The EUR/USD pair remains under pressure due to a mix of political uncertainty in Germany, deteriorating French public finances, and growing expectations of a prolonged Fed rate-hiking cycle. The euro finds some support in hawkish ECB rhetoric, but so far, this has not been enough to offset the impact of a strong US dollar.
Possible technical scenarios:
The daily chart demonstrates that the EUR/USD pair broke out the 1.1494 level and is consolidating below it. If fundamental pressure on the price persist, quotes will likely continue their decline toward the 1.1399 support, and should that give way, toward the dotted level at 1.1324.
Fundamental drivers of volatility:
Political risks in Germany are adding pressure to the euro. The defeat of Friedrich Merz’s CDU in the Mecklenburg-Vorpommern elections—where the party failed to cross the 5% threshold for the first time in post-war history—raises questions about the government’s political backing and the rollout of planned economic reforms.
An additional risk stems from the roughly €2 trillion pan-European budget, which includes a substantial increase in defense spending. The German government’s weakened standing could complicate reaching a consensus on this plan at the EU level.
Issues surrounding France’s public finances remain a distinct headwind. The country’s national debt has reached its highest level since 1978, while a sovereign credit rating downgrade by one of the rating agencies has amplified concerns over further increases in borrowing costs. With limited scope for meaningful fiscal tightening, mounting fiscal risks could keep French government bonds and the euro under persistent pressure.
In the meantime, the ECB maintains a hawkish tone. The central bank delivered its second rate hike of the year and left the door open to further tightening should inflationary pressures stay elevated. Christine Lagarde’s speech today could reinforce this signal and provide temporary support for the euro. That being said, for a lasting effect, the market will need confirmation that the ECB is genuinely prepared to push ahead with rate hikes rather than merely keeping the option on the table. The primary advantage remains with the greenback via the US rates market. The 2-year Treasury yield has already gained around 55 basis points since late last month as investors reprice the longevity of the Fed’s hiking cycle. According to MUFG estimates, the market is pricing in three more rate increases over the coming year, driven by recent hawkish remarks from regional Fed presidents. The widening expected gap in interest rates and bond yields remains the key fundamental factor favoring the dollar against the euro.
Intraday technical picture:
Given the unfolding scenario on the 4H EUR/USD chart, the price is sitting halfway to the support of the 1.1399–1.1494 range, retaining plenty of room to move toward its lower boundary.
The GBP/USD pair remains under pressure, with sterling tumbling to seven-week lows. The deteriorating state of UK public finances is casting doubt on the sustainability of current Bank of England rate expectations.
Possible technical scenarios:
On the GBP/USD daily chart, the pair continues to decline within a broad range of 1.3215–1.3630, nearing its support. The price has about a third of the way left to reach the 1.3215 mark.
Fundamental drivers of volatility:
The US dollar drew support within the pair from a more hawkish tone struck by the Fed. Meanwhile, sterling continues to struggle against a weak fiscal backdrop and the limited likelihood of substantial monetary tightening by the Bank of England.
Public borrowing figures were the main negative trigger for the pound. Net borrowing in August surged to £18.26 billion against a revised £2.04 billion in July, topping the £15.70 billion consensus forecast. Since the start of the fiscal year, total borrowing has run approximately £8.1 billion above projections from the Office for Budget Responsibility (OBR). This ramps up pressure on the government ahead of the October budget and narrows its room for fiscal maneuver.
That said, the market continues to price in a fairly high probability of a Bank of England rate hike. Following the latest policy meeting, investors are assigning an approximate 65% probability to a November hike and anticipate four 25-basis-point increases in total by the end of next year. However, market participants point out that the BoE could underdeliver on such aggressive expectations, particularly if energy-driven price pressures begin to cool. Under that scenario, rate expectations could see downward revisions, piling further pressure on sterling.
UK macroeconomic releases have yet to deliver a clear signal for further policy tightening. August retail sales beat expectations, and July GDP growth came in at 0.4%, also topping forecasts. Attention is now shifting to the September flash PMIs: resilient figures could shore up rate-hike expectations and temporarily stem the pound’s decline, whereas signs of an economic slowdown will heighten doubts about the BoE’s capacity to sustain its tightening cycle.
