Track market-moving stories before they get noisy

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

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

Latest — Exchange Rates:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: centralbankwatch

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

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

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

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

Source: TradingEconomics

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

 

USD/JPY Technical Outlook

Source: StoneX, Tradingview

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

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

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

 
Key Levels:

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

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

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

 
Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

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

Several factors are contributing to volatility risks across both charts:

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

DXY Price Outlook: Monthly Time Frame — Log Scale

Source: TradingView

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

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

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

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

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

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

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

Source: TradingView

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

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

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

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

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

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

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

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

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Latest — Exchange Rates:

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

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

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

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

JPMorgan is not abandoning its constructive view.

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

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

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

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

The distinction matters after the stronger US payroll report.

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

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

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

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

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

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

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

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

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

JPMorgan also reported real-money demand for the currency.

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

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

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

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

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

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

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

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

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

Source: TradingView

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

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

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

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

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

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

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

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

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

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

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

Source: Bloomberg

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

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

Source: TradingView

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

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

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

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

Source: TradingView

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

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

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

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

USD/JPY Respects the Range

Source: TradingView

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

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

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

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

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

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

EUR/USD comes under selling pressure on Friday as the US Dollar (USD) strengthens following the release of the upbeat United States (US) employment report. At the time of writing, the pair trades around 1.1605, down roughly 0.18% on the day, after retreating from an intraday high of 1.1633.

US Nonfarm Payrolls (NFP) rose by 162K in August, comfortably beating expectations for a 56K increase. July’s reading was revised sharply higher to a gain of 21K from the previously reported 23K decline, while June payrolls were revised to 31K from 20K. The Unemployment Rate held steady at 4.1%, as expected.

The US Dollar strengthens following the employment report, while US Treasury yields also move higher across the curve. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.20 after falling to a more-than-one-week low of 98.83 on Thursday. Meanwhile, the benchmark 10-year Treasury yield retests 4.81%, its highest level since October 2023, touched earlier this week.

The stronger employment figures revive expectations that the Federal Reserve (Fed) could raise interest rates at its September 15-16 meeting. Still, the jobs report may not settle the September policy debate on its own. Next week’s Consumer Price Index (CPI) and Producer Price Index (PPI) data will give policymakers a clearer picture of inflation before the Fed announces its decision.

On the Euro (EUR) side, weaker-than-expected Eurozone Retail Sales add some pressure. However, expectations that the European Central Bank (ECB) will raise interest rates at its September 9-10 meeting could limit the Euro’s losses. The ECB is widely expected to deliver a second rate hike this year as higher Oil prices amid tensions in the Middle East keep inflation risks elevated.

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 Swiss Franc.

USDEURGBPJPYCADAUDNZDCHFUSD0.18%0.15%0.09%0.42%0.10%0.11%0.44%EUR-0.18%-0.03%-0.09%0.27%-0.09%-0.05%0.26%GBP-0.15%0.03%-0.04%0.29%-0.05%-0.02%0.28%JPY-0.09%0.09%0.04%0.34%-0.01%0.03%0.33%CAD-0.42%-0.27%-0.29%-0.34%-0.35%-0.32%-0.01%AUD-0.10%0.09%0.05%0.00%0.35%0.03%0.33%NZD-0.11%0.05%0.02%-0.03%0.32%-0.03%0.30%CHF-0.44%-0.26%-0.28%-0.33%0.00%-0.33%-0.30% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

EUR/USD attracts buyers on Thursday as a sharp rally in the Japanese Yen (JPY), softer United States labour-market data and a pullback in US Treasury yields weigh on the US Dollar (USD). At the time of writing, EUR/USD trades around 1.1622, up roughly 0.30% on the day.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.00, near a one-week low, after reaching 99.86 on Wednesday, its highest level since August 14. Meanwhile, the benchmark 10-year US Treasury yield falls for the second consecutive day to around 4.74%, retreating from 4.81%, its highest level since October 2023.

Dovish comments from Federal Reserve (Fed) Governor Christopher Waller prompt traders to scale back bets on a rate hike this month. Waller said he is “finally seeing some signs of disinflation in recent data” and that the “rate decision in September hinges on August inflation.” He added that he would support keeping interest rates unchanged if the August data confirm recent progress.

Waller also said the Fed’s mandate is to achieve “price stability and full employment, not financial conditions,” adding that the current interest-rate setting “could get us back to 2% inflation.”

According to the CME FedWatch Tool, the probability of a rate hike at the Fed’s September 15-16 meeting has fallen to around 48% from 63% a day earlier.

Meanwhile, mixed US economic data offers conflicting signals. Initial Jobless Claims increased to 206K in the week ending August 29, slightly above the market forecast of 205K and the previous reading of 204K. However, the ISM Services PMI rose to 55.4 in August from 54.1 in July, exceeding expectations of 54.3. The Prices Paid and Employment indices increased to 72.6 and 47.8, respectively. Traders now await Friday’s Nonfarm Payrolls (NFP) report for fresh clues on the Fed’s monetary policy outlook.

Across the Atlantic, the European Central Bank (ECB) is widely expected to raise interest rates at next week’s monetary policy meeting. The move would mark the second rate hike this year as the central bank seeks to curb inflation, which has been driven largely by elevated Oil prices linked to the war in the Middle East.

A Reuters poll showed that all 65 economists surveyed expect the ECB to raise its Deposit Facility Rate by 25 basis points to 2.50% on September 10. Around 91% expect the rate to stay at 2.50% through the end of the year, while 78% see it holding at that level through mid-2027.

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 British Pound.

USDEURGBPJPYCADAUDNZDCHFUSD-0.29%-0.18%-2.02%-0.31%-0.28%-0.32%-0.59%EUR0.29%0.10%-1.75%-0.08%0.01%-0.10%-0.31%GBP0.18%-0.10%-1.85%-0.16%-0.09%-0.18%-0.41%JPY2.02%1.75%1.85%1.72%1.78%1.67%1.45%CAD0.31%0.08%0.16%-1.72%0.04%-0.06%-0.27%AUD0.28%-0.01%0.09%-1.78%-0.04%-0.08%-0.30%NZD0.32%0.10%0.18%-1.67%0.06%0.08%-0.19%CHF0.59%0.31%0.41%-1.45%0.27%0.30%0.19% 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).

