-minute agreement, postponement or softer tariff framework could remove an important source of uncertainty for the Canadian economy and potentially strengthen the loonie. Conversely, implementation of the proposed 50% tariffs could raise concerns about Canadian exports, business investment and economic growth. That makes Wednesday’s deadline a potential volatility event for the USD/CAD exchange rate.

USD/CAD Technical Analysis: 1.3900 Back in Focus The four-hour chart shows USD/CAD attempting to recover after its prolonged decline from the July highs. The pair recently found support around 1.3850, before rebounding to approximately 1.3897. Price has also moved back above the 20-period Bollinger Band moving average near 1.3885, providing an early indication that short-term momentum is improving.

The MACD reinforces that recovery signal. Although both the MACD and signal lines remain below zero, the MACD line has crossed above its signal line and the histogram has turned positive. This suggests bearish momentum is weakening after the recent selloff.

Immediate resistance sits around 1.3900, followed by the upper Bollinger Band near 1.3932. A sustained move above 1.3930 could strengthen the rebound and expose the previous resistance zone around 1.3950.

On the downside, 1.3850 remains the key support level, closely followed by the lower Bollinger Band around 1.3838. A break below this region would restore the bearish structure and increase the risk of another leg lower.

USD/CAD Outlook: Can the Canadian Dollar Resume Its Rally? Despite Tuesday’s rebound, the broader USD/CAD price trend remains bearish, with the pair having fallen substantially from levels above 1.4100 in late July. For buyers, reclaiming 1.3930 to 1.3950 would provide stronger evidence that the current move is developing into something more than a short-term correction.

For sellers, failure to establish a sustained break above 1.3900 would leave the recent 1.3850 support vulnerable to another test. The tariff deadline may ultimately decide which side gains control. With Canada’s CPI report now behind the market, US-Canada trade negotiations have become the most immediate catalyst for the USD/CAD price forecast, and Wednesday could determine whether the pair extends its recovery or resumes the broader decline.

Why is USD/CAD rising today?

USD/CAD is rebounding toward 1.3900 as the Canadian dollar loses some of the support it received from Canada’s July inflation report. Traders are also positioning ahead of the US-Canada tariff deadline, which could have significant implications for the Canadian economic outlook.

How did Canada’s CPI affect the Canadian dollar?

Canada’s July headline CPI accelerated to 3.0% year over year from 2.8% in June. However, underlying inflation measures remained considerably softer, limiting expectations that the Bank of Canada will need to respond aggressively to the headline increase.

What could move USD/CAD next?

The US-Canada tariff deadline is the main near-term catalyst. Any agreement, postponement or escalation in tariffs could trigger volatility in the Canadian dollar and USD/CAD. Traders will also continue monitoring oil prices, US economic data and Bank of Canada interest rate expectations.

Goldman Sachs has raised its three and six month USD/BRL exchange rate forecasts, placing election risk ahead of a later high-carry recovery. Goldman Sachs has raised its near-term USD/BRL forecasts as Brazil's election begins to command a larger risk premium.

The bank now projects the US Dollar to Brazilian Real exchange rate at 5.20 in three months, 5.10 in six months and 5.00 in 12 months.

Only the near-term forecasts moved “Our new USD/BRL forecasts are 5.20, 5.10, 5.00 in 3-, 6- and 12-months,” Goldman said.

The previous sequence was 4.90, 5.00 and 5.00, so the bank has raised the three- and six-month figures while leaving the 12-month destination unchanged.

With spot near 5.19 when the note was prepared, the revision chiefly removes the near-term Real appreciation that Goldman had previously expected.

That is not a wholesale bearish turn on the Real.

The revised profile implies modest BRL weakness during the first leg, followed by appreciation as USD/BRL declines from 5.20 to 5.00.

Goldman links the adjustment to the return of political risk as Brazil approaches its election.

The Real could still rally tactically, but the bank expects the exchange rate to respond both to changing probabilities for the candidates and to what each result could mean for the public finances.

“While BRL could tactically rally here, we think it will be difficult for USD/BRL to trade below 5.00, unless there is more clarity on fiscal consolidation post-election,” the report said.

The 5.00 level is both the 12-month destination and the threshold Goldman doubts can break without fiscal consolidation.

The forecast also sits inside a broader low-volatility environment in which carry has been a powerful source of returns.

Goldman expects high-carry currencies to continue outperforming once the immediate political premium fades, which explains why the medium-term trajectory slopes lower even after the near-term forecast revisions.

But the bank is explicit that the election can disrupt that sequence.

“Different election outcomes could push BRL away from this path over the medium-term,” it warned.

Timing defines the call: election uncertainty comes first and carry support later.

A 5.20 three-month forecast is not a call for uninterrupted Dollar strength, and a 5.00 12-month forecast is not a promise that fiscal concerns disappear.

Without clearer fiscal consolidation after the election, Goldman sees little room for USD/BRL to remain below 5.00.

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

TL;DR: AUD/USD has broken out on external tailwinds — a weaker Dollar and rebounding risk appetite — but Thursday’s jobs report lands in the middle of a genuine split between economists who think the RBA is done hiking and an RBA that keeps saying otherwise.

Aussie Has External Momentum — Now Australia Needs to Contribute AUD/USD has already received almost everything it could ask for from outside Australia. The Dollar is weakening as markets scale the Fed path back toward only “one and a bit” additional hikes through mid-2027. Regional risk appetite has rebounded strongly, with the KOSPI more than 30% above its July trough and the Nikkei roughly 14% higher. Against that backdrop, AUD/USD extended its rally from 0.6864 and broke through its near-term channel ceiling, giving the first technical sign that the advance is accelerating.

The question now is whether domestic fundamentals can join the move. Thursday’s July employment report arrives with consensus around just 12k jobs growth, a dramatic slowdown from June’s 76.3k, while the unemployment rate is expected to hold at 4.4%. That would normally look like routine normalization after an outlier. This time, however, the labor data sit directly in the middle of an unresolved disagreement over whether the RBA’s tightening cycle is finished.

Economists Say the RBA Is Done. The RBA Hasn’t Said That. All four major banks now have no further 2026 hike as their base case, with Westpac dropping its August tightening call after softer Q2 inflation data. But the RBA’s own language remains conspicuously hawkish. The August SoMP retained a commitment to increase the cash rate further “if upside risks materialise.” Governor Michele Bullock said at the July 28 Anika Foundation speech that the Board was “prepared to act as required.” After the August hold, Assistant Governor Christopher Kent went further at the Reuters Next event on August 13, saying inflation risks “lean firmly to the upside” and the cash rate “could rise further” if those risks materialise.

That consistency before and after the decision matters. It suggests the hike bias is deliberate rather than a sentence left behind by inertia. At the same time, the rates market hasn’t moved all the way toward bank economists’ conviction: the SoMP cited pricing consistent with roughly a 50% chance of another hike by year-end. ANZ also continues to flag a November hike as a live risk despite its hold base case. In other words, economists are leaning heavily toward “done,” but money markets remain genuinely divided.

One Jobs Report Already Proved It Can Change the Rate Story This year’s employment series has been unusually volatile: -18.6k in April, +43.9k in May, and +76.3k in June. The June surge, almost five times the expected increase, helped send year-end hike odds from around 78% to 97% before the August meeting. The RBA still chose to hold, and the current roughly 50% year-end probability reflects the reset since then. But the precedent is clear: one labor report has already moved RBA pricing materially this cycle.

That gives Thursday a genuine two-sided setup. Another large beat could challenge the hold-through-2026 consensus, revive hike pricing, and potentially add domestic rate support to AUD/USD’s existing Dollar and risk-sentiment tailwinds. A result near or below consensus would instead strengthen the case that June was an outlier and pull market pricing closer to the Big Four view. Neither outcome should be read in isolation, however — jobs this week and CPI next week are better treated as a paired test: only a combination of resilient labor demand and renewed inflation pressure would make the September hike case substantially harder to dismiss.

ActionForex’s Technical View on AUD/USD The chart setup already reflects rising optimism. AUD/USD’s rally from 0.6864 has broken above its near-term channel ceiling, signaling upside acceleration. As long as 0.7042 minor support holds, the next objective sits at the 161.8% projection of 0.6864 to 0.7026 from 0.6921, at 0.7183.

The larger trend remains bullish as well. AUD/USD continues to hold well above the 38.2% retracement of the 0.5913 to 0.7277 rise, at 0.6756, leaving the year-long advance from the 2025 low intact. Price action from 0.7277 is treated as corrective, though it’s too early to rule out another down leg before the larger uptrend resumes.

For now, holding above the 55-day EMA near 0.7023 keeps a retest of 0.7277 favored. The Aussie has already broken higher on external support; Thursday will show whether Australia can supply the next reason to keep buying.

Key Takeaways AUD/USD’s breakout has so far been driven entirely by external factors: fading Fed hike odds and a strong regional risk-appetite rebound. All four major Australian banks expect no further RBA hikes in 2026, but RBA officials, including Bullock and Kent, have kept using hawkish language even after the August hold. Rates markets remain split from bank economists, pricing roughly a 50% chance of another hike by year-end versus the Big Four’s near-unanimous “done” call. June’s 76.3k jobs surge already proved a single report can swing RBA pricing sharply, from 78% to 97% hike odds, showing Thursday’s data carries real two-sided risk. AUD/USD holds above 0.7042 support with 0.7183 as the next objective; the broader uptrend from 2025 stays intact above the 0.6756 retracement level. Related Reading Dollar Index Faces Imminent Breakdown Risk as Fed Hike Path Shrinks. RBA’s Kent Says Tightening Is Working, but Policy Restraint Remains Hard to Gauge RBA Accepts Softer Inflation but Still Leaves Scope for One More Hike

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.

USD/CAD extends its decline farther below 1.4000 on Friday and heads for a third consecutive weekly loss. At the time of writing, the pair trades around 1.3877, at levels last seen in early July.

The recent strength in the Canadian Dollar (CAD) is driven by broad US Dollar (USD) weakness and relatively stronger Canadian economic data, while elevated Oil prices provide underlying support to the commodity-linked Loonie.

Monetary policy expectations remain in focus. In the US, moderating inflation, weaker consumer spending and signs of labour market softness have lowered the chances of a Federal Reserve (Fed) interest rate hike next month. Across the border, next week’s Consumer Price Index (CPI) report will provide a fresh update on inflation and its possible impact on the Bank of Canada’s (BoC) policy path.

BoC seen prioritising soft core inflation as output gap closes only graduallyAccording to TD Securities, the Bank of Canada is likely to place greater emphasis on the “softer trajectory for core inflation” at its 2 September decision, noting that the limited “passthrough from higher oil prices gives it more scope to continue looking through the energy shock.” The bank adds that the “recent deceleration across core inflation measures also helps to validate the Bank's assessment around excess supply and capacity to absorb stronger growth amid the rebound in Q2 GDP tracking.”

