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Swiss Franc slides to two-week low as oil-driven Fed hike bets boost USD

  • USD/CHF attracts buyers for the fourth straight day on Thursday amid a broadly firmer USD.
  • Inflation risks amid volatile oil prices keep Fed hike bets on the table and underpin the buck.
  • Traders now look to the US PPI and Weekly Jobless Claims data for short-term opportunities.

The USD/CHF pair prolongs the weekly uptrend for the fourth consecutive day and climbs to a two-week high, around 0.8045, during the Asian session on Thursday amid a firmer US Dollar (USD). Moreover, the fundamental backdrop favors bulls and backs the case for further appreciation