USD/JPY has tumbled to 156.04, but JPMorgan's 164 year-end target survives because the pair remains inside its 155-165 central range. The US Dollar to Japanese Yen (USD/JPY) exchange rate has slumped to around 156.04 after a sudden Yen surge wiped more than four Yen from the pair in less than 48 hours.

The latest USD/JPY rate was down 1.81% on the day and 2.56% across 48 hours, trading only fractionally above the period's 156.00 low.

USD/JPY 48-Hour Price Chart

Image: USD/JPY 48h chart The fall looks severe on the short-term chart, but USD/JPY has not yet broken the range behind JPMorgan's year-end forecast.

JPMorgan expects the BoJ to raise rates roughly once per quarter, while assuming no substantial change in market expectations for Federal Reserve policy.

"If the BOJ continues to hike at roughly a quarterly pace while Fed hike expectations do not change materially, we think USD/JPY is likely to remain within the 155–165 range for the time being. This is our base case, and we maintain our USD/JPY targets of 160 at end-September and 164 at end-December."

At 156.04, USD/JPY is 1.04 Yen above the bottom of that range, while reaching 160 and 164 would require rebounds of approximately 2.5% and 5.1%, respectively.

JPMorgan said the OIS-implied probability of a September BoJ increase had already risen from 28% before the end-July intervention to 92%.

The latest surge therefore brings the market closer to the policy assumptions behind its central scenario rather than directly invalidating the 164 target.

USD/JPY Three-Month Chart

Image: USD to JPY rate three-month graph The three-month chart places USD/JPY much closer to its 155.27 low than July's 163.98 peak, with the pair also trading below its 20-day and 50-day moving averages.

Fed Pause Scenario Points to 157 JPMorgan's alternative scenario, in which the Fed pauses its rate increases, produces a lower USD/JPY range of 153-163.

"Based on the correlation between the 1y1y spread and USD/JPY observed at that time, the fair value of USD/JPY under a Fed pause scenario is around 157."

The current rate is already slightly below that estimate, although it remains inside the scenario range and near the 156-160 band discussed in our earlier Japanese Yen forecast.

JPMorgan accepts that an overshoot could temporarily push USD/JPY below 155, but adds: "In this scenario, however, we view the likelihood of a sharp yen appreciation—such as a move below 150—as low."

Near-Term US$/JPY Forecast: What Would Break the Range? A sustained move below 155 would require a stronger catalyst, with JPMorgan identifying Fed rate-cut expectations, an accelerated BoJ cycle that damages Japanese equities, a GPIF portfolio change or heavier official Yen buying.

Slower-than-priced BoJ tightening, stronger Fed hike expectations or renewed Japanese fiscal concerns could instead drive USD/JPY above 165.

US payrolls and the September Fed and BoJ decisions will now determine whether 156 becomes the starting point for a rebound or the first step towards JPMorgan's lower 153 boundary.

The EUR/USD rate has rebounded to 1.1610, while UniCredit sees a Fed-Treasury policy clash becoming a medium-term Dollar headwind. The Euro to Dollar (EUR/USD) exchange rate has climbed back to around 1.1610 after recovering from a 48-hour low of 1.1567.

The Euro is up roughly 0.2% on the day, although the prospect of another Federal Reserve rate hike continues to offer the Dollar near-term support.

Markets are assigning around a two-thirds probability to a September increase following Fed Chair Kevin Warsh's hawkish Jackson Hole speech.

UniCredit accepts that the repricing has helped the US currency, but strategist Roberto Mialich sees a more difficult medium-term picture.

Image: EUR/USD 48hr chart The 48-hour chart shows EUR/USD recovering steadily from below 1.1570, with the pair pushing towards the top of its recent range around 1.1610.

Fed Hike Expectations Support the Dollar UniCredit said: “The USD’s reaction has been exactly as expected, as Warsh’s speech has forced investors to reprice expectations regarding US monetary tightening – correcting the excessive optimism regarding limited rate-hike prospects following a series of weak US macro-data releases earlier this month.”

A rate increase by December was already fully priced when UniCredit published its assessment.

However, Mialich doubts that investors will price a much steeper tightening path without stronger US data or a further change in the Fed's language.

“That said, forward curves are unlikely to price in more aggressive monetary moves unless US data surprise sharply to the upside or the Fed signals an even more hawkish stance regarding the timing and magnitude of its tightening strategy.”

That gives the Dollar room to hold firm in the short term, but UniCredit's argument stretches beyond the next Fed meeting.

Treasury and Fed Objectives Could Collide The US Treasury is trying to contain borrowing costs as the budget deficit approaches 6.3% of GDP and public debt exceeds $40 trillion.

Its planned buyback operation will run from 9 September to 4 November, with purchases of longer-dated Treasuries financed through additional short-term bill issuance.

That strategy is intended to flatten the yield curve and reduce pressure at the long end.

A hawkish Fed would be pulling in the opposite direction by raising short-term rates and tightening financial conditions.

“Although the USD has gained from the repricing of overly dovish rate expectations, a collision between fiscal and monetary policy could emerge as a medium-term drag on the currency.”

Could “Sell America” Return? UniCredit argues that conflicting policy objectives could revive concerns about US fiscal credibility and encourage investors to reduce their Dollar exposure.

“However, the risk of a collision course between US fiscal and monetary policies may increase significantly if they were to pursue opposing goals on interest rates. This could act as a headwind for the USD in the medium term – regardless of signs of potential escalation in the Middle East – by further fuelling “sell America” trades and the de-dollarization process.”

The beneficiaries could include the Euro, precious metals, real estate and selected cryptocurrencies.

For EUR/USD, UniCredit offers a direction rather than a formal price target.

Its view also fits the longer-term bias in our latest bank forecast survey, which sees the pair rising towards 1.18 over the coming quarters.

The next tests will be US payroll and inflation data, the September Fed decision and the Treasury buyback beginning on 9 September.