In TD’s view, this backdrop “should allow the Bank of Canada to stick to its recent messaging next month, with a focus on softer underlying inflation and the gradual timeline to close the output gap.”

Technical analysis

From a technical perspective, USD/CAD maintains a steady downtrend, forming a series of lower highs and lower lows since reversing from above 1.4200 in late June. The pair subsequently slipped below the 50-day Simple Moving Average (SMA), while the latest leg lower has pushed it beneath the 100-day SMA.

The Relative Strength Index (14) around 29 signals oversold conditions and warns that downside momentum may be stretched even as the Moving Average Convergence Divergence (MACD) remains in negative territory.

On the downside, immediate support is aligned with the 200-day SMA close to 1.3850, ahead of a more substantial horizontal floor at 1.3700, with a deeper bearish extension exposing the structural level at 1.3542.

On the topside, a recovery attempt would first face resistance at the 100-day SMA at 1.3920, with any stronger rebound likely capped by the higher 50-day SMA at 1.4077 unless sellers lose control of the medium-term trend.

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

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

USDEURGBPJPYCADAUDNZDCHFUSD-0.31%-0.35%-0.08%-0.39%-0.29%-0.59%-0.14%EUR0.31%-0.04%0.22%-0.10%0.02%-0.30%0.17%GBP0.35%0.04%0.28%-0.08%0.06%-0.24%0.22%JPY0.08%-0.22%-0.28%-0.30%-0.21%-0.54%-0.04%CAD0.39%0.10%0.08%0.30%0.10%-0.20%0.26%AUD0.29%-0.02%-0.06%0.21%-0.10%-0.30%0.16%NZD0.59%0.30%0.24%0.54%0.20%0.30%0.48%CHF0.14%-0.17%-0.22%0.04%-0.26%-0.16%-0.48%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The British Pound (GBP) trades 0.35% higher to near 1.3533 against the US Dollar (USD) during the European trading session on Friday. The GBP/USD pair reflects strength as the US Dollar declines, with traders pricing out the possibility of an interest rate hike by the Federal Reserve (Fed) in the September policy meeting.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.23% lower to near 99.70.

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

USDEURGBPJPYCADAUDNZDCHFUSD-0.34%-0.39%-0.24%-0.35%-0.31%-0.65%-0.27%EUR0.34%-0.05%0.07%-0.06%0.03%-0.32%0.06%GBP0.39%0.05%0.15%0.00%0.08%-0.25%0.12%JPY0.24%-0.07%-0.15%-0.11%-0.08%-0.43%-0.03%CAD0.35%0.06%-0.00%0.11%0.04%-0.29%0.08%AUD0.31%-0.03%-0.08%0.08%-0.04%-0.34%0.05%NZD0.65%0.32%0.25%0.43%0.29%0.34%0.39%CHF0.27%-0.06%-0.12%0.03%-0.08%-0.05%-0.39%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

The CME FedWatch tool shows that the odds of the Fed holding policy rates steady in September have increased to almost 65%. This represents a major repricing from the 75% odds of two Fed hikes by the September meeting recorded a month earlier.

Soft United States (US) Consumer Price Index (CPI) data for July allowed traders to pare back hawkish Fed interest rate expectations.

US inflation data temper September Fed hike oddsAnalysts at Commerzbank note that "July US CPI came in broadly in line with expectations," reinforcing the view that price pressures, while still elevated, are not re-accelerating. They highlight that "overall, the report suggested that underlying inflation remains above the Fed's target but showed no broad-based re-acceleration, giving policymakers more room to remain on hold." In response, Commerzbank points out that "the Fed funds futures subsequently pared expectations for a September rate hike, with markets pricing around a 40% probability of a 25bp increase compared with 52% on Monday," underscoring a modest but notable shift in near-term Fed tightening expectations.

Meanwhile, the British Pound is expected to trade highly volatile next week as the United Kingdom (UK) labor market data for three months ending June and the CPI data for July are scheduled to be released on Tuesday and Wednesday, respectively.

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3535, having pushed decisively above the former downward resistance trend line, which now offers support around 1.3451. Price action above this reclaimed structural level suggests a bullish near-term bias, while the Relative Strength Index (14) at 62.7 shows firm positive momentum without yet reaching overbought territory, hinting that buyers retain control.

On the downside, the broken trend-line region near 1.3451 is immediate support, and a daily close back below that level would signal waning bullish pressure. On the topside, the next notable hurdle is the origin of the previous trend line around 1.3871, where a sustained break would open the way for a broader continuation of sterling gains against the dollar.

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

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

The Euro (EUR) trades 0.17% higher at around 1.1550 against the US Dollar (USD) during the European trading session on Friday. The major currency pair gains as the Euro rises due to firm expectations that the European Central Bank (ECB) will raise interest rates in the policy meeting in September.

According to a Reuters poll, 57 of 69 economists said that they see the ECB hiking its deposit rates by 25 basis points (bps) to 2.50% in September.

Market experts also seem confident about the ECB tightening its monetary conditions in September to tame hot inflationary pressures.

ECB seen hiking again as other central banks face tougher choices

Analysts at HSBC highlight a growing divergence in the global policy outlook, noting that "although we expect the European Central Bank (ECB) to now deliver another rate rise in September, for other major central banks it is a much tougher balancing act." The bank contrasts the ECB’s readiness to tighten further with a more cautious stance elsewhere, underscoring the challenge facing policymakers outside the Eurozone as they weigh inflation risks against the need to keep policy on hold.

Meanwhile, traders pricing out the possibility of an interest rate hike by the Federal Reserve (Fed) in September is dragging the US Dollar.

Fed hike odds slip as softer inflation data drives dovish repricing

Analysts at Deutsche Bank highlight that the softer inflation backdrop has prompted a notable dovish shift in Fed expectations, with “pricing for a September Fed hike fell to just 35% by the close, down from above 50% on the morning of Wednesday’s CPI release.” They add that the “downside PPI surprise led to an immediate reaction in pricing for the next Fed meeting,” noting that “the probability of a September hike had been at 40% right before the release, but was down to 35% by the close.”

EUR/USD Technical Analysis

EUR/USD trades at around 1.1550, holding the downward-sloping trendline at around 1.1540, but is capped by the 100-day simple moving average (SMA), which is at 1.1567.

The Relative Strength Index (14) around 60 hints at firm bullish momentum, but this improving sentiment is yet to overcome the overhead SMA that continues to act as a ceiling.

On the downside, initial support is seen near the former trend-line break point at 1.1510, where the market previously cleared a descending resistance line, now acting as a structural floor. On the topside, the 100-day SMA at 1.1567 forms the first resistance barrier, and a decisive close above this level would be needed to ease the current bearish bias and open the way to a more sustained recovery. Looking up, the major barricade of the pair would be the round-level at 1.1600.

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

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

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

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

Summary:

AUD/JPY rose for seven straight sessions but slipped about 0.2% today as the yen strengthened on intervention fears and BoJ hike expectations Japan and the US conducted a rare coordinated yen-buying intervention in early August, the first such joint action since 2011 The wide Australia-Japan interest-rate gap still underpins the carry trade. However, there is a rising likelihood of a near-term volatility from policy signals The Australian dollar’s recent upward trend against the Japanese yen has been a significant topic in foreign exchange markets. A seven-session winning streak is a notable achievement for any currency pair, particularly one often viewed as an indicator of market risk sentiment.

However, this streak ended today. The AUD/JPY pair saw a decline of approximately 0.2% during New York trading, settling around 112.37 compared to a previous close of 112.60. This shift raises questions about the underlying causes and whether this marks a more substantial change or a temporary pullback.

Yen Intervention Risk Hasn’t Gone Away The most important piece of context here is what happened just two weeks ago. Japan and the United States confirmed a rare, coordinated yen-buying intervention, aiming to stop the currency’s slide to 40-year lows. Tokyo signaled it’s ready to act again if needed.

This wasn’t just any intervention. It was the first joint effort since 2011, and the market can’t simply ignore it. US Treasury Secretary Scott Bessent reinforced that message, stating Washington “won’t hesitate to participate in further joint intervention.” He also pushed for more rate hikes from the Bank of Japan. That combination creates a persistent headwind for anyone holding long AUD/JPY positions.

The yen also strengthened after traders looked at the Bank of Japan’s recent Summary of Opinions. BoJ members pointed out growing risks of domestic inflation, leading some to think that Japanese officials might raise interest rates again, possibly in September.

What Does This Mean for the Carry Trade? AUD/JPY has long been a favourite among carry traders. AUD/JPY has long been a favorite among carry traders. This strategy works best when Australian rates stay high (or rise) and the yen remains weak and stable. Today’s price action suggests both pillars are wobbling a bit.

It looks like the period of easy gains during the rally might be turning into a trading range. As the BoJ moves closer to normalizing its policies and yields on long-term Japanese government bonds rise, the net return from the interest rate difference becomes less protected from sudden currency dips.

How to Position From Here? None of this necessarily signals the rally is over. Seven consecutive days of gains represent a strong upward move, and a single 0.2% dip is within the normal range for profit-taking. However, traders should now consider the risk of intervention as a consistent element for this currency pair, rather than an isolated event.

This suggests adopting tighter stop-losses and smaller position sizes for any new long entries, rather than aggressively pursuing new highs. Longer-term investors who can tolerate market fluctuations may still find the interest rate differential appealing. It is advisable to maintain strict stop-losses around upcoming speeches by Reserve Bank of Australia officials and releases of Japanese inflation data to mitigate potential volatility.

Why did AUD/JPY fall about 0.2% today after seven session gains?

The Japanese yen got a slight lift today. New intervention warnings surfaced, and people are increasingly expecting a Bank of Japan rate hike this September.

What still supports the AUD/JPY carry trade?

Australia’s cash rate is higher than Japan’s policy rate, creating a big interest-rate difference. This still makes holding the Australian dollar attractive.

How significant is the recent US-Japan intervention?

That coordinated action in late July did give the yen a short-term boost, but its impact has mostly faded. The carry trade now looks attractive once more.

ING’s Francesco Pesole keeps a constructive stance on EUR/USD after recent US data, based on a view that the Federal Reserve is unlikely to deliver further tightening. He targets 1.160 in coming weeks, 1.17 in autumn and 1.18 by year‑end, while warning that the lack of clear catalysts and Gulf risks could keep EUR/USD confined to tight ranges and low volatility.

Upside targets but tight trading ranges"We retain a preference for EUR/USD upside following the latest US data. That view is rooted in our Fed assessment outlined above, though it must be balanced against the risk that renewed escalation in the Gulf could provide fresh support to the dollar."

"Our target for the coming weeks remains 1.1600, followed by 1.1700 in autumn and 1.1800 by year-end. The absence of a clear catalyst, however, may keep EUR/USD range-bound for longer, while vols test recent lows."

"We will be watching closely for another test of 1.1500. Our bias is that buyers would re-emerge there, potentially nudging the dominant trading range higher to 1.1500-1.1600."