On the dollar side, the fundamental edge persists following last week’s hawkish stance from the Federal Reserve. The Fed raised rates and flagged the potential for further tightening, whereas the Bank of England is currently merely leaving that possibility open. The retreat in oil prices offered a modest boost to global risk appetite, though it has yet to spark any sustained dollar weakness. Should US PMIs confirm robust economic momentum, bets on further Fed tightening could gain traction, generating fresh demand for the dollar.
Intraday technical picture:
Judging by the look of things on the 4H GBP/USD chart, the pair is trading halfway to the support of the 1.3276–1.3474 range, between two dotted lines. The price still has room to move toward the next dotted level at 1.3276.
The USD/JPY pair continues its upward trajectory following the yen’s reversal from seven-month highs, as markets question whether the Bank of Japan can bridge the interest rate gap with its global peers quickly enough.
Possible technical scenarios:
The USD/JPY pair has hit the 157.90 resistance level and is consolidating below it. Downtrend resistance also aligns here, making a downward reversal and a retreat toward the 155.03 level a possibility. An alternative scenario would see an attempt to push toward 158.93, breaking the emerging downward channel.
Fundamental drivers of volatility:
Despite the Bank of Japan’s rate hike last week, the central bank’s cautious tone alongside expectations of further Fed tightening keeps the advantage firmly with the greenback.
The primary pressure on the yen remains expectations regarding the BoJ’s next moves. Two central bank board members advocated for a more measured pace of rate hikes, which the market interpreted as an indication of headwinds facing further tightening. The odds of an interest rate increase to 1.5% as early as October are currently estimated at around 30%.
Meanwhile, the Federal Reserve remains on a more hawkish course, keeping the dollar well-bid. The market is pricing in roughly a 53% chance of another 25-basis-point Fed rate hike into the 4.00%–4.25% range. Consequently, the yield divergence continues to favor the dollar and cap the yen’s upside potential.
Elevated oil prices present an additional risk for the Japanese currency. Persistent volatility across energy markets clouds the outlook for inflation and rates. As a major oil importer, high energy costs worsen Japan’s terms of trade and place additional pressure on the yen.
That said, further USD/JPY upside is tempered by the risk of currency intervention from Japanese authorities. However, intervention would likely only slow the yen’s depreciation temporarily if the market continues to bet that the BoJ will hike at a slower pace than the Fed. The pair’s path forward will depend primarily on the speed of the Bank of Japan’s monetary tightening and expectations surrounding the Fed’s next steps.
Intraday technical picture:
As evidenced by developments on the 4H USD/JPY chart, the price has turned lower from the 157.90 resistance, shaping a bearish double-top reversal pattern. This sets the technical stage for a continued move down toward the 155.03 level.
The USD/CAD pair continues to push higher, though the fundamental backdrop remains mixed, with a strong US dollar being buoyed by hawkish Fed expectations and safe-haven flows, while elevated crude prices and a more hawkish tone from the Bank of Canada are providing underlying support to the loonie.
Possible technical scenarios:
The daily chart suggests that the USD/CAD pair has broken out 1.4013 level from the bottom up. Consolidating above this threshold will clear the path for quotes to advance toward the next target at 1.4108.
Fundamental drivers of volatility:
The Canadian dollar is finding support from the hawkish stance of Bank of Canada Governor Tiff Macklem, who signaled that consecutive rate hikes might be warranted if higher energy prices and trade uncertainty begin spilling over into broader inflation. For USD/CAD, this poses a fundamental downside risk, as higher BoC rates enhance the appeal of Canadian assets.
At the same time, the US dollar retains firm backing from hawkish Fed expectations. The prospect of at least one more US rate hike is underpinning Treasury yields and greenback demand, especially given the threat of accelerating inflation driven by high oil prices. Geopolitical tensions in the Middle East are also fueling demand for the dollar as a safe-haven asset. As a result, the Canadian dollar’s gains from crude oil and BoC policy are being partially offset by Fed support and global safe-haven flows into the US currency.
The critical fundamental balance for the pair remains the policy trajectory gap between the Fed and the Bank of Canada, amplified by oil price dynamics. Stronger crude benchmarks and further hawkish rhetoric from the BoC could weigh on USD/CAD, whereas a persistently hawkish Fed stance, inflation risks, and safe-haven dollar demand work in the opposite direction, keeping the pair supported.