Markets will also watch the shape of the US yield curve and whether fiscal concerns start to outweigh the Dollar's near-term interest-rate advantage.

EUR/JPY extends steep fall into second consecutive day (down 1.3% durian Asian / European trading on Thursday), losing so far over 2%.

Fresh strength of Japanese yen was sparked by hawkish narrative of Japanese officials which points to faster pace of BOJ rate hikes against growing inflationary pressures, while analysts sidelined scenario about another intervention, after yen lost the most of gains from late July intervention.

Sharp drop that accelerated further on Thursday, has so far retraced the largest part of 179.36/186.02 recovery leg (over 61.8%), with target at 180.93 (Fibo 76.4%) being in focus.

Technical studies on daily chart turned to full bearish configuration, but oversold conditions suggest that bears may face increased headwinds.

Strong support provided by the top of ascending weekly Ichimoku cloud (181.70, which has already contained attack on early Aug) are expected to hold bears again for consolidation / limited correction.

Two large bearish daily candles weigh heavily on near-term action and contribute to scenario of positioning for fresh push lower, targeting 180 (psychological) and 179.36 Au 3 spike low).

Upticks should be ideally capped under 182.70 zone (broken Fibo 50%) to keep bears in play.

Res: 181.90; 182.70; 183.48; 184.26.
Sup: 181.30; 180.93; 180.00; 179.36.

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AUD/USD

Sell AUD/USD. Higher odds of both RBA and Fed hikes push the market toward tighter USD policy and less room for AUD to rally; strong Aussie data is already “priced,” while the article flags elevated inflation and renewed oil/energy pressure that can keep both central banks hawkish. Technicals also point to a bearish reversal (rising wedge convergence, PPO bearish crossover, RSI rolling over). Target 0.700 support.

Key Risk: A sharp risk-off move that weakens the USD (or a surprise dovish Fed/RBA shift) that drives AUD/USD back above 0.7207.

Brent-linked AUD

Sell AUD exposure via AUD/JPY (or AUD futures). The news ties the hawkish rate repricing to higher oil after US-Iran activity; that supports global growth but also keeps inflation sticky, which tends to keep JPY relatively supported versus high-beta AUD when rates are uncertain. With AUD/USD set up to break lower, AUD/JPY should follow on the same rate-and-risk repricing.

Key Risk: Oil spikes further and triggers a broad commodity/risk rally that lifts AUD/JPY despite the wedge/oscillator bearish setup.

The Australian dollar held firm today, September 3rd, as investors adjusted their RBA and Federal Reserve expectations for the year. The AUD/USD pair was trading at 0.7165, a few points below the August high of 0.7207. 

Traders are bracing for interest rate hikes from the Federal Reserve and the Reserve Bank of Australia (RBA) happening as soon as this month.

Polymarket gives the odds of RBA’s rate hike happening in September rose to 67%. These odds jumped after the US and Iran resumed their kinetic activity, which led to higher oil prices. 

Australia has also published strong macro numbers this week. An S&P Global report showed that the services PMI came in at 53.2 in August, higher than the expected 52.9. A PMI reading of 50 and above is usually a sign that a sector is growing. The composite PMI came in at 52.7, also higher than the expected 52.50.

Another report released on Wednesday showed that the Australian economy expanded by 2.1% in the second quarter, higher than the expected 1.8%. It grew by 0.4% in Q2 after growing by 0.3% in Q1 on a QoQ basis. 

This growth happened even as the Reserve Bank of Australia (RBA) became the most hawkish central banks this year. It has already delivered three rate hikes this year, with officials leaving the door open for more hikes.

A key concern is that Australia’s inflation has remained at an elevated level in the past few months. This trend will likely continue now that the US and Iran have restarted their kinetic activity, leading to higher energy prices. Brent, the global benchmark, rose to $95.68, while the West Texas Intermediate (WTI) rose to $91.

The same situation is happening in the US, where odds that the Fed will hike rates this month have jumped to 55% on Polymarket. These odds soared after Kevin Warsh delivered a highly hawkish statement at the Jackson Hole Symposium.

In it, he hinted that the bank was concerned about the state of inflation, which has remained above the 2% target in the past five years.

Focus now shifts to the upcoming US nonfarm payrolls (NFP) report that will provide color on the labor market. Economists expect the data to show that the economy created over 80k jobs in August this year.

AUDUSD chart | Source: TradingView

The daily chart shows that the AUD/USD pair may be on the verge of a bearish reversal in the coming days. For one, it has formed a rising wedge pattern whose two lines are about to converge. 

Also, the two lines of the Percentage Price Oscillator (PPO) have made a bearish crossover, while the Relative Strength Index is pointing downwards.

Therefore, the most likely scenario is where the AUD/USD pair falls, potentially to the key support of 0.700.

TL;DR: NZD/JPY fell over 1% despite the RBNZ’s second consecutive hike, as an Iran-driven oil shock reduced carry appetite, increasingly hawkish BoJ rhetoric strengthened the Yen, and the RBNZ’s own gradual guidance disappointed markets pricing a faster path.

Four Forces Are Hitting NZD/JPY at Once NZD/JPY fell more than -1% on Wednesday, even after the RBNZ delivered a second consecutive 25bp rate hike to 2.75%. At first glance, that looks contradictory — higher New Zealand rates should normally support NZD. But the current decline is being driven by several forces pointing in the same direction: an Iran-driven oil shock has weakened risk appetite and encouraged carry reduction; BoJ rhetoric is reinforcing expectations for faster Japanese tightening; US pressure is adding urgency to the Yen story; and the RBNZ’s own guidance disappointed markets looking for a more aggressive hiking path.

That distinction matters for durability. Geopolitical risk and equity weakness can reverse quickly if oil retreats or US-Iran tensions ease. But BoJ-RBNZ policy divergence could persist even after risk sentiment stabilizes. In other words, oil triggered the broad move, while central-bank divergence amplified it.

Iran and Oil Trigger the Risk-Off Layer Fresh Middle East escalation pushed Brent as high as around $97 earlier Wednesday, reviving concern over the Strait of Hormuz, inflation, and another round of US-Iran retaliation. Asian equities reflected the deterioration in risk appetite, with the Nikkei down around -2.5% and the KOSPI falling almost -4%.