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

The Japanese yen continued its recent retreat, reaching its lowest level since July 31 as the recent US intervention backfired. The USD/JPY pair rose to 159.43, up by 2.72% from its lowest level this month. 

The USD/JPY pair crashed hard earlier this month, reaching its lowest level since May, after the Donald Trump administration made its biggest intervention in years. It did that by converting some of its euro holdings into the Japanese yen, a move that caught European officials offguard.

The Bank of Japan (BoJ) also intervened, pumping billions of dollars to yen buying. This happened after the pair jumped to 163.96, its highest level in decades. 

The Trymp administration intervened to prevent the BoJ from intensifying its US government bond sales, which would have driven yields higher. Already, the 30-year yield has remained above 5% for months.  And this week, the US government sold ten-year bonds at the highest yield in years. 

Historically, forex market interventions tend to have a short-term impact on the currency. A good example of this is how the Japanese yen jumped on April 30th after the BoJ intervened and then resumed its downward trend.

The main issue facing the Japanese yen is that the Bank of Japan maintains low interest rates compared to the Federal Reserve. It recently hiked rates to 1%, the highest level in decades. This rate, however, is much lower than the US, which has remained between 3.50% and 3.75% this year.

The implication of this is that the USD/JPY has become a carry top carry trade pair. A carry trade is a situation where investors borrow from a low interest country and invests in a high interest rate one. In this case, they are borrowing from Japan and investing in the US.

As such, analysts believe that the Japanese yen will only have a sustained uptrend against the US when the BoJ hikes interest rates further. The BoJ has hinted that it may hike rates further this year. A Polymarket poll shows that odds of a 25 basis point hike in September have jumped to 68%.

Separately, the USD/JPY pair reacted mildly to the latest US nonfarm payrolls and consumer inflation data. The jobs report showed that the US economy lost 23k jobs in July, while the unemployment rate dropped to 4.2%. Another report released on Wednesday showed that the US inflation softened a bit in July. These numbers mean that the Fed will maintain rates unchanged this year.

USDJPY chart | Source: TradingView

The daily chart shows that the USD to JPY pair has rebounded in the past two weeks as the impact of the intervention fades. It has now jumped to 159.46, and is attempting to cross the 25-day Exponential Moving Average (EMA). 

The Average Directional Index (ADX) has continued rising and moved to 37, the highest level in months, a sign that the uptrend is continuing. Therefore, the path of the least resistance for the pair is bullish, with the next key target to watch being 160. A move above that level will point to more upside.

The only caveat to remember is that the BoJ and the US have hinted at possible interventions, meaning that these gains can easily reverse.

EUR/USD price action turned volatile on Wednesday as the pair struggled to hold early gains following the latest US Consumer Price Index (CPI) report, a key driver for Federal Reserve interest rate expectations and US dollar direction. The euro briefly surged on signs of cooling US inflation but quickly lost momentum as traders reassessed the broader policy outlook.

The currency pair initially climbed as high as $1.1563 immediately after the inflation release before reversing lower, highlighting the market’s indecision. At the time of writing, EUR/USD is trading around $1.1525, with the closely watched $1.1500 psychological level once again coming into focus as a key short-term support zone.

While US inflation data showed further moderation, typically a bearish signal for the US dollar, the reaction was muted. The CPI figures largely met expectations rather than delivering a significant downside surprise, limiting the scope for a sustained dollar selloff and keeping EUR/USD trapped within a tight intraday range.

US CPI Falls to 3.4% as Fed Rate Hike Expectations Ease US consumer prices increased 0.1% month-on-month in July, following a 0.4% decline in June. On an annual basis, headline inflation eased to 3.4% from 3.5%. Core CPI, which excludes volatile food and energy prices, increased 0.2% during the month and slowed to 2.5% year-on-year.

Both readings were broadly consistent with market expectations. Nevertheless, the continued moderation in inflation strengthened the argument for the Federal Reserve to leave interest rates unchanged at its September meeting.

Interest-rate markets subsequently reduced the probability of a September rate increase to around 40%, compared with significantly higher expectations earlier this month. The combination of softer inflation and July’s weak employment report has made the case for an immediate rate increase considerably harder to justify. That should theoretically be negative for the US dollar and supportive of EUR/USD. Wednesday’s price action, however, shows that traders are not ready to abandon the greenback.

US Dollar Recovers as Oil and Middle East Risks Complicate Fed Outlook The US Dollar Index initially dropped to approximately 99.61 following the CPI release but subsequently recovered toward the psychologically important 100.00 level. One reason is that the inflation outlook remains vulnerable to developments in energy markets.

Oil prices have remained volatile amid continuing tensions in the Middle East and uncertainty surrounding shipping through the Strait of Hormuz. A sustained increase in crude prices could feed back into US inflation, complicating the Federal Reserve’s path even as underlying price pressures moderate. The geopolitical backdrop has also maintained some safe-haven demand for the dollar.

As a result, traders appear reluctant to price out additional Fed tightening entirely. While a September move now looks less likely, markets still see the possibility of another increase later in the year if inflation proves persistent. For EUR/USD, this has created a tug-of-war between improving rate differentials for the euro and lingering demand for the US dollar.

EUR/USD Price Forecast: $1.1500 Becomes Critical Support The one-hour EUR/USD chart shows a clear deterioration in short-term momentum following the rejection from the $1.1560 area. EUR/USD is currently trading around $1.1525, below the Bollinger Band 20-period moving average near $1.1536. The pair has also moved toward the lower Bollinger Band, currently around $1.1517, highlighting the increase in short-term selling pressure.

The MACD provides another warning for euro bulls. The MACD line has moved below its signal line and the histogram has turned increasingly negative, suggesting bearish momentum is building following Wednesday’s failed breakout.

The first level to watch is therefore $1.1500. This psychological level has repeatedly attracted buyers and remains important to the broader recovery structure. A decisive break below $1.1500 could strengthen the bearish correction and expose the $1.1465-$1.1470 area.

On the upside, EUR/USD first needs to reclaim $1.1535-$1.1540 to ease immediate selling pressure. Above there, the $1.1555-$1.1565 zone represents the more significant resistance area. A sustained break above $1.1565 would put $1.1600 back into focus.

EUR/USD Outlook: Can the Euro Hold Above $1.15? The near-term EUR/USD outlook remains finely balanced following the US CPI report. Cooling inflation and weaker US employment data have reduced the probability of a September Fed rate hike, removing an important source of support for the dollar. However, Wednesday’s reversal shows that softer CPI alone may not be sufficient to push EUR/USD decisively higher.

Attention now turns to upcoming US economic releases, including producer prices and retail sales. Stronger data, particularly another sign of persistent inflation, could revive Fed tightening expectations and put $1.1500 under renewed pressure.

Conversely, further evidence that inflation and economic activity are cooling could push Treasury yields and the dollar lower, giving EUR/USD another opportunity to challenge $1.1565 and potentially $1.1600. For now, $1.1500 is the key dividing line. Holding above it keeps the euro’s broader recovery intact, while a convincing breakdown would shift the short-term EUR/USD price forecast increasingly in favour of sellers.

Why is EUR/USD falling after the US CPI report?

EUR/USD initially rose after US inflation eased but reversed as the dollar recovered. The CPI figures were broadly in line with expectations, while elevated energy prices and geopolitical uncertainty continue to create upside inflation risks.

Will the Federal Reserve raise interest rates in September?

Expectations for a September Fed rate hike fell after July CPI showed headline inflation easing to 3.4% and core inflation declining to 2.5%. Markets currently favour the Fed keeping rates unchanged, although another increase later in 2026 remains possible if inflation pressures intensify.

What are the main EUR/USD resistance levels?

Immediate resistance sits around $1.1535-$1.1540, followed by the stronger $1.1555-$1.1565 area. A breakout could open the door toward $1.1600.

Summary:

The GBP/JPY continues its post-intervention recovery ahead of the US CPI report tomorrow, which could have a secondary impact on the pair. Current Setup The GBPJPY still retains the structural bullishness because of the interest rate differential that still exists between the British Pound and the yen. However, the overall risk-to-reward for this interest rate differential is no longer as one-sided as it was before the late July FX intervention by the Japanese financial authorities, followed by the Bank of Japan’s hawkish switch in monetary policy. However, the pair still retains its key macro divergence as the Bank of England still maintains its official bank rate at 3.75%, against the BoJ’s 1.0%.

The sudden switch to a more hawkish approach to monetary policy by Japanese authorities has triggered a round of strengthening in the last two weeks. Not only have Japanese financial authorities demonstrated a willingness to intervene in FX markets when required, but this has also been backed up by more hawkish messaging at last week’s BoJ monetary policy meeting.

The summary is clear. While the fundamentals of the carry trade continue to support a GBP/JPY uptrend, it is becoming riskier to keep chasing that trend at elevated price levels. 

Macro Analysis of the GBP/JPY 1) The BoE-BoJ rate differential still favors the GBP

The rate differential remains the largest structural support for the GBP/JPY pair. Investors will therefore still choose to borrow the Yen (lower interest) and buy the Pound (earning higher interest); the so-called carry trade. As long as this differential remains, investors will remain incentivized to continue the carry trade.

The carry only collapses if the BoE reduces rates, or the BoJ fastens its tightening course. Otherwise, any interventions by the Japanese financial authorities will make it cheaper to get into the GBP/JPY uptrend, providing a dip-buying opportunity.

2) A More Hawkish BOJ is gaining market traction

Japan’s export-oriented economy depends on a weaker Yen relative to the other G10 currencies to make its products more attractive for other countries to import. But with the rise in oil prices due to the geopolitical tensions in the Middle East, it has become simply too expensive to use a gradually weakening Yen to fund oil imports. Japan is 100% dependent on imports of crude oil/refining derivatives for its fossil-fuel needs. The Yen’s weakness was starting to become an untenable situation. The Japanese financial authorities are no longer just threatening to intervene (verbal action). They actually consulted US authorities and performed a coordinated action to buy Yen and sell the US Dollar.

The message is clear, and BoJ Governor Ueda also sounded this at the last monetary policy meeting: the BoJ was prepared to use all means at its disposal to resist disorderly depreciation of the Yen and respond to any inflationary pressures brought on by wage growth. Estimates put the cost of the latest intervention at about ¥8.45 trillion. As is the culture, there are no official figures from the BoJ or Japanese Finance Ministry to this effect.

This is important because such an intervention usually leads to the yen strengthening across the board. Despite the USD/JPY being the primary target of this move, the GBP/JPY suffered collateral damage.

USD/JPY ↓ → JPY strengthens → GBP/JPY ↓

3) Intervention risk at elevated levels is now a credible factor

This is a major change for the macro fundamentals of GBP/JPY. There is now a risk of abrupt reversals without warning if the uptrend takes prices above 210.00. Maybe even lower. Trying to chase an additional upside move at that price level, or even trying to pre-empt an intervention, can quickly lead to severe losses if the trader’s account cannot handle the volatility.