Intraday technical picture:
The 4H USD/CAD chart demonstrates the price consolidating above the 1.4013 level, paving the way for quotes to climb toward the 1.4108 target.
Gold remains under pressure following the Federal Reserve’s rate hike, as the market grows increasingly convinced of a higher-for-longer interest rate regime. The strengthening US dollar is intensifying headwinds for the precious metal despite lingering geopolitical risks.
Possible technical scenarios:
Gold prices are once again pulling back from the 4375.25 resistance level, holding roughly halfway to the 4209.95 support as sideways price action continues.
Fundamental drivers of volatility:
The primary factor weighing on gold remains the shift in Fed interest rate expectations. The regulator delivered a 25-basis-point hike last week, and Fed Chair Kevin Warsh signaled the potential for further tightening in the months ahead. Additional cues from Fed officials Alberto Musalem and Austan Goolsbee also point to the need for further rate increases to rein in inflation. The probability of a December rate hike is currently priced by the market at 92%, up from 80% a week ago.
Rising US bond yields are lifting the opportunity cost of holding non-yielding bullion. With higher interest rates anticipated, investors have a stronger incentive to reallocate capital into yield-bearing assets. Concurrently, a stronger dollar makes gold more expensive for foreign currency holders, exerting further downside pressure on quotes.
Climbing oil prices are also acting as a negative catalyst by stoking inflation expectations and prompting a firmer Fed response. Crude benchmarks are finding support from prospects of potential US-Iran contacts, and costlier energy keeps upside inflation risks alive. In the current environment, this strengthens the case for tighter monetary policy, ultimately undermining gold’s appeal.
Intraday technical picture:
Given the look of things on the 4H XAU/USD chart, the price has once again retreated from the 4375.25 resistance. The nearest downside target within the 4209.95–4375.25 sideways range is the September 16 low (4235.20).
Brent crude prices are correcting for the fifth consecutive session. The market is on the lookout for fresh cues regarding potential US-Iran negotiations, while the resumption of shipments through the Strait of Hormuz has yet to resolve supply deficit risks, particularly in the refined products market.
Possible technical scenarios:
As we can see on the daily chart, Brent has pulled back toward the 95.18 support level. A confirmed breakout and consolidation below this mark will open the door for a deeper decline toward support at 85.70. Otherwise, the price may rebound toward resistance at 106.40, marked by the dotted line.
Fundamental drivers of volatility:
US-Iran relations remain the primary short-term driver for the oil market. While Tehran and Washington have exchanged threats, the prospect of their leaders meeting at the UN General Assembly remains alive. Hopes for diplomatic progress are capping the geopolitical risk premium in crude; however, the market has yet to see concrete proof of a lasting reduction in supply disruption risks. Consequently, after four days of declines, buyers are once again sensitive to any headline that could shift export expectations out of the region.
The supply landscape remains tight despite an uptick in Saudi Arabian exports via Hormuz. On Sunday, roughly 14 million barrels of Saudi crude were loaded onto seven supertankers in the Persian Gulf following export disruptions via Yanbu caused by strikes on the East-West Pipeline. Even so, Middle Eastern oil exports remain considerably below pre-conflict levels, and the market has yet to witness a steady, reliable normalization of flows through the strait.
An additional supply risk has emerged in Libya: a valve closure on the Sharara-Zawiya pipeline knocked field production down by approximately 200,000 barrels per day to around 100,000–105,000 bpd. At the same time, the conclusion of sales from the US Strategic Petroleum Reserve eliminates an extra source of supply buffer. As a result, the physical market remains fairly tight, especially if the recovery in Middle Eastern exports proceeds sluggishly.
Further support comes from the refined products market, where deficits are currently more acute than in crude oil. Diesel prices in Europe and the US have surged to record highs following export cuts from Russia, Saudi Arabia, and the UAE due to the conflicts in the Middle East and Ukraine. This provides underlying demand from refiners, while crude’s subsequent direction will hinge on the pace of shipping normalization through Hormuz and Chinese demand trends against the backdrop of shrinking domestic inventories.
Intraday technical picture:
Given the look of things on the 4H XAU/USD chart, the price has once again retreated from the 4375.25 resistance. The nearest downside target within the 4209.95–4375.25 sideways range is the September 16 low (4235.20).
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