For NZD/JPY, this matters through carry rather than a simple safe-haven mechanism. NZD is highly sensitive to global risk appetite, while the Yen has historically served as a funding currency for positions in higher-yielding assets. When volatility rises and investors reduce leverage, those trades are unwound by selling higher-beta currencies and buying back the Yen.

That gives Middle East escalation a clear transmission channel into NZD/JPY. But it’s only the first layer. Wednesday’s selloff is larger because the Yen itself is also receiving increasingly hawkish policy support.

The BoJ Debate Is Moving Beyond September Markets are already close to fully pricing a BoJ hike at the September 17–18 meeting, so simply expecting a move from 1.00% to 1.25% is no longer especially new. The more important question is whether September marks the start of a faster tightening cadence.

US Treasury Secretary Scott Bessent has added pressure from Washington. NHK reported that Bessent told Finance Minister Satsuki Katayama and BoJ Governor Kazuo Ueda at the G20 meeting that Japan’s “next step should be to raise interest rates.” Nomura’s Mari Iwashita highlighted the credibility of that signal, saying: “Whenever Bessent made comments on Japanese monetary policy, the BOJ followed through with rate hikes.”

BoJ board member Hajime Takata then sharpened that message on Wednesday in Sapporo. He described “2026 [as] a regime change” and argued policy should become “nimble and data-dependent,” rather than being “bound by particular intervals or ranges anticipated in the markets.” Takata was already the sole dissenter in July, proposing an immediate hike from 1.00% to 1.25%.

That makes the current Yen story less about one September move and more about the possibility that the BoJ abandons its twice-yearly tightening rhythm. If markets begin pricing another hike substantially sooner than previously expected, Yen-funded carry becomes structurally less attractive.

RBNZ Delivered the Hike but Not the Hawkish Path The New Zealand side produced the opposite surprise. The RBNZ raised the OCR from 2.50% to 2.75% by consensus, but NZD sold off sharply because markets were trading the future path rather than Wednesday’s decision itself. The RBNZ characterized tightening as gradual and stressed that policy isn’t on a preset course.

Its quarterly-average OCR projections rise only gradually from 2.8% in December 2026 to 3.0% in March 2027, 3.1% in June and September, and 3.2% by December 2027. Governor Anna Breman also emphasized the need to assess how rate increases already delivered are transmitting through the economy before deciding the next step.

Inflation risks aren’t viewed uniformly either. Hayley Gourley, Karen Silk, Prasanna Gai, and Breman saw risks tilted to the upside, while Paul Conway and Carl Hansen judged them balanced. That 4–2 split matters because it shows the Committee agrees on the current hike but not on the need for an aggressively hawkish future path.

So the RBNZ delivered hawkish action but a dovish reaction. Rates rose, but the policy message didn’t validate expectations for rapid tightening.

BoJ and RBNZ Are Moving in Opposite Directions at the Margin This is what makes NZD/JPY particularly useful. The BoJ is telling markets not to assume rate hikes will remain six months apart. The RBNZ is telling markets not to assume further hikes will come quickly.

That doesn’t mean the RBNZ is turning dovish outright — it’s still tightening and sees inflation risks. But relative monetary-policy surprise is what matters for FX. Japan is challenging expectations for gradualism just as New Zealand is reinforcing them.

The pair therefore captures more than generic risk aversion. It combines:

Higher geopolitical risk → lower carry appetite. Faster BoJ normalization risk → stronger Yen. Slower-than-hoped RBNZ tightening → weaker NZD. That three-way alignment explains why NZD/JPY is moving more aggressively than either central-bank headline might imply in isolation.

ActionForex’s Technical View on NZD/JPY: Break of the 55-Day EMA Shifts Focus to 91.02 The technical picture has deteriorated sharply. NZD/JPY’s fall through the 55-day EMA around 93.78 confirms the rebound from 91.64 completed at 95.18. The decline from 95.18 is now viewed as another falling leg within the broader consolidation from 95.41.

The near-term bias stays lower while 94.21 minor resistance holds, with focus turning to 91.02 support. Strong support could emerge around that zone and trigger a rebound.

However, downside risk becomes more serious if carry unwind intensifies alongside further equity weakness and higher oil. A break of 91.02 would expose 89.44, the 38.2% retracement of the larger rise from 79.79 to 95.41.

One caution is that the 4H RSI has already fallen close to 20, leaving the pair deeply oversold in the short term. A rebound would therefore not be surprising. But the technical damage would remain intact unless NZD/JPY can recover above 94.21 and, more importantly, regain the lost 55-day EMA.

What Determines Whether the Selloff Lasts? There are two separate questions. The first is whether the geopolitical catalyst persists. Brent’s move toward $102 is key — if oil continues higher and Asian equities remain under pressure, carry reduction can extend and accelerate downside in NZD/JPY. If US-Iran tensions ease and Brent retreats, that part of Wednesday’s move could reverse quickly.

The second is whether policy divergence survives beyond the current risk shock. The BoJ’s Sept. 17–18 decision and guidance will test whether Takata’s call for more nimble tightening is gaining broader support. In New Zealand, upcoming data will determine whether the RBNZ stays in wait-and-assess mode or shifts toward a faster path. Friday’s US payrolls also matter indirectly through global yields and risk appetite.

For now, NZD/JPY isn’t falling because of one headline. Iran escalation triggered carry reduction, the BoJ’s increasingly hawkish message strengthened the Yen side, and the RBNZ’s gradual guidance weakened the Kiwi side. That combination makes the current decline more than a simple geopolitical trade.

Key Takeaways NZD/JPY fell over 1% despite the RBNZ’s second straight hike, because markets traded the future path (gradual, disappointing) rather than the decision itself. Bessent’s public pressure on the BoJ and Takata’s “2026 regime change” comments suggest Japan may abandon its twice-yearly tightening rhythm for something faster. The RBNZ’s 4–2 committee split on inflation risk and quarterly-average OCR path (only reaching 3.2% by December 2027) confirm hawkish action but dovish forward guidance. Iran-driven oil moving toward $102 is the reversible layer of this selloff; BoJ-RBNZ policy divergence is the layer that could persist even if geopolitical risk eases. NZD/JPY has broken its 55-day EMA, opening a path toward 91.02 and then 89.44, though a 4H RSI near 20 leaves the pair deeply oversold and due for a possible bounce.

