The EUR/USD pair remains under pressure amid broader dollar strength, rising oil prices, and expectations of a Federal Reserve rate hike. The single European currency has slid toward monthly lows, with weak eurozone sentiment data piling further pressure on the euro.
Possible technical scenarios:
On the daily chart, EUR/USD is approaching support of the 1.1494–1.1682 range, with limited room left to it. Once price reaches 1.1494, it could stage an upward reversal and recover within the current range, or attempt to break out support. A price consolidation below 1.1494 will pave the way toward the 1.1399 target.
Fundamental drivers of volatility:
The ZEW survey delivered a mixed signal for the eurozone economy. In Germany, the Current Conditions Index improved sharply from -61.1 to -47.1, beating forecasts and pointing to a gradual improvement in economic assessments. However, the broader Eurozone Economic Sentiment Index dropped from 31.4 to 25.8, missing expectations of a rise to 39.9. This highlights that the economic recovery remains fragile, while elevated energy prices and geopolitical uncertainty continue to cloud the region’s outlook.
The greenback holds the upper hand for now, driven by diverging monetary policy expectations. A 25-basis-point Fed rate hike on Wednesday is almost fully priced in, while strong employment data and accelerated inflation in August have fueled expectations of at least one more rate increase before the end of March. The 10-year US Treasury yield reached 5.03%—its highest level since 2007—further enhancing the appeal of dollar-denominated assets and weighing on EUR/USD.
Surging crude oil prices are amplifying this dynamic. Brent gained following renewed Houthi strikes on Saudi Arabia, while disruptions to energy infrastructure heighten the risk of prolonged supply deficits. For the US, this stokes inflationary risks and strengthens the case for Fed hawkishness; for the eurozone, expensive energy simultaneously generates inflationary pressure and dampens economic growth prospects.
The key driver for EUR/USD this week will not be the Fed rate hike itself—which markets have largely discounted—but Kevin Warsh’s rhetoric and the updated monetary policy guidance. If the Fed signals that this move marks the start of a fresh tightening cycle, the dollar will gain added momentum, keeping the pair subdued. A more cautious tone could weaken the greenback, yet a sustainable euro recovery will still hinge on improving European macroeconomic indicators and easing energy risks.
Intraday technical picture:
The 4H chart shows that EUR/USD has consolidated below local resistance at 1.1566, creating the technical preconditions for a continued decline toward 1.1494.
The GBP/USD pair remains under pressure amid a strengthening dollar, driven by rising crude prices, deteriorating risk appetite, and expectations of a Wednesday Fed rate hike. The pound faced additional pressure from labor market weakness, which narrows the Bank of England’s leeway for further policy tightening.
Possible technical scenarios:
Given what we see on the GBP/USD daily chart, the pair remains on track for a medium-term decline within the broad 1.3215–1.3630 range. Despite local pullbacks, the pair still has substantial room to move down toward the 1.3215 level.
Fundamental drivers of volatility:
Oil prices rallying to four-month highs have heightened inflation risks and pushed bond yields higher, driving demand for the dollar as a safe-haven asset. Ongoing tensions surrounding Iran and the Strait of Hormuz could extend this effect, as elevated energy prices undermine global economic prospects and reinforce expectations of tighter Fed policy.
Markets have nearly fully priced in a 25-basis-point Fed rate hike on Wednesday following solid jobs data and accelerating US consumer inflation. The 10-year Treasury yield topped 5% for the first time since 2007, solidifying the dollar’s yield advantage and serving as a primary headwind for GBP/USD.
By contrast, the Bank of England is widely expected to hold rates steady at Thursday’s meeting, though markets anticipate a hike later this year and further tightening in 2027. UK economic indicators paint an ambiguous picture: July GDP rose by 0.4%, easily beating forecasts, but regular wage growth cooled to 2.9%. Meanwhile, job vacancies tumbled to a four-year low, mitigating the risk of a persistent wage-price spiral and urging the BoE to adopt a more cautious stance.
An additional risk for the pound is that expectations for future BoE rate hikes are already priced in and may prove overly aggressive. If the regulator delivers a less hawkish message on Thursday while robust US inflation and Treasury yields continue to bolster the dollar, sterling will stay under pressure.