4) The BoE is not straightforwardly dovish

The Bank of England’s pathway to rate cuts remains unclear and non-committal. UK inflation for June cooled significantly to 2.6% YoY. This should ordinarily be an impetus for a rate cut, but growth and employment data surprised to the upside, which is a sign that the UK economy presently does not need the BoE’s help via a dovish action.

The next UK inflation and employment data on 17-18 August 2026 are deemed as a key driver of the GBP/JPY’s near-term trend.

5) Risk sentiment

The GBP/JPY is more risk-sensitive than many major FX crosses. The pair gains when the market is risk-on, and loses ground when the market is risk-off. The geopolitical space has made risk sentiment an active determinant of intraday and ultra-short-term direction.

GBP/JPY Technical Outlook The 4-hr chart shows that the price action has broken above the 214.62 resistance (2 July) en route to the 216.03 barrier and prior high of 1 July 2026. If the bulls push past this resistance, the 217.23 and 218.56 resistance levels come into the picture, with the latter being the 30 July high from where the BoJ intervention took place.

Fig 1: GBP/JPY 4-hr chart showing post-intervention recovery levels (snapshot: 11 August 2026) On the flip side, downside targets at 212.61 (24 June low) and 209.51 (2 August low and post-intervention trough) become available if the bulls fail to defend the 214.62 support mark.

Summary:

Robust Canadian economic data and broad U.S. dollar weakness outweighed falling crude oil prices, pushing USD/CAD down toward two-month lows Key upcoming catalysts include Wednesday's US CPI release and new 50% US tariffs on Canadian goods effective August 19, both pivotal for direction Holding U.S. dollars carries risks from Federal Reserve rate cuts, whereas Canadian dollar exposure remains vulnerable to falling energy prices and trade friction Oil prices have fallen notably in recent weeks due to changing dynamics in the Middle East and evolving supply expectations. Despite this, the Canadian dollar has strengthened against the US dollar more than anticipated, with USD/CAD trading around 1.393, a level not seen in approximately two months.

This divergence suggests that oil prices are not the sole driver of the Canadian dollar’s performance. Other factors are providing more substantial support for the Canadian currency in the current market conditions.

Oil Is Down, But That’s Not the Story Right Now WTI crude’s been on a bumpy ride lately. After hitting a late July high near $86.89, it fell to about $74.30 in early August, though it’s since found its footing in the upper $70s. This dip came as Middle East tensions eased, partly due to a U.S.-Iran memorandum that calmed fears about Strait of Hormuz disruptions. Record U.S. output and expected inventory surpluses also played a part.

Ordinarily, a drop like that would hurt the loonie. But the currency has mostly shrugged it off.

Several key macro factors are insulating the Loonie from the recent slide in oil prices. For one, Canada’s own economic data has given the currency a lot of support. Strong domestic job numbers and steady GDP growth have boosted confidence in the country’s economic health.

Interest rate differences still favor the US dollar, as the Federal Reserve’s policy rate is higher than the Bank of Canada’s 2.25% target. While the Fed remains cautious, commentary from Vantage Markets suggests the Bank of Canada’s policy rate has reassured investors, signaling that Canadian rates have stabilized.

What to Watch in the Coming Weeks A few things could quickly change this situation. For one, everyone will be watching Wednesday’s US CPI release. A hot inflation number there could bring back Fed rate-hike expectations and give the dollar another boost.

Additionally, new U.S. tariffs of 50% on approximately $20 billion of Canadian goods are set to take effect on August 19. Unlike previous measures, these tariffs will apply even to goods that typically receive preferential treatment under the CUSMA trade agreement.

This presents a significant challenge for Canadian exporters and could exert downward pressure on the Canadian dollar once the tariffs are fully implemented.

Furthermore, the Bank of Canada’s interest rate decision on September 2 is approaching. The consensus among most analysts is that the bank will maintain its current rate of 2.25% as it continues to assess the impact of the tariffs.

Risks in Holding Either Currency If you hold Canadian dollars, you’re exposed to how commodity prices move. If oil prices fall for a while, it would hurt export earnings and the Canadian dollar. Trade uncertainty or weak Canadian economic news could also undo recent gains.

On the other side, the US dollar remains susceptible to weaker US economic indicators or a shift in Federal Reserve policy towards a more accommodative stance. Geopolitical risks can sometimes support the dollar as a safe-haven asset, while at other times, they can boost oil prices and the Canadian dollar.

Speculative positioning adds another wrinkle. Traders have been betting against the Canadian dollar more heavily than almost any other major currency. This means if something good happens for Canada, those bets could quickly unwind, causing sharp, exaggerated moves in the Canadian dollar in either direction.

Why has the Canadian dollar gained despite softer oil periods?

Stronger Canadian July jobs data, lower unemployment and relative US dollar softness have outweighed oil weakness in supporting the loonie recently.

What’s the risk of holding US dollars right now?

A weakening labor market and softer inflation data could deepen Fed rate-cut expectations, extending recent dollar weakness against major currencies including CAD.

What is the main risk for the Canadian dollar?

A sustained decline in oil prices, weaker domestic data or escalated trade tensions could reverse recent CAD strength against the US dollar.

TL;DR: A hawkish BoE tailwind has lifted Sterling this week, but Thursday’s June monthly GDP — not the flattering Q2 headline — will determine whether that hawkish drift can survive into September, with EUR/GBP downside and GBP/CHF upside both hanging on the answer.

Sterling Has a Hawkish BoE Tailwind — But Thursday Will Test It Sterling has been mildly firmer against the Euro and Swiss Franc this week, helped in part by an increasingly hawkish tone inside the BoE. At the July 30 meeting, the MPC voted 6–3 to hold Bank Rate at 3.75%, with Megan Greene, Catherine Mann, and Huw Pill backing a hike to 4.00%. Governor Andrew Bailey remained cautious and played down expectations of an imminent move, but the direction of the voting pattern is hard to ignore.

Hawkish dissent has widened at every meeting this year:

April: 8–1. June: 7–2. July: 6–3. That’s a more meaningful signal than a static minority repeatedly casting the same votes. It suggests the Committee is gradually moving closer to another hike, even if the majority isn’t there yet. Put differently, the BoE is still holding, but hawkish pressure is building underneath that hold.

Oil Is Making the Policy Question More Urgent The recent rise in oil adds urgency to that debate. The ECB has already tightened in response to energy-driven inflation pressure, while the BoE has so far stayed put. If crude remains elevated, higher energy costs will keep feeding into the UK inflation outlook and increase pressure on the MPC to prevent second-round effects from taking hold.

Still, the BoE cannot respond to oil in isolation. The key question is whether the domestic economy is strong enough to tolerate another increase. That’s why Thursday’s GDP data matter. Strong activity would give existing hawks more room to argue inflation risk deserves priority; a sharper slowdown would strengthen Bailey’s and others’ case for patience.

For Sterling, this relative policy backdrop matters most against currencies where central-bank divergence is clearer. EUR/GBP reflects whether the BoE can begin closing the gap with the ECB, while GBP/CHF has an even cleaner setup given expectations that SNB rates stay pinned near bottom for the foreseeable future.

Why Q2 GDP May Flatter the Underlying Picture Headline Q2 GDP is expected to show 0.4% q/q growth, down from 0.6% in Q1 but still respectable given disruption from the Iran war. Yet that number may overstate underlying resilience.

Earlier in the quarter, manufacturers and clients front-loaded purchases to protect against expected price increases and supply disruption. S&P Global’s May PMI commentary explicitly linked stronger output to that stockpiling behavior, while June data showed those effects fading. That means part of Q2 growth may simply have been activity pulled forward — so a 0.4% quarterly print can look healthy while masking a much weaker economy at quarter-end.

Why June Is the Number That Really Matters That’s why June monthly GDP may carry more information than the Q2 headline itself. June output is expected to fall -0.1% m/m, reversing May’s 0.1% increase. By that point, much of the earlier front-loading had faded, making the monthly figure a cleaner read on how the economy was actually entering Q3.

If Q2 comes in around 0.4% but June contracts more sharply than expected, markets may conclude that resilience was temporary and dependent on stockpiling — giving BoE doves a stronger argument to resist tightening. If June instead holds up better than expected, the message would be much more supportive for Sterling, suggesting the economy retained momentum even after temporary war-related support faded, giving the hawkish bloc more room to expand in September.

So Thursday’s real test isn’t simply whether the UK grew in Q2 — it’s whether the UK economy still had momentum once stockpiling stopped.

ActionForex’s Technical View: EUR/GBP and GBP/CHF EUR/GBP has twice been rejected by the falling 55-day EMA, keeping the downtrend from 0.8863 intact. A break of 0.8528 minor support would suggest the rebound from 0.8453 has already run its course and bring a deeper fall back to retest 0.8453. A sustained break there would reopen the broader decline from 0.8863.

That technical setup would fit a stronger June GDP print particularly well. If the economy proves resilient enough to keep BoE hawks gaining ground, Sterling would have a clearer relative policy advantage against the Euro. On the other hand, a weak June print would weaken that argument and reduce pressure for another EUR/GBP leg lower.

GBP/CHF may offer an even cleaner expression of Sterling strength because the SNB policy outlook is far less hawkish. The rally from 1.0281 is still in progress, although momentum has stalled near the rising channel ceiling. Further upside remains favored while 1.0808 support holds.

A decisive break through channel resistance would open scope for acceleration toward the 161.8% projection of 1.0281 to 1.0674 from 1.0468, at 1.1104. Loss of 1.0808 would instead argue the rally is entering a deeper correction.

Thursday Is Really About September Q2 headline will get attention, but June could decide how markets frame the September BoE meeting. Three consecutive meetings of widening hawkish dissent show the Committee is drifting closer to tightening. Higher oil gives hawks more inflation ammunition — what they still need is evidence the economy can absorb another move.

A resilient June print would strengthen the case for EUR/GBP downside and GBP/CHF upside. A weak one would suggest Q2 strength was partly borrowed from earlier stockpiling, giving BoE doves stronger ground to push back.

Key Takeaways BoE hawkish dissent has widened at every meeting this year, from 8-1 in April to 6-3 in July, signaling gradual movement toward tightening even without a majority yet. Higher oil is adding inflation pressure the BoE can’t ignore, but the Committee needs evidence the economy can absorb a hike before acting on it. June monthly GDP (forecast -0.1% m/m) matters more than the flattering 0.4% Q2 headline, since Q2 strength was partly inflated by stockpiling that faded by June. A resilient June print would support EUR/GBP downside toward 0.8453 and GBP/CHF upside toward 1.1104; a weak print would favor BoE doves and undercut both trades. Thursday’s data matters most for how it shapes September BoE expectations, not for the Q2 headline number itself.

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.

Rabıobank's Senior FX Strategist Jane Foley discusses recent EUR/USD strength, noting it was mainly driven by a softer Dollar after weak United States (US) labour data reduced Federal Reserve (Fed) rate hike expectations. Foley highlights resilient Eurozone data but also growth headwinds and limited appetite for strong Euro appreciation. Rabobank now expects EUR/USD to reach 1.16 in three months, assuming no major Eurozone growth surprises.