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.

MUFG's 94.00 USD/INR target is close, but oil near $96 and higher Treasury yields threaten further Indian Rupee gains. The US Dollar to Indian Rupee (USD/INR) exchange rate slipped to 94.9523 early on Wednesday, placing MUFG's 94.00 third-quarter forecast within roughly 1% of spot.

The pair has dropped from 95.6044 at Friday's close and touched 94.7304 in early September.

When we last examined MUFG's call, USD/INR was trading near 95.75.

Spot has since moved much closer to the target, although the external backdrop has become less friendly for the Rupee.

MUFG said: “We are currently forecasting USD/INR to move towards 94.00 over the next three to six months, before rebounding towards 96.00 next year as structural portfolio outflows, corporate repatriation and import demand reassert themselves.”

Its quarterly table puts USD/INR at 94.00 in Q3 2026, 94.50 in Q4, 95.50 in Q1 2027 and 96.50 by Q2 2027.

That path points to further near-term Rupee gains, followed by a gradual reversal next year.

Image: USD/INR performance chart over 2026 - year-to-date graph The year-to-date chart shows USD/INR below its 20-day and 50-day moving averages after repeatedly failing to hold above 96, although the pair is still 5.53% higher in 2026.

RBI support has brought 94 closer MUFG attributed the Rupee's firmer footing to fading Dollar momentum and RBI foreign-currency mobilisation measures.

Foreign investors also bought around $470 million of Indian equities in the week ending 28 August, following roughly $500 million of inflows the previous week.

The bank added: “Existing foreign-currency inflows have enlarged India’s external buffer and curtailed the risk of sharp INR depreciation, but the removal of incremental liquidity support, accelerating credit growth and the lagged inflationary effects of earlier oil-price increases point towards higher INR rates.”

India's economy subsequently expanded by a stronger-than-expected 7.8% in the April-June quarter, reinforcing the case for tighter domestic policy.

MUFG said: “We continue to expect 50bp of RBI tightening beginning in December, with the central bank focused on limiting excessive FX volatility rather than engineering sustained rupee appreciation.”

Oil and US yields threaten the Rupee rally There is a catch, though.

Since MUFG published its forecast, Brent crude has climbed to $95.68 a barrel as renewed US-Iran strikes revived supply concerns.

That raises India's import bill and inflation risk, while higher US yields make emerging-market assets less attractive.

The US 10-year Treasury yield closed at 4.79% on Tuesday, up from 4.73% on Friday.

MUFG's 94.00 target has plainly come into view, but a smooth decline is no longer assured.

A break below September's 94.7304 low would strengthen the case for another push towards 94, while oil, US yields and Friday's employment report could quickly put 95.50 back in play.

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Summary:

The EUR/USD remains vulnerable below 1.1621 as USD strength still remains despite Monday's pullback move to the upside. Current Setup Current sentiment: cautiously bearish EUR/USD.

The pair is up 0.33% on the day and trading around 1.1616. The modest intraday recovery comes as traders who were long USD take profits. However, sentiment still favors USD strength, and that is why this bias for EUR/USD is cautiously bearish. The Euro is getting some support from expectations of a potential rate hike by the European Central Bank in September, especially as renewed tensions between the US and Iran have driven oil prices higher and raised concerns about imported inflation in the Eurozone. 

Macro Drivers for the EUR/USD 1) Fed Hawkish Expectations

After the Fed Chair’s hawkish comments at the Jackson Hole symposium on Friday, 28 August, markets are now pricing in a much higher probability of a September Fed hike. US bond yields rose sharply, which continues to support the dollar while limiting the EUR/USD’s upside. This upside retracement was capped at 1.1621 on 31 August.

2) The ECB Policy Meeting

The ECB is also expected to raise rates in September in direct response to the hike in oil prices following the renewed tensions in the Middle East. Eurozone yields have also risen sharply, which should be ok to ward off a major euro sell-off unless the ECB disappoints and the Fed’s monetary policy expectations are repriced more hawkishly.

3) Geopolitics

Renewed US-Iran military tensions are keeping Brent crude above $90/barrel. This supports defensive positioning into the dollar, even as the risk of imported inflation makes an ECB rate hike more likely. Geopolitics is clouding the EUR/USD outlook, and the next two weeks should provide additional clarity on the situation.

Price Catalysts This Week 1. Non-Farm Payrolls: The major price catalyst this week is the Non-Farm Payrolls report. A weak payrolls report undermines any September Fed-hike expectations. This could strongly support EUR/USD amid ECB rate-hike expectations. However, a better-than-expected US jobs report favors additional dollar strength.

2. Other Macroeconomic Data: Other price catalysts include the US ISM Manufacturing PMI data and the Eurozone Core CPI Flash Estimates YoY (2.5% consensus vs 2.5% prior).

3. Brent crude prices: This is important to establish the level of defensive positioning into the US Dollars, and also the extent to which any ECB rate hike bets are repriced.

EUR/USD Weekly Forecast Scenarios Base case: EUR/USD remains under pressure below 1.1640.

Bull case: Euro gets support from hawkish ECB expectations. Additionally, weak US jobs data → fall in Fed hike expectations → weaker USD → allows EUR/USD to rebound toward 1.17.

Bear case: strong US jobs data + higher oil prices + hawkish Fed → reinforces USD strength. EUR/USD breaks 1.1570 and targets 1.1550.

EUR/USD Technical Outlook Technically, 1.1621 (31 August intraday high) is the next important resistance. Below it, EUR/USD remains vulnerable to 1.1577, followed by the 8 June and 4 August lows at 1.1506. A breakdown of 1.1577 support unlocks the downward path to a retest of the uncapped neckline of the completed double bottom at 1.1506.

On the flip side, a break of 1.1621 clears the pathway to 1.1682. A further move north brings in 1.1743, a potential pitstop before 1.1813 comes into the picture.