Intraday technical picture:
Based on the current scenario on the 4H chart, GBP/USD has reached the support of the local sideways range between 1.3474 and 1.3557, marked by two dashed lines. If 1.3474 holds, the pair could stage a recovery and maintain its range-bound action. A breakout and consolidation below 1.3474 will open the door for a slide toward the next dashed support level at 1.3276.
The USD/JPY pair continues to push higher this week against the backdrop of rising US dollar strength. Meanwhile, the yen showed little reaction to the prospect of a Bank of Japan rate hike from 1.00% to 1.25% this week, as the move is already priced in. The decisive catalyst for the yen will not be the tightening itself, but whether the central bank signals further rate hikes ahead.
Possible technical scenarios:
USD/JPY has rebounded and is trading just below resistance at 155.03. If the price is unable to overcome this barrier, the price may pull back toward 153.19. That being said, should heightened volatility around the BoJ and Fed decisions trigger a sustained breakout above 155.03, the next upside target will be 157.90.
Fundamental drivers of volatility:
The market currently prices in a quarterly BoJ rate hike over the coming year—double the current pace of tightening. That said, these expectations may prove overly optimistic: if the BoJ raises the policy rate to 1.25% on Friday but outlines a more cautious trajectory than investors anticipate, the yen could quickly unwind part of its recent gains.
Simultaneous tightening by the Federal Reserve limits the yen’s edge. The 10-year US-Japan yield spread remains around 200 basis points in favor of the US, preserving the allure of dollar-denominated assets and setting the stage for a resurgence in carry trades following the massive unwinding of long-yen positions.
Rising crude prices pose an additional challenge for the yen. Japan is heavily reliant on energy imports; consequently, higher oil prices deteriorate its terms of trade and elevate foreign currency demand, presenting a fundamental headwind for the Japanese currency.
Expectations of large-scale capital repatriation also appear overstated. Even if Japan’s public pension fund opts to raise its domestic asset allocation, the shift will unfold over several months. Moreover, Japanese investors channeled 1.3 trillion yen into foreign equities in August, demonstrating ongoing demand for overseas assets.
Intraday technical picture:
The 4H chart suggests that USD/JPY has reached the upper boundary of the 153.19–155.03 range. From a technical standpoint, the pair stands at a crossroads between retreating toward support at 153.19 and advancing toward 157.90. A decisive direction relative to 155.03 is likely to materialize once the Fed and BoJ announce their decisions this week.
The USD/CAD pair retains upside potential amid growing expectations of a Fed rate hike. That being said, expensive crude continues to cap the US dollar’s advance against the Canadian currency.
Possible technical scenarios:
Given the unfolding situation on the daily chart, USD/CAD has climbed above the 1.3861 level. A double bottom reversal pattern has formed within the 1.3744–1.3908 range. A breakout and consolidation above 1.3908 would establish the technical preconditions for a price recovery toward 1.4013. That said, the likelihood of a third bottom forming within the 1.3744–1.3908 range before an upward trend reversal cannot be ruled out.
Fundamental drivers of volatility:
Over the near term, the pair’s trajectory will remain governed by the interplay between a more hawkish Fed and commodity-driven support for the Canadian dollar.
Markets attach a 92% probability to a 25-basis-point Fed rate hike on Wednesday. Robust August US employment figures and accelerating inflation have heightened expectations not only for a December rate increase but for a steeper overall policy path, underpinning the dollar and exerting upward pressure on USD/CAD.
High crude prices remain the primary anchor for the Canadian dollar. Brent crude is trading above $104 per barrel, nearly 22% off its late-August lows. For Canada, a major crude exporter, elevated commodity prices improve the terms of trade and boost demand for the domestic currency.
Conversely, domestic Canadian data remains soft. Headline August consumer inflation eased by 0.1% month-over-month, while manufacturing sales contracted by 0.4%, giving the Bank of Canada greater justification to keep interest rates steady to support broader economic activity.
Against this backdrop, the fundamental outlook for USD/CAD remains mixed: the Fed is lending the US dollar strong support via hawkish rate expectations, while oil is limiting the pair’s upside. If crude holds above $100 per barrel, it could offset a portion of the greenback’s yield advantage. Nonetheless, persistent US dollar strength will inevitably ramp up pressure on the loonie amid widening central bank policy divergence.