Euro gains on softer US outlook"At the end of last month EUR/USD lurched higher. On Friday, the currency pair traded at its highest levels since June 17. This may give the illusion of a buoyant EUR."

"The release of the surprisingly soft US July labour market report was the clear trigger for the move higher in EUR/USD on Friday. The softer data dealt a blow to expectations of Fed rate hikes which knocked US yields and the greenback lower."

"Indeed, it is RaboResearch’s view that the Fed will hold rates steady this year, which suggests scope for further softness in the USD."

"Given than another ECB rate hike is already in the price, a move is unlikely to provide much additional upside incentive for the EUR. We see scope for a modest upside bias in EUR/USD in the months ahead, mostly reflecting a reduction in Fed rate hike speculation and we have brought forward our forecast of a move to 1.16 from 6mths to 3mth."

"That said, in the absence of upside growth surprises in Q3, we are doubtful that the market will be keen to rebuild substantial EUR long positions in the coming months."

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

Summary:

EUR/USD holds near 1.1555 as the euro retains much of its recent advance against the US Dollar. Eurozone Sentix Investor Confidence jumped to +0.9 in August from -3.1, returning to positive territory and adding to signs of improving sentiment across the bloc. Weak US payrolls remain a major drag on the Dollar, while 1.1600 is emerging as the key resistance level for EUR/USD. EUR/USD held above 1.1550 on Monday, extending the recovery that gathered pace following last week’s surprisingly weak US employment report. The pair was trading near 1.1555 at the time of writing, keeping it close to recent highs as investors reassessed the outlook for the Federal Reserve and the US Dollar.

The euro received an additional boost from fresh Eurozone data after the Sentix Investor Confidence Index beat expectations in August and returned to positive territory. The improvement gives EUR/USD another source of support beyond Dollar weakness and comes as traders assess whether the Eurozone economy is entering the second half of 2026 on firmer footing.

Eurozone Sentix Investor Confidence Beats Expectations Eurozone investor sentiment improved more sharply than expected in August, with the Sentix Investor Confidence Index rising to +0.9 from -3.1 in July. The return to positive territory represents a notable improvement in investor perceptions of the region’s economic outlook after sentiment remained below zero in the previous month.

For the euro, the timing of the improvement is particularly relevant. EUR/USD’s recent recovery has been driven largely by a repricing of US interest-rate expectations following disappointing American economic data. An improvement in Eurozone sentiment gives the single currency a domestic catalyst of its own and reduces the extent to which its recovery depends entirely on weakness in the Dollar.

The Sentix report is not normally as influential for EUR/USD as inflation figures or European Central Bank policy decisions, but the positive surprise adds to evidence that confidence in the Eurozone economy is stabilizing. If upcoming European indicators reinforce that picture, expectations for a widening economic-performance gap between the US and Eurozone could continue to ease.

Weak US Jobs Report Keeps EUR/USD Buyers in Control The main catalyst behind the latest EUR/USD rally remains the sharp deterioration in the headline US employment figures. US Nonfarm Payrolls fell by 23,000 in July, delivering a much weaker result than markets had anticipated. Government employment accounted for a significant part of the decline, while private-sector employment remained positive, preventing the report from pointing to an outright collapse in hiring.

The unemployment rate also complicated the picture by unexpectedly falling to 4.1% from 4.2%. However, the decline was accompanied by weaker labor-force participation, limiting how positively markets could interpret the lower jobless rate.

For currency traders, the broader implication is that the Federal Reserve now faces greater uncertainty over how long restrictive monetary policy can be maintained if labor-market conditions continue to deteriorate. Expectations for further tightening have consequently softened, removing an important source of support for the US Dollar. That repricing has helped EUR/USD recover strongly from the 1.1350 region, with buyers pushing the pair back through 1.1500 and toward the 1.1600 psychological barrier.

US Inflation Data Could Decide the Dollar’s Next Move The next phase of the EUR/USD price forecast will depend heavily on whether upcoming US economic data confirms the softer picture presented by the July jobs report.

Inflation will be particularly important. Weak employment combined with easing price pressures would strengthen the argument against additional Federal Reserve tightening and could place renewed downward pressure on the Dollar. Such a combination would also give EUR/USD buyers a stronger fundamental case for challenging 1.1600 and potentially extending the recovery.

The alternative scenario is more complicated. If US inflation remains stubbornly elevated, the Fed could have less room to respond to weaker employment conditions. That would leave markets balancing deteriorating growth indicators against persistent inflation, potentially restoring some support for US Treasury yields and the Dollar. EUR/USD therefore enters the new week with momentum on its side, but the durability of the rally will increasingly depend on whether upcoming US releases validate the market’s more cautious Fed expectations.

EUR/USD Outlook The EUR/USD outlook remains cautiously bullish above 1.1500, supported by weaker US employment data, reduced expectations for additional Fed tightening and the unexpectedly strong Eurozone Sentix Investor Confidence reading.

A sustained move above 1.1600 would strengthen the bullish case and could open the door toward 1.1650. However, failure to clear 1.1580-1.1600, combined with a break below 1.1500, would suggest the post-NFP recovery is losing strength and could bring 1.1465 back into focus. For now, buyers retain the advantage, but 1.1600 remains the level EUR/USD must break to turn the current recovery into a more convincing bullish extension.

Why is EUR/USD rising today?

EUR/USD is holding near 1.1550 as the US Dollar remains under pressure following weak US Nonfarm Payrolls data. The euro also received support after the Eurozone Sentix Investor Confidence Index rose to +0.9 in August from -3.1, beating expectations.

What is the EUR/USD forecast for this week?

The EUR/USD outlook remains cautiously bullish while the pair holds above 1.1500. A break above 1.1600 could strengthen momentum toward 1.1650, while a drop below 1.1500 could expose 1.1465.

Is EUR/USD bullish or bearish?

The short-term EUR/USD trend remains bullish, although momentum is beginning to moderate near 1.1580-1.1600 resistance. Holding above 1.1500 would preserve the current bullish structure.

The USD/CHF pair struggles to attract any meaningful buyers and remains on the back foot below the 0.8100 mark through the first half of the European session on Monday.

Friday's disappointing US Nonfarm Payrolls (NFP) further tempered bets of an immediate interest rate hike by the US Federal Reserve (Fed), which, in turn, is seen undermining the US Dollar (USD) and capping the USD/CHF pair. Investors, however, are still pricing in the possibility that the US central bank will raise borrowing costs by the end of this year amid inflation risks stemming from energy supply disruptions.

Apart from this, persistent geopolitical uncertainties might hold back traders from placing aggressive bearish bets on the safe-haven USD and contribute to limiting losses for the USD/CHF pair. The market focus now shifts to the release of the US inflation figures, due this week. The crucial data will be looked for fresh cues about the Fed's future policy path, which, in turn, will play a key role in influencing the USD demand.

From a technical perspective, the USD/CHF pair is holding below the 23.6% Fibonacci retracement level of the May-July rally, albeit bears await a break below the 50-day Simple Moving Average (SMA) before placing fresh bets. Meanwhile, the Relative Strength Index (RSI) hovers just below the 50 line and the Moving Average Convergence Divergence (MACD) remains slightly negative, suggesting upside momentum is tentative.

Hence, a break below the 50-day SMA will be seen as a key trigger for USD/CHF bears and pave the way for a decline to a dense Fibo. support band between the 38.2% retracement at 0.8037 and the 61.8% level at 0.7932 ahead of structural floors at 0.7857 and 0.7761. On the topside, initial resistance comes at the 23.6% Fibo. retracement at 0.8103, and a break above this barrier would expose the next upside objective at the cycle high zone around 0.8208.

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

USD/CHF daily chart

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

USDEURGBPJPYCADAUDNZDCHFUSD-0.04%-0.07%0.48%-0.02%-0.05%-0.01%0.00%EUR0.04%-0.03%0.53%0.03%-0.02%0.02%0.04%GBP0.07%0.03%0.58%0.04%0.06%0.05%0.07%JPY-0.48%-0.53%-0.58%-0.54%-0.57%-0.56%-0.49%CAD0.02%-0.03%-0.04%0.54%-0.09%0.03%0.02%AUD0.05%0.02%-0.06%0.57%0.09%0.03%0.04%NZD0.00%-0.02%-0.05%0.56%-0.03%-0.03%0.03%CHF-0.01%-0.04%-0.07%0.49%-0.02%-0.04%-0.03% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Commerzbank’s Michael Pfister notes that reduced expectations for Federal Reserve (Fed) tightening have helped EUR/USD climb, but questions how justified this move is. He stresses that Kevin Warsh’s lack of forward guidance does not preclude rate hikes, and that stronger US labour data could shift expectations back toward tighter policy. Commerzbank has cut its EUR/USD forecast by two cents across its horizon as perceived Dollar hike risks rise.

dollar risks reprice on Fed uncertainty"Since last week's Fed meeting, expectations of interest rate hikes have been priced out. Rather than tightening by roughly 44 basis points by the end of the year, the expectation is now for 'only' 33. This is likely the main reason why EUR-USD has recently climbed higher again."

"The key point is this: the absence of forward guidance does not mean that there will be no change in interest rates. It simply means that any change will not be announced in advance. This shifts the focus to the decision itself and places greater emphasis on the data."

"Today's labour market figures could provide an initial indication of the direction of future monetary policy. Our economists expect 100,000 new jobs to be created, which is a stronger increase than the current Bloomberg consensus forecast of +80,000. However, the USD’s reaction will depend not only on the headline figure, but also on the extent of revisions to previous months' figures and the unemployment rate."

"If today's figures are more positive than expected, this would strongly suggest possible interest rate hikes. While we still do not believe that the Fed ultimately intends to take this step, the market is unlikely to be deterred from continuing to bet on a rate hike. This is one of the main reasons why we have revised our EUR/USD forecast downwards by two cents over our whole forecast horizon this week."

"This is because, even though we have not adjusted our Fed forecast, the risk of an interest rate hike has clearly increased in recent weeks."

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

Summary:

USD/CAD climbed toward weekly highs as falling oil prices weakened the Canadian dollar despite strong domestic trade data. Canada's trade surplus reached a four-year high, but the positive economic data was overshadowed by the sharp decline in crude oil prices. Markets are reassessing Federal Reserve expectations, limiting gains in the US dollar after weaker-than-expected US economic data. USD/CAD rises as oil prices pressure the Canadian dollar The USD/CAD exchange rate extended its gains on Wednesday, climbing toward the 1.4080 level as another sharp decline in oil prices continued to pressure the Canadian dollar.

The move came despite encouraging economic data from Canada, where the country’s merchandise trade surplus expanded to its highest level in four years during June. Under normal market conditions, stronger trade figures would support the loonie. However, investors remained focused on the collapse in crude oil prices, which has become the dominant driver of the Canadian currency this week.