The Pound to Dollar (GBP/USD) exchange rate traded around 1.3547 on Monday after last week's Dollar rebound knocked Sterling back from six-month highs.

Friday's US employment report should determine whether that correction extends.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.355175 (+0.13%)

Euro to Dollar (EUR/USD): 1.161853 (+0.31%)

Dollar to Yen (USD/JPY): 159.75691 (-0.22%)

WEEKLY RECAP:

GBP/USD climbed above 1.3640 early last week before coming under sustained pressure, ending Friday at 1.3534.

The Dollar strengthened after Federal Reserve Chair Kevin Warsh used his Jackson Hole speech to underline continued concern over underlying inflation.

Markets subsequently raised the probability of a September rate increase, while Barclays switched its forecast to two further Fed hikes this year.

MUFG economists described Warsh's message as hawkish, but added: “Overall, the speech was hawkish, but this is not new for Warsh.”

There remains disagreement over whether the Fed will actually deliver.

ING's Francesco Pesole said: “we remain reasonably confident in our call for the Fed to hold on 16 September and, by extension, in a weaker dollar.”

The Dollar edged lower again on Monday as traders looked towards this week's data.

Sterling has its own policy uncertainty.

BoE hike expectations softened last week, but recovering UK-US yield spreads have helped limit Pound selling.

Scotiabank noted that the recovery was “offering fundamental support” to Sterling, while its strategists continue to see the broader Dollar trend as lower.

Near-Term GBP/USD Forecast: US Payrolls Hold the Key Tuesday brings UK manufacturing PMI and mortgage approvals, while US ISM manufacturing and JOLTS vacancies should provide the first important Dollar tests.

Wednesday's ADP employment report is followed on Thursday by UK services PMI, US jobless claims and ISM services.

Friday combines UK construction PMI and a speech from BoE Governor Andrew Bailey with the crucial US payroll report.

Non-farm employment is forecast to increase by 55,000, unemployment to remain at 4.1% and hourly earnings to rise 0.3%.

Weak payrolls could return GBP/USD towards 1.3650.

Stronger hiring and hawkish Bailey caution would expose 1.3450.

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

USDJPY tested the 160 mark for the first time in a month. Kevin Warsh’s ‘hawkish’ rhetoric provided support for the US dollar. The US dollar reacted enthusiastically to Kevin Warsh’s ‘hawkish’ rhetoric, strengthening against the world’s major currencies. The recent slowdown in inflation did not mislead the Fed Chair. He considers the current monetary policy to be insufficiently restrictive and maintains that the central bank still has a lot of work to do. Such rhetoric led to a rise in Treasury bond yields, put the brakes on stock indices and gave the greenback a boost.

The futures market has raised the probability of a Fed rate hike in September from 38% to 60%. CME derivatives put the probability of two federal funds rate hikes in 2026 at 49%. Prior to Kevin Warsh’s speech at Jackson Hole, the figure stood at 21%.

The escalation of the conflict in the Middle East is adding fuel to the fire of rising economic indicators. For the first time since 29 July, the US resorted to bombing Iran, to which Tehran responded with attacks on American bases in Jordan. As a result, Brent crude has risen back above $90 per barrel, heightening the risk of accelerating inflation and prompting the Federal Reserve to tighten monetary policy.

The strengthening of the US dollar enabled the ‘bulls’ on USDJPY to push the exchange rate above the critical 160 mark. It did not manage to hold that level on the first attempt. However, the fact that speculators have been building up short positions on the yen for the second week running suggests that further ones will follow this initial attempt. The pair recouped half of its losses due to currency intervention, which totalled a record $98.7 billion.

Scott Bessent was forced to explain to Congress Washington’s involvement in the coordinated intervention in the forex market. According to the Treasury Secretary, Japan is the largest holder of Treasuries, and erratic movements in the yen could destabilise financial markets and increase the cost of borrowing in the US.

Scott Bessent has no intention of telling the Bank of Japan what to do. However, the Bank must have a clear understanding of the situation. Japan has reached the end of Abenomics, which was essentially a reflationary programme. This is a clear hint at the need to raise the overnight rate at the BoJ’s next meeting in September. The futures market puts the probability of monetary policy tightening at over 80%. Without this, currency interventions make no sense.

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The Pound-Dollar rate has fallen back to 1.3534 after Jackson Hole, but UBS still sees Sterling at 1.40 by December and 1.41 through much of 2027. The Pound to Dollar (GBP/USD) exchange rate ended Friday at 1.3534, down 0.46% after Kevin Warsh revived expectations for another Federal Reserve rate increase.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.3534 (-0.46%)

Euro to Dollar (EUR/USD): 1.158209 (-0.61%)

Dollar to Yen (USD/JPY): 160.10118 (+0.50%)

That leaves Cable well below its August high at 1.3675, but UBS has made no retreat from its bullish medium-term Sterling path.

Its updated forecast table reads: “GBP/USD: 1.40 Dec 2026, 1.41 Mar 2027, 1.41 Jun 2027, 1.41 Sep 2027.”

The rationale was set out more fully by UBS strategists Constantin Bolz and Dominic Schnider earlier this month.

“UK politics have shifted from a headwind to a potential tailwind,” they said, while “[Pound] Sterling remains relatively under-owned.”

That under-ownership matters if investors return after Friday's Dollar-driven correction.

UBS has also argued that “long-dollar positioning remains vulnerable to a reversal”, creating scope for “existing long-dollar positions [to] be unwound” if Fed expectations soften again.

Friday went the other way.

Warsh pushed the implied probability of a September Fed hike from around 35% before his speech to 57.5%, while Sterling suffered its first weekly decline against the Dollar in more than a month.

We previously examined UBS's increasingly positive Sterling view before the Jackson Hole reversal.

The forecast now has a cleaner test: holding around 1.35 would leave the 1.40 year-end scenario plausible, while renewed Fed tightening pressure would make the first hurdle, around 1.38, considerably harder to clear.