Intraday technical picture:
As evidenced by the USD/CAD 4H chart, there is a horizontal trend of the local dashed resistance at 1.3908, which acts as the neckline of the emerging double bottom reversal pattern. A consolidation above 1.3908 will open the path for an extension toward 1.3958 and 1.4013.
Gold continues to drop this week as climbing oil prices exacerbated inflation risks and boosted expectations of further monetary tightening by the Fed, while supporting the dollar. In the meantime, persistent geopolitical uncertainty and high inflation are limiting the precious metal’s downside potential.
Possible technical scenarios:
Gold prices have slid below 4375.25 and are currently midway toward support at 4209.95. Should this level fail to hold, the precious metal’s decline could extend toward the 4002.27 target.
Fundamental drivers of volatility:
The centerpiece for bullion this week will be Fed Chair Kevin Warsh’s rhetoric following the anticipated policy decision. Markets have almost entirely factored in a 25-basis-point rate hike on Wednesday, which would lift the federal funds target range to 3.75%–4.00%.
For gold, which maintains an inverse correlation with the US dollar, the hike itself matters less than the central bank’s forward guidance. If Warsh indicates that policymakers are prepared to continue raising rates at consecutive meetings, downside pressure on the metal will intensify. Conversely, a more cautious message could lend bullion immediate support.
Surging US Treasury yields remain an additional headwind for bullion. The 10-year yield reached its highest level since 2007, elevating the opportunity cost of holding non-yielding bullion and dampening investor demand.
Inflation risks are also mounting alongside high energy costs. Recent prints showed US consumer inflation accelerating in August, while fresh Houthi strikes on Saudi Arabia continue to stoke concerns over sustained energy price spikes. This concurrently fuels safe-haven demand for gold while reinforcing the rationale for a more hawkish Fed stance.
In the short term, gold remains vulnerable to higher yields and hawkish Fed messaging. However, escalating geopolitical risks and ongoing inflationary pressures should keep a floor under severe selloffs.
Intraday technical picture:
The 4H chart demonstrates that XAU/USD has consolidated below local mirror-like resistance at 4304.11, marked by a dashed line, opening the path for a continued decline toward 4209.95.
Brent crude climbed on Tuesday after fresh strikes hit Saudi Arabia’s energy infrastructure, fueling concerns that supply disruptions could last longer. Markets are increasingly pricing in the risk of a protracted crude shortfall amid bottlenecks along alternative export routes.
Possible technical scenarios:
As the daily chart shows, Brent has moved above the dashed 97.84 level, pushed through the psychological $100-per-barrel mark, and is now trading roughly halfway to the next target at 113.99, with further upside still possible.
Fundamental drivers of volatility:
The primary catalyst fueling crude’s rally remains the shutdown of Saudi Arabia’s East-West pipeline, which allows oil exports to bypass the Strait of Hormuz. The disruption could affect up to 4% of global crude supply, with Goldman Sachs warning that restoring pipeline operations could take anywhere from several days to eight weeks. Should outages persist, Brent could rally toward the $120–$130 per barrel range.
Additional risks stem from potential follow-up Houthi attacks on Saudi Arabia and the lack of progress in talks between Gulf states and Iran. This heightens the probability of further strikes on energy infrastructure and shipping corridors. A drop in vessel transits through Hormuz to four per day—down from ten the previous day—underscores that supply disruptions are already hitting this vital export artery.
The supply balance is particularly vulnerable given the limited capacity to rapidly offset missing barrels. If the East-West pipeline remains offline for several weeks and flows through Hormuz fail to normalize, the supply deficit will deepen, sustaining a steep risk premium in Brent. Goldman Sachs has already upgraded the probability of prices breaking above $120.
On the demand side, there are no immediate signs of a slowdown: Chinese refinery throughput rose for a second consecutive month in August, supported by strong refined product exports. Consequently, the near-term fundamental backdrop remains decidedly bullish for Brent, with the timeline for repairing Saudi infrastructure and crude flow dynamics across the Strait of Hormuz serving as the core market drivers.
Intraday technical picture:
Judging by the look of things on the 4H chart, it’s clear that Brent is consolidating in the middle of a broad 97.84–113.99 range, from where it could move toward either boundary. That said, as long as the fundamental backdrop remains supportive, the price could still move toward the 113.99 level.
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