Canada is one of the world’s largest crude exporters, meaning movements in oil prices often have a direct impact on the value of the Canadian dollar. With Brent crude slipping below $80 per barrel as hopes for a diplomatic breakthrough between the United States and Iran improved, traders reduced exposure to the loonie in anticipation of weaker export revenues.

Lower oil prices offset stronger Canadian economic data The Canadian dollar struggled to capitalize on stronger-than-expected domestic economic data as falling crude oil prices remained the dominant driver of market sentiment. Canada reported a merchandise trade surplus that climbed to a four-year high in June, reflecting resilient exports and healthy external demand. Under normal circumstances, such data would provide support for the loonie by reinforcing confidence in the country’s economic outlook.

However, investors largely overlooked the upbeat trade figures as oil prices extended their recent decline. Brent crude slipped below $80 per barrel, marking its lowest level in several weeks, after growing optimism that diplomatic negotiations between the United States and Iran could ease tensions in the Middle East and reduce the risk of supply disruptions. Expectations that global oil supplies could stabilize prompted traders to unwind part of this year’s geopolitical risk premium.

Because crude oil is Canada’s largest export, movements in energy prices have a significant impact on the country’s trade balance, corporate earnings and economic growth prospects. The latest decline in oil prices therefore outweighed the positive impact of Canada’s stronger trade data, leaving the loonie under pressure as investors continued to favor the US dollar.

Softer US data caps US dollar gains While USD/CAD continued to move higher, gains in the US dollar remained limited as investors reassessed the outlook for Federal Reserve policy following a fresh batch of weaker-than-expected US economic data. The greenback initially found support from broad risk sentiment but struggled to build sustained momentum as markets questioned whether the Fed would have enough justification to continue tightening monetary policy.

Recent economic releases painted a mixed picture of the US economy. JOLTS job openings fell by more than economists had anticipated, suggesting labor demand is beginning to cool after months of resilience. Meanwhile, factory orders unexpectedly declined, pointing to softer business investment and moderating manufacturing activity. Together, the data reinforced expectations that economic momentum is slowing, reducing pressure on the Fed to raise interest rates aggressively in the near term.

As a result, traders scaled back expectations for another interest rate hike, with market-implied odds of a September increase easing from the previous session. Lower rate expectations tend to weigh on the US dollar by narrowing its interest-rate advantage over other major currencies.

Despite this, USD/CAD remained supported because weakness in the Canadian dollar proved more significant than softness in the greenback. Falling crude oil prices continued to undermine the loonie, allowing the pair to edge higher even as US dollar gains were capped by expectations of a less hawkish Federal Reserve.

USD/CAD outlook The USD/CAD outlook remains cautiously bullish while the pair trades above the psychological 1.4000 support level. Buyers are now testing resistance around 1.4090, a key technical barrier that has capped recent advances. A decisive breakout above this level could expose 1.4125, with the yearly high near 1.4250 becoming the next major upside target.

However, if oil prices recover or expectations for further Federal Reserve tightening continue to fade, the Canadian dollar could regain some ground, potentially pulling USD/CAD back toward 1.4000.

Why is USD/CAD rising today?

USD/CAD is rising mainly because falling oil prices are weakening the Canadian dollar, while the US dollar remains relatively stable despite softer US economic data.

What is the next key level for USD/CAD?

The immediate resistance level is around 1.4090. A sustained move above this level could open the door for a test of 1.4125, followed by the 2026 highs near 1.4250.

Why do oil prices affect the Canadian dollar?

Canada is a major oil exporter. Lower crude prices reduce export revenues and typically weaken the Canadian dollar, while higher oil prices generally support the currency.

Summary:

The AUD/JPY forex pair has declined sharply since late July and for a carry trade favourite, investors are weighing how to position themselves The Australian dollar has seen a significant depreciation against the Japanese yen since late July. The AUD/JPY exchange rate declined from approximately 114.50 to lows between 109 and 110. While a rebound of over 1% yesterday pushed the pair above 111, it has since eased again.

These movements are influenced by differing central bank policies, the potential for intervention, and evolving market expectations for both the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ).

What Drove AUD/JPY Sell-off and Rebound? The sharp decrease in AUD/JPY during late July primarily resulted from a global unwinding of yen-funded carry trades. Previously, market participants borrowed yen at low interest rates to invest in currencies offering higher yields, such as the Australian dollar. However, market changes necessitated a rapid liquidation of these leveraged positions, leading to substantial buying of the yen across major currency pairs.

A notable factor emerged on July 30 when a rapid appreciation of the yen against major currencies led to widespread market speculation of official intervention by Japanese authorities. The AUD/JPY pair dropped more than 1.3% on that day and continued its downward trend in the following sessions, reaching its lowest point in several weeks.

Although Tokyo has not officially confirmed intervention, the magnitude of the currency move, combined with prior warnings regarding excessive yen weakness, provided strong indications to traders.

Yesterday’s temporary 1.0% rebound was sparked by a short-term resurgence in global equity markets and a temporary stabilization in risk appetite.

But the pair couldn’t hold onto those gains during today’s trading, which showed how vulnerable it still is. Softer commodity prices, particularly crude oil and industrial metals, have kept the growth-sensitive Aussie dollar struggling.

Near-Term Momentum and Outlook Yesterday’s rebound proved the pair can still draw buyers when the yen eases up or broader risk appetite improves. But since it couldn’t hold onto those gains today, it seems the risk of intervention is still capping any rise.

Traders are now looking ahead to the RBA’s next decision and any further signals from the BoJ, like the summary of opinions and upcoming Japanese inflation data.

In the near term, AUD/JPY might trade in a wider range. Support could hold near recent lows of 109-110, with resistance possibly around 112-113. For a lasting recovery, we’d need clearer signs that Japanese authorities are stepping back, and that Australian data actually back up the current yield advantage.

On the other hand, more yen strength or a dovish shift in RBA expectations could extend the decline.

Over the medium term, the outlook depends on how quickly policies adjust. If the BoJ speeds up normalization while the RBA remains on hold, the yield gap would narrow and favor the yen.

If Australian inflation proves more persistent and Japanese tightening remains gradual, carry demand could reassert itself and lift the pair once intervention fears calm down.

What caused the AUD/JPY to drop sharply at the end of July?

It fell fast because yen-funded carry trades were quickly unwound, and global commodity prices cooled down.

How are the Reserve Bank of Australia and the Bank of Japan affecting the AUD/JPY right now?

The RBA has stopped raising rates, and the Bank of Japan is starting to normalize its policies. This means the difference in interest rates between Australia and Japan is getting smaller.

Why did the AUD/JPY suddenly jump 1% yesterday?

Yesterday’s quick rise happened because global stock markets temporarily bounced back, and investors felt a bit more willing to take risks for a short while.

Unemployment hits highest level since June 2015 Underutilisation jumps despite stronger-than-expected hiring\ Kiwi swaps retreat as rate bets unwind AUD/NZD rebounds after support holds Labour market slack builds New Zealand's unemployment rate climbed to its highest level in over a decade in the June quarter, reinforcing the view that abundant labour market slack leaves little risk of a wage breakout that could reignite domestic inflationary pressures. 

The unemployment rate climbed to 5.6% in the June quarter, the highest level since the June quarter of 2015, comfortably above the 5.4% expected by both markets and RBNZ. Broader measures softened too, with the underutilisation rate climbing to 13.8% from 12.9%. This measure includes unemployed, people wanting more hours and those on the sidelines available for work, making it a broader gauge of spare capacity in the labour market.

Source: StatsNZ, FOREX.com

Despite the increase in slack, the report masked what was a strong quarter for hiring. Employment increased 0.5%, more than double the 0.2% gain expected by markets and well above the 0.1% increase forecast by the RBNZ. Over the year, it grew by 1.2%.

The reason unemployment increased was a sharp lift in labour force participation, with the rate jumping to 70.7%, well above the 70.3% expected by both markets and the RBNZ. More people entered the workforce than the economy was able to absorb, leaving unemployment and underutilisation higher.

Wage growth wasn't a game changer either. While private sector labour cost inflation edged above the RBNZ's forecast at 2.0% year-on-year, it remains at levels inconsistent with the type of wage breakout that could fuel domestic inflationary pressures.

Markets may have overcooked the RBNZ Despite the softness of the report, it is unlikely to derail the near-term RBNZ outlook with another 25 basis point rate increase still highly likely at next month's meeting, fitting with the hawkish bias delivered in July when policymakers began the tightening cycle.

At the conclusion of that meeting, the RBNZ said "with inflation still above target and economic activity expected to strengthen, some further reduction in monetary stimulus is likely to be required to return inflation to the 2 percent target mid-point", while adding that future cash rate decisions would depend on incoming data, price-setting behaviour and the strength of economic activity.

Beyond next month's meeting, today's data does raise fresh questions over how far rates will ultimately need to move beyond neutral, estimated by the RBNZ to be around 3%.

Source: LSEG, FOREX.com

That was reflected in New Zealand's two-year swap rate, a key market gauge of expectations for the future path of the cash rate. The rate fell to 3.61% following the release, the lowest level since mid-July after briefly dipping beneath 3.60%. That's a notable reversal given it traded as high as 3.78% in late July as markets ramped up expectations for a more aggressive tightening cycle.

The move matters because two-year swap rates heavily influence the pricing of fixed-rate mortgages in New Zealand, making them one of the primary channels through which changes in RBNZ policy are transmitted to households and the broader economy.

Risk appetite calls the shots for NZD/USD

Source: TradingView

For NZD/USD, the domestic rates story is superseded by broader risk appetite as the primary directional driver, helping to explain why the Kiwi has only edged lower following the labour market report.

More importantly, the pullback has done little to threaten last week's break above resistance at 0.5860. Having bounced from around that level in each of the past two sessions, it remains the immediate level to watch on the downside. Below, the confluence of the 50 and 100-day moving averages, along with minor support at 0.5825, marks the next downside zone of note before the uptrend from the June lows comes into view.

On the topside, the pair stalled above 0.5900 on Monday, leaving that and more persistent resistance at 0.5920 as the immediate hurdles. A break above the latter would open the door for a retest of the 0.5992 double top established earlier this year.

Momentum indicators continue to favour buying dips over selling rallies. RSI (14) remains above the neutral 50 level despite losing some upside momentum in recent sessions, while MACD continues to hold above both its signal line and zero, maintaining the bullish bias established in early July.

AUD/NZD tries to turn the tide

Source: TradingView

Where relative rate expectations matter far more is in the crosses, including AUD/NZD. Combined with stronger-than-expected Australian household spending data for June released on Tuesday, New Zealand's soft labour market report has helped the pair rebound after a failed attempt to break below support at 1.1935.

Having held on this occasion, AUD/NZD is now pushing back towards 1.2000. Above there, former support at 1.2053 is the next hurdle, followed by the confluence of the 50 and 100-day moving averages and horizontal resistance at 1.2115.

Should the broader downtrend reassert itself, the recent lows beneath 1.1935 and the nearby 200-day moving average remain the immediate downside focus.

Momentum indicators have become less bearish in recent sessions. RSI (14) has turned higher from oversold territory and is pushing back towards the neutral 50 level, while MACD has started to curl back towards its signal line while remaining in negative territory. It suggests downside momentum is fading, leaving the near-term directional outlook looking far more balanced than it did only a few days ago.

TL;DR: With markets already convinced the RBA is done hiking, tomorrow’s New Zealand employment report matters less for whether the RBNZ turns more hawkish and more for whether the labor market stays resilient enough to keep its tightening bias intact — a dynamic already pressuring AUD/NZD lower.

Why the Focus Has Shifted Across the Tasman Markets have already reached a broad consensus that the Reserve Bank of Australia has finished tightening for this year. The focus is now shifting across the Tasman, where the Reserve Bank of New Zealand still appears to have work left to do. That makes tomorrow’s second-quarter employment report less about whether the RBNZ will turn more hawkish, and more about whether the labor market is resilient enough to keep its existing tightening bias intact.

Inflation Already Made the Case for More Tightening The case for further tightening was largely established by inflation. New Zealand’s second-quarter CPI rose 4.1% y/y, exceeding the RBNZ’s 3.9% forecast and reminding policymakers that price pressures remain more persistent than expected. More importantly, non-tradable inflation held at an elevated 3.4%, indicating domestic inflation — not just higher fuel costs linked to the Middle East conflict — continues to pose a challenge.

Stronger business sentiment since then has only reinforced that picture, with July’s ANZ Business Confidence jumping to 56.1 from 36.6.

Why Tomorrow’s Data Doesn’t Need to Surprise Against that backdrop, tomorrow’s labor market data don’t need to surprise on the upside to support the policy outlook. Consensus forecasts call for:

Employment growth of 0.1% q/q. Unemployment edging up from 5.3% to 5.4%. The Labour Cost Index accelerating from 0.5% to 0.6% q/q. Those figures are broadly consistent with the RBNZ’s own projections, meaning an in-line report would leave the Bank’s economic assessment largely intact. Instead of weakening the tightening narrative, it would reinforce the view that policy still needs to move somewhat further into restrictive territory to contain domestic inflation and limit second-round effects from higher energy prices.

What Would Actually Move Markets The bigger market reaction would likely come from a stronger-than-expected report. Faster employment growth, firmer wage inflation, or a lower unemployment rate would strengthen the case for another hike as early as September, and increase expectations that the Official Cash Rate ultimately reaches the upper end of the 2.75%–3.00% range currently expected by many economists. Only a materially weaker labor market would cast meaningful doubt on that outlook, by suggesting higher borrowing costs are beginning to bite more sharply than anticipated.

Why This Matters for AUD/NZD Those shifting policy expectations have become important for AUD/NZD. Australia’s softer-than-expected second-quarter CPI has persuaded markets the RBA is likely to keep the cash rate unchanged at 4.35% through year-end, effectively ending a period in which Australian rate expectations consistently outpaced those in New Zealand. With the RBA sidelined, investors are now watching whether the RBNZ can narrow the policy differential through further tightening, providing fundamental support for the New Zealand Dollar against its Australian counterpart.

ActionForex’s Technical View on AUD/NZD The technical picture complements the macro story. AUD/NZD’s decline from 1.2283 continues to look like a correction of the five-wave advance from 1.0649. As long as 1.2119 resistance caps rebounds, the bias remains lower. The next downside objective remains the 38.2% retracement at 1.1658, which sits just above the previous fourth-wave consolidation around 1.1412–1.1634.

Against a backdrop of narrowing policy differentials, tomorrow’s New Zealand labor market report has the potential to provide the catalyst for the next leg lower in AUD/NZD.

Key Takeaways New Zealand’s Q2 CPI beat the RBNZ’s own forecast at 4.1% y/y, with sticky non-tradable inflation at 3.4% keeping the tightening bias intact. Consensus expects tomorrow’s employment data to come in broadly in line with RBNZ projections, meaning an in-line print alone would reinforce, not weaken, the hawkish case. A stronger-than-expected report would raise September hike odds and support an Official Cash Rate move toward the top of the 2.75%-3.00% range. Australia’s softer CPI has convinced markets the RBA is done hiking, shifting the AUD/NZD policy narrative fully toward the RBNZ’s next move. AUD/NZD’s decline from 1.2283 remains capped below 1.2119 resistance, with 1.1658 the next downside objective if the labor data supports further RBNZ tightening.

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.

AUD/USD waits for a clearer signalDirectional bias: Neutral to bullish above 0.6900, although repeated difficulty clearing 0.7000 leaves the pair exposed to another rejection.

Preferred approach: Patience may offer a better risk-reward profile than chasing the pair immediately below resistance. A confirmed break above the 0.7000 threshold or a pullback that holds around the 200-day SMA would provide a cleaner setup.

Bullish trigger: A sustained move above 0.7000, ideally supported by firm Australian labour data, stronger expectations of another RBA rate increase, lower US yields or an improvement in risk appetite.

Bearish trigger: Another failure at 0.7000, accompanied by renewed US Dollar strength or a generalised deterioration in market sentiment.

Key invalidation level: A daily close below the 200-day SMA around 0.6900 would undermine the broader constructive structure and increase the risk of a deeper retracement in the short-term horizon.

Three paths from the 0.7000 crossroadsBase case: The range holds

AUD/USD could remain trapped between the 0.7000 psychological barrier and the 200-day SMA just above 0.6900 while traders wait for a sufficiently strong catalyst.

Australia’s relatively solid domestic fundamentals and the Reserve Bank of Australia’s (RBA) cautious stance should discourage aggressive selling. At the same time, persistent demand for the Greenback and geopolitical uncertainty could prevent an immediate breakout.

Until either boundary gives way, spot may be better treated as a side-lined trade than a convincing directional move.

Bull case: Buyers establish a foothold above 0.7000

A convincing break above 0.7000 would suggest that buyers have absorbed the selling pressure surrounding this closely watched threshold.

The breakout would carry greater conviction if supported by:

Firmer-than-expected Australian data releases.A stable or lower Unemployment Rate.Increased expectations of another RBA rate hike.Lower US yields and a softer US Dollar.An improvement in risk-linked sentiment.Under this scenario, the next important medium-term target would emerge around 0.7200, followed by the 2026 ceiling near 0.7280.

The sizeable build-up of speculative AUD shorts could add fuel to the move if a confirmed breakout forces bearish traders to unwind their positions.

Bear case: Another rejection opens the door to 0.6900

A fresh failure around 0.7000 could bring sellers back into the market, particularly if the Greenback regains momentum or global risk appetite deteriorates.

The next major test would then be the 200-day SMA around 0.6900. A daily close below this area would damage the wider bullish structure and increase the probability of a deeper correction.

Once that support gives way, previous resistance and consolidation zones below 0.6900 could return to focus.

Australia’s economy continues to hold its groundAustralia’s domestic backdrop remains relatively healthy, supported by firm demand, positive growth and a resilient labour market.

July business surveys reinforced that picture. The Manufacturing PMI improved to 52.0 from 51.5, while the Services PMI rose to 53.0 from 50.5, leaving both sectors comfortably in expansionary territory.

The June labour-market report was also encouraging. The Unemployment Rate held steady at 4.4%, while Employment Change jumped by 76.3K following a revised 44K increase in May.

Still, the picture is not uniformly positive. Australia recorded an A$3.018 billion trade deficit in May, reversing April’s A$1.383 billion surplus. Economic growth also slowed to 0.3% quarter-on-quarter in the first three months of 2026, down from 0.9%, while annual growth held at 2.5%.

Overall the figures suggest a resilient economy but perhaps not strong enough on its own to trigger a sustained breakout in AUD/USD.

Inflation leaves the RBA with unfinished businessAustralian headline inflation eased to 3.9% in the second quarter from 4.1%. Underlying price pressures, however, remained uncomfortable. Both the Trimmed Mean and Weighted Median measures rose to 3.6% from 3.5% in the previous quarter.

Consumer inflation expectations offered some relief, falling to 4.7% in July from 5.5%, according to the Melbourne Institute. Even so, inflation remains too high for the RBA to declare victory.

The central bank left its Official Cash Rate (OCR) unchanged at 4.35% in June and maintained a cautious message. Policymakers warned that further tightening could still be required if inflation proves more persistent than expected.

Governor Michele Bullock struck a more balanced tone. While keeping the possibility of another rate increase alive, she suggested there was no immediate need to tighten again as the economy was broadly evolving in line with expectations.

Markets expect the RBA to remain on hold at its August meeting while continuing to price the possibility of additional tightening before year-end. So far, nearly 15 basis points of extra tightening are pencilled in by the turn of the year.

That stance provides the AUD with some domestic support, but it is not necessarily enough to trigger an immediate rally. Further gains may require incoming data to strengthen the case for another rate increase.

China steadies but offers little additional liftChina remains an important influence on the Australian currency, although it is currently providing stability rather than a powerful tailwind.

The Chinese economy expanded by 4.3% YoY in the April-June period, Industrial Production rose by 5.3% in the year to June, and Retail Sales increased by a more modest 1.0%.

Business surveys suggest that activity is stabilising. The official Manufacturing and Services PMIs remained slightly above the 50 threshold, while private-sector gauges continued to signal expansion.

China’s trade surplus also widened to $125.62 billion in June from $105.4 billion, supported by stronger imports and exports.

Meanwhile, the People’s Bank of China (PBoC) left its Loan Prime Rates (LPR) unchanged, keeping the one-year rate at 3.00% and the five-year rate at 3.50%.

China is therefore neither delivering a major boost nor creating a significant drag. Unless the data reveal a clearer acceleration or deterioration, Chinese releases may generate short-term volatility without establishing a lasting direction for the pair.

Bearish positioning remains heavy, but momentum is fadingThe speculative mood on the Australian Dollar stayed bearish in the week ended July 28. Commodity Futures Trading Commission (CFTC) data showed net short positions rose to almost 40K contracts from 37.7K a week before.

However, the weekly increase in bearish exposure has decelerated to around 2.3K contracts from 7K previously. That said, the non-commercial players are still building on their downside positions, but with less urgency than earlier this summer.

Open interest also increased slightly to around 229.8K contracts from just above 225K, indicating a slight increase in market participation. In addition, speculative exposure decreased as well to -17.4% (from -16.7%).

The broader trend points to a similar loss of momentum. Indeed, the 4-week change improved to -22.3K contracts from -24.7K, suggesting that cumulative bearish flows are gradually cooling.

Overall, speculators remain firmly bearish on the Aussie, but that view is becoming more established than aggressive. This means the AUD position is increasingly reliant on incoming economic data.

It also creates an interesting asymmetry. Disappointing data could reinforce the prevailing bearish bias, but a convincing improvement in the outlook could trigger a sharper reaction as crowded short positions are unwound.

Jobs data take centre stageAustralia’s July Labour Force report will be the next major domestic test for the Australian Dollar. The release could influence expectations for the RBA’s next move and determine whether AUD/USD can establish itself above 0.7000.

Stronger-than-expected labour data

A solid increase in employment, particularly full-time employment, combined with a stable or lower jobless rate would reinforce the view that the labour market remains tight.

Firm participation and hours-worked figures would add credibility to the headline result. Such an outcome could strengthen expectations of another RBA rate increase and support a sustained move above 0.7000 of the pair.

A broadly balanced report

Employment growth close to expectations, accompanied by little change in unemployment or participation, would probably leave the RBA outlook largely unchanged.

In that case, AUD/USD could remain confined between resistance around 0.7000 and the 200-day SMA just past 0.6900, with its direction determined primarily by the US Dollar and global risk sentiment.

A clear deterioration in the labour market

Weak or negative employment growth, particularly alongside a rise in the Unemployment Rate, would raise questions about the resilience of the Australian economy.

A drop in hours worked or a result driven mainly by part-time employment would make the report look even softer. This could reduce expectations of further RBA tightening and leave spot vulnerable to a renewed test of 0.6900.

Participation will require careful attention. A lower Unemployment Rate caused by people leaving the labour force would be less encouraging than the headline figure might initially suggest.

Beyond the domestic data, traders should continue to monitor US yields, Federal Reserve expectations, Chinese developments, global risk appetite and geopolitical headlines.

Technical landscapeIn the daily chart, AUD/USD trades at 0.6994, holding above the 200-day simple moving average (SMA) at 0.6913 but still capped by the 55-day SMA at 0.7019 and the 100-day SMA at 0.7053, which keeps the near-term tone neutral-to-bearish. Momentum is modestly constructive, with the Relative Strength Index (14) hovering near 51, while the Average Directional Index (14) around 15 suggests a weak, non-trending environment where price is more likely to consolidate beneath these moving average barriers than to embark on a decisive directional move.

On the topside, immediate resistance is clustered at the short-term SMAs, with the 55-day SMA at 0.7019 followed by the 100-day SMA at 0.7053, ahead of a horizontal cap near 0.7079; higher up, the 0.7278–0.7283 region and then 0.7661 mark more substantial medium-term hurdles. On the downside, initial support aligns with the 200-day SMA at 0.6913, before the horizontal floor at 0.6833, while deeper retracements would expose 0.6660 and 0.6593, with 0.6414 and 0.6373 acting as longer-term bearish objectives if selling pressure resumes.

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

The line in the sand remains 0.6900AUD/USD retains a constructive medium-term structure above its 200-day SMA, but the immediate outlook remains uncertain while the pair struggles to secure a foothold above 0.7000.

The most attractive setup remains conditional. Confirmed acceptance above 0.7000 would favour additional gains and could trigger a positioning-driven short squeeze. Another rejection, however, would leave the pair exposed to a return toward 0.6900.

Until one of these boundaries breaks, AUD/USD remains caught between supportive Australian fundamentals and an external backdrop still dominated by the US Dollar, geopolitical uncertainty and only moderate support from China.

Employment FAQs Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

USDJPY edged higher from new lowest level in almost three months, following three-day sharp fall on coordinated intervention by Japan’s authorities and US central bank, to support weakening yen.

Massive intervention buying lifted yen against US dollar (nearly 5%) and Euro (4.2%), with yen’s weekly gains of 3.9% vs dollar and 3.1% vs Euro.

The authorities signaled that further intervention cannot be ruled out that keeps near-term focus at the downside, with current (still mild) bounce, seen as positioning for fresh push lower for both currency pairs (USDJPY and EURJPY).

The USDJPY surged through daily Ichimoku cloud (spanned between 160.67 and 158.48), broke through 200DMA (157.92) and trendline support (157.10), while EURJPY broke 200DMA support (183.62), to hit the lowest since 17 Nov 2025 (179.36) on Monday.

Technical picture on daily chart turned bearish for both pairs, but stretched indicators after sharp fall suggest that bears may take a breather, though with limited upticks, due to persisting risk for possible further intervention.

USDJPY – broken 200DMA turned to solid resistance which capped today’s action and should ideally limit upticks, guarding next significant barrier at 158.48, provided by the base of thick daily cloud.

Fresh bears eye next pivotal supports at 155.02/154.78 (May 6 low / Fibo 38.2% of 139.88/163.98 rally) break of which to generate stronger reversal signal and support scenario of direction change of 16-month uptrend.

EURJPY- upticks should ideally hold below 182.50 zone (Fibo 38.2% of 187.43/179.36 post-intervention fall) to keep bears intact for firm break through cracked 180 psychological support and acceleration towards 175.28 (Fibo 38.2% of 154.79/187.94) and 172.70 (100WMA) in extension.

Windsor Brokers Ltdhttp://www.windsorbrokers.com/

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Summary:

EUR/USD climbed to its highest level in more than six weeks after breaking above 1.1500. Softer expectations for further Federal Reserve tightening continued to pressure the US dollar. Traders now await ISM manufacturing data before shifting attention to Friday's US payrolls report. The euro began the week on a stronger footing, extending last week’s rally as broad-based weakness in the US dollar continued to support the common currency. EUR/USD climbed above 1.1500, reaching its highest level since mid-June after investors scaled back expectations that the Federal Reserve will need to resume raising interest rates this year.

Last week’s Fed meeting marked a turning point for the dollar. Although policymakers left interest rates unchanged, markets were unconvinced that officials are prepared to deliver another hike unless inflation accelerates significantly. Treasury yields retreated after the meeting, dragging the greenback lower across major currency pairs and allowing the euro to recover sharply from July’s lows.

At the same time, geopolitical concerns eased after reports that the United States postponed further military action against Iran. The decline in oil prices that followed helped reduce immediate inflation concerns, removing one of the main factors that had recently supported the US dollar.

US economic data now becomes the next catalyst for EUR/USD With the Federal Reserve now temporarily out of the spotlight, investors are turning their attention to incoming economic data for fresh clues on the direction of US monetary policy.

Monday’s ISM Manufacturing PMI will offer an early indication of how the US industrial sector performed in July after recent signs that business activity has begun to stabilize. Markets will also monitor the S&P Global Manufacturing PMI for confirmation of broader economic momentum.

However, attention is already shifting toward Friday’s Nonfarm Payrolls report, widely regarded as the week’s most important release. A resilient labour market could revive expectations for tighter monetary policy later this year, while weaker employment growth would strengthen the view that the Fed has reached the end of its tightening cycle.

That makes this week’s data particularly important for EUR/USD after last week’s breakout.

Euro buyers regain technical control The technical picture has improved considerably over the past several sessions.

After establishing support around 1.1350, EUR/USD has produced a strong impulsive recovery, breaking through the psychological 1.1500 level while also clearing the descending trendline that had capped prices since June.

The rally has been accompanied by a move back above both the 100-day and 200-day moving averages, reinforcing the argument that medium-term bullish momentum is returning. Price is now consolidating just below 1.1560, suggesting buyers are pausing after a rapid advance rather than showing signs of exhaustion.

A sustained move above 1.1558 would expose the June high near 1.1620, while a successful break there could encourage a broader recovery toward 1.1650.

Bullish Outlook The outlook remains positive while EUR/USD holds above 1.1480. Continued weakness in the US dollar and softer Treasury yields could allow buyers to challenge 1.1558, with 1.1620 becoming the next major upside objective.

Bearish Outlook Failure to hold above 1.1480 would increase the risk of profit-taking after last week’s rally. A decisive break below 1.1430 could expose 1.1350, signalling that the recent recovery was only corrective rather than the beginning of a broader trend reversal.

On the downside, the first layer of support sits near 1.1480, followed by 1.1455, which represents the midpoint of the latest advance. A move below 1.1430 would weaken the current bullish structure and suggest that sellers are regaining control.

EUR/USD Outlook The near-term outlook for EUR/USD remains constructive after last week’s decisive break above the 1.1500 psychological level shifted momentum back in favour of buyers. However, the pair is entering a data-heavy week that could determine whether the rally has enough strength to extend toward the June highs. Traders will closely monitor the US ISM Manufacturing PMI and Friday’s Nonfarm Payrolls report for fresh clues on the Federal Reserve’s policy path. Softer-than-expected US data could reinforce dollar weakness and lift EUR/USD toward 1.1620, while stronger economic readings may trigger a pullback as investors revive expectations of tighter US monetary policy. For now, the broader bias remains bullish as long as the pair holds above key support around 1.1480.

The United States joined Japan in buying yen to contain disorderly currency moves, protect the US Treasury market and prevent Japan’s financial strains spilling into the global economy. The Japanese Yen strengthened sharply on Monday after Japan confirmed that Washington had joined Tokyo in a rare coordinated intervention to support the currency.

Image: USD/JPY crashed as seen in the 24h chart Japan’s Ministry of Finance said it purchased yen alongside the US Treasury on Friday to counter “excessive volatility and disorderly movements” after the currency fell towards a 40-year low near ¥164 against the Dollar. Finance Minister Satsuki Katayama warned that the two countries would not hesitate to intervene again.

At the time of writing, the US Dollar to Yen exchange rate (USD/JPY) was trading around 156.63, down 0.52% on the day. The pair briefly plunged towards 155.27 overnight before recovering, extending its retreat from levels above 163 in late July.

Latest — Exchange Rates:

Dollar to Yen (USD/JPY): 156.62001 (-0.53%)

Euro to Dollar (EUR/USD): 1.153244 (+0.02%)

Pound to Dollar (GBP/USD): 1.347124 (-0.08%)

Washington’s involvement was not simply an act of support for a key Asian ally.

Japan had already spent heavily buying yen, with Bank of Japan data suggesting that Tokyo may have deployed almost $59 billion during Thursday’s intervention. Funding further action by selling US government bonds risked driving Treasury prices lower and pushing American borrowing costs higher.

The US intervention therefore helped address two risks at once: a destabilising collapse in the yen and the possibility that Japan could become a forced seller of Treasuries as it raised dollars to defend its currency.

The Federal Reserve’s FIMA repo facility could also allow Japan to obtain temporary dollar liquidity without selling its Treasury holdings outright.

US Treasury Secretary Scott Bessent described the facility as an important backstop and said Washington was prepared to participate in further coordinated action.

The move also supports the Trump administration’s trade agenda.

An exceptionally weak yen makes Japanese exports cheaper and can offset some of the competitive impact of US tariffs, while higher import costs are intensifying inflation and political pressure within Japan.

The intervention has forced traders to unwind large speculative bets against the yen, but officials may struggle to secure a lasting recovery without help from monetary policy.

The Bank of Japan kept its benchmark rate at 1.00% last week, although the coordinated action and increasingly forceful US pressure have strengthened expectations of another increase as soon as September.

Image: Dollar-Yen exchange rate performance over 2026 For USD/JPY, the immediate risk is now two-sided.

Further intervention could drive the pair back below 155.00, while a failure to follow the currency purchases with tighter Japanese policy could eventually allow the underlying US-Japan yield gap to reassert itself.

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