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

Canada’s 3.3% Q2 rebound supports the Loonie, but Scotiabank sees USD/CAD wrestling with 1.39 as the broader Dollar regains momentum. The US Dollar to Canadian Dollar (USD/CAD) exchange rate ended Friday around 1.3903, extending its late-August rebound despite another strong batch of Canadian economic data.

USD/CAD has still fallen around 0.8% during August and almost 1.5% over the past month, but the pair has recovered sharply from the 1.3733 low reached on 22 August.

Scotiabank analysts had expected the Canadian economy to confirm a solid rebound after the weakness around the turn of the year.

“The Canadian economy appears to have rebounded firmly after the weak period around the turn of the year and Q2 growth seems to be tracking a little above 3%,” the bank said.

That call proved accurate.

Statistics Canada reported that real GDP expanded 0.8% quarter-on-quarter in Q2, equivalent to an annualised 3.3%, the fastest pace since 2023.

Exports rose 3.6%, household consumption gained 0.8% and business investment increased 2.3%, while June GDP also beat Scotiabank’s 0.2% expectation with a 0.3% increase.

The Canadian Dollar barely moved.

USD/CAD climbed towards 1.3908 instead as Kevin Warsh’s Jackson Hole comments drove the broader US Dollar higher and lifted expectations for a September Fed rate increase.

Image: USD to CAD rate 1-month chart Scotiabank Outlook: CAD Fundamentals Have Improved Scotiabank had already warned that good Canadian numbers were becoming less capable of surprising the FX market.

“Solid data is perhaps already priced in to the CAD to a degree, given that domestic data have generally outperformed expectations in recent weeks,” it said, although stronger GDP could “add modestly to CAD tailwinds in the short run.”

The bank’s fair-value work also suggested the USD/CAD exchange rate had little reason to move dramatically away from the high-1.38s.

“Spot continues to track our fair value estimate closely,” Scotiabank said, with its equilibrium estimate falling to 1.3865 before the GDP release.

Friday’s close at 1.3903 therefore leaves the pair only modestly above that estimate.

The more interesting question is whether the Dollar’s post-Warsh rally can overpower the improving Canadian backdrop.

A Reuters poll published Friday found all 35 economists surveyed expect the Bank of Canada to leave rates unchanged at 2.25% next week, with most also expecting no policy change for at least another year.

That removes the prospect of an immediate BoC catalyst, leaving US rates and the worsening Canada-US trade dispute unusually important for the cross.

USD/CAD Technical Forecast: 1.3900 Is Becoming a Useful Pivot Scotiabank’s technical assessment remains officially neutral, but there are bearish signals underneath.

“The USD is maintaining, just about, its push above the 200-day MA (1.3840),” the bank said, while warning that the previous soft close could be a “heads up” that the Dollar rebound was beginning to stall.

“Daily and weekly trend oscillators remain bearish,” with intraday momentum also looking soft.

The levels are relatively clean.

Scotiabank places minor resistance around 1.3895/1.3900, followed by firmer resistance in the mid-to-upper 1.39s.

Support stands at 1.3825/30, with a stronger floor around 1.3775/85.

Friday’s close just above 1.3900 means that first resistance zone is already under pressure.

That contrasts with our recent UBS USD/CAD forecast, where the bank saw scope for near-term support before an eventual decline towards 1.36 during 2027.

Scotiabank is more tactical here.

Canada’s economy is performing well enough to support the Loonie, and its fair-value model sits below spot, but USD/CAD needs to get back under 1.3840 before the technical picture starts looking convincingly bearish again.

For the immediate outlook, 1.3900 is the battleground, 1.3825 the first downside target and the upper 1.39s the level that would signal the Dollar rebound has more room to run.

Summary:

This week's Jackson-Hole symposium and the US Treasury's bond buyback program are the defining factors for this week's EUR/USD forecasts. Current Setup and Live Chart The EUR/USD enters the new week with a moderately bullish bias due to last week’s developments in the US Treasury market.

The previous week began with US long-term Treasury yields spiking to levels not seen in decades. The 30-year Treasury Note hit a 19-year high, and the 10-year Treasury Note also topped 4.24%, a high not seen in a long while. The sharp spike in bond yields caused an accelerated selloff in the US bond market, forcing the US Treasury Department to double its bond-buying program to $4 billion per operation to stabilize the market. The corresponding drop in bond yields reduced the appeal of the US Dollar and USD-denominated assets, weighing on the greenback vs. its peers.

The FX implication of doubling the bond-buying program is that the US Treasury is trying to set a floor under the bond market. This is creating an unusual dynamic:

Treasury buys long-term (10-yr and 30-yr) bonds → drop in long-term yields → Narrowing of US yield advantage → USD loses appeal → EUR/USD gains.

Simultaneously, geopolitical developments in the Middle East remain relevant to price action on USD pairs. Uncertainty around the Strait of Hormuz and the prospect of stiffer US sanctions against Iran keep geopolitical risks elevated. This means that oil prices will remain high, which brings on inflationary pressures. This is a risk-off event that generates some USD safe-haven appeal. This is the factor limiting the upside in the EUR/USD.

EUR/USD is therefore trading amid the interaction of US fiscal policy (Treasury-market intervention), geopolitics, and central bank expectations, which will come back under the spotlight at this week’s annual Jackson-Hole Symposium.

Macro Drivers for EUR/USD Forecasts 1) The Treasury Buyback Program

The US Treasury announced last Tuesday that it will double the maximum size of its long-end liquidity support operations from two billion dollars to at least four billion dollars per operational cycle. This bond buyback program will cover the 10- to 20-year and 20- to 30-year bond yields. The program is due to commence on 9th of September. However, this is not the same as quantitative easing by the US Federal Reserve. This distinction matters because Treasury buybacks primarily aim to boost liquidity by removing less-liquid bonds from the market. In other words, the Treasury is effectively redefining the maturity profile of US government debt and is not creating new money. The US Treasury documentation describing this new initiative explicitly calls them liquidity-support buybacks. For FX market traders, the policy is clear: It aims to contain long-term borrowing costs and reduce the US Dollar’s yield advantage, making USD and USD-dominated assets less appealing. The move has sent the US dollar lower, where it is now trading at multi-month lows versus the euro and many of its other G10 currency pairs. 

2) US Fiscal Concerns

Concerns about the US fiscal position are growing. The US Treasury’s intervention reflects these concerns. The surge in the 30-year Treasury yield above 5% indicates investors want higher premiums to buy and hold US government debt for longer. The sentiment is that investors increasingly see attempts to suppress long-term yields as artificial, which indicates that the US government is now uncomfortable with rising borrowing costs. The latter sentiment reduces fiscal credibility and ultimately scares investors away from US government bonds to other destinations. The decline in the US Dollar is evidence of this sentiment currently.

3) Geopolitical Risk Premium Still Generates USD Appeal

The US-Iran conflict is a risk-off event that still generates demand for the USD via safe-haven appeal. If there is severe geopolitical escalation beyond the current situation, safe-haven demand for the dollar will rise, curtailing EUR/USD upside. Furthermore, the Eurozone is an energy-import-dependent region. Higher oil prices will create imported Eurozone inflation, which could stifle Eurozone growth (a key ECB concern). The ECB is likely to turn dovish if Eurozone growth is suppressed.

EUR/USD Price Catalysts This Week 1) Jackson Hole and Fed expectations: This week’s annual Jackson-Hole Symposium is the most important catalyst for price action this week on monetary policy. The market will look for clues on the direction of Fed policy and how ECB policymakers handle the battle between imported inflation and growth.

2) Treasury yields: the intervention of the US Treasury in the bond market has made the direction of the 10-year and 30-year bond yields of prime importance. Typically, rising bond yields are USD-supportive, while falling bond yields are USD-negative, which favors a EUR/USD upside.

3) US-Iran developments and oil prices: A further deterioration in the conflict raises the geopolitical premium and introduces risk-off sentiment, which favors the USD via safe-haven appeal. However, US fiscal concerns and lower US bond yields will reduce USD demand and further weaken the USD. The energy shock also introduces Eurozone inflationary pressures and stifles growth prospects, limiting the Euro’s upside. View the geopolitical situation as fluid, as the dominant factor will determine which way the pair swings.

EUR/USD Technical Outlook The presence of the two pinbar candles at the 1.1671 resistance is indicative of a stall in the uptrend. If the price declines from this resistance, the 15 June high at 1.1621 becomes the immediate downside pivot. If this pivot fails to hold, 1.1577 (19 January and 21 May lows) forms the next downside target. Further below, the double bottom’s neckline at 1.1506 assumes importance.

Fig 1: EUR/USD daily chart showing key price levels (snapshot: 24 August 2026) On the flip side, if 1.1671 holds firm against downward pressure, we could see a bounce targeting 1.1813 resistance as the major upside target. Before then, there is the potential for a pit stop at 1.1743, which served as the 19 February support level.

Currency analysts lift their near-term EUR/USD view and bring forward a 1.18 target as US debt-market worries put the US Dollar back on the defensive. The Euro to Dollar (EUR/USD) exchange rate ended the week around 1.1677 after a sharp mid-week jump carried the pair as high as 1.1711.

EUR/USD is now up roughly 1.15% in August, while the Dollar has lost ground against the Pound, Euro, Australian Dollar, New Zealand Dollar and Canadian Dollar over the past month. Rabobank has responded by softening its Dollar forecasts and raising its one-to-three-month EUR/USD projection to 1.16 from 1.15.

Latest — Exchange Rates:

Euro to Dollar (EUR/USD): 1.16767 (-0.09%)

Pound to Dollar (GBP/USD): 1.36445 (+0.01%)

Dollar to Yen (USD/JPY): 158.98453 (+0.05%)

At first glance, that looks odd. Spot is already above 1.16.

The more important change sits further out: Rabobank has brought forward its 1.18 EUR/USD target to next spring, rather than leaving it on a 12-month horizon.

“We have softened our USD forecasts moderately and, given also resilient Eurozone economic data, increased our 1-to-3-month EUR/USD forecasts to 1.16 from 1.15,” said Rabobank's Jane Foley.

Image: Euro-to-Dollar exchange rate chart for last week EUR/USD climbed from below 1.1570 to above 1.17 during the week before giving back some of the advance, leaving the pair comfortably above its recent range lows.

The bigger Dollar problem, in Rabobank's view, is no longer simply Fed policy.

Concerns over the US Treasury market have “stormed back into the limelight” amid a large budget deficit, rising national debt, above-target inflation and stronger competition for buyers of fixed-income assets.

There is a slightly uncomfortable twist here.

US government bonds used to become more attractive when markets became nervous. Rabobank argues that last year's Treasury sell-off raised questions over whether that automatic safe-haven relationship can still be taken for granted.

Foley warns that fears of greater government intervention in the Treasury market could add “debasement pressure on the USD”, potentially encouraging some investors to accelerate de-dollarisation.

She is careful not to overplay it.

The bank still argues that “the USD's dominance in the global payments system is still unchallenged” and expects that status to preserve a floor under Dollar demand and its safe-haven role.

EUR/USD Outlook: 1.18 Comes Forward The Euro side has improved too.

Rabobank highlights stronger-than-expected Eurozone second-quarter GDP and a robust August PMI round, including Germany's strongest manufacturing performance in more than four years.

“Despite the June rate hike from the ECB and the expectation of one more rate hike next month, potential growth headwinds have undermined confidence in the single currency,” the bank said.

But the latest data are “consistent with an improved position for the EUR”.

There is still an obvious risk. Europe remains an energy importer, so another escalation in the Iran conflict would revive the same growth and inflation concerns that hurt the Euro earlier in the year.

Image: USD crosses over one-month The Dollar's weakness has become broad rather than confined to EUR/USD, with all five major USD crosses in the chart below their levels from a month earlier.

Rabobank's forecast path reflects that tension rather well: 1.16 at one and three months, 1.17 at six months and 1.18 at nine and twelve months.

So this is not a call for EUR/USD to sprint higher from 1.17.

Quite the opposite. Rabobank still expects some near-term consolidation.

What has changed is the destination.

The bank now thinks 1.18 can arrive sooner, with the Dollar's fiscal and Treasury-market vulnerabilities becoming harder to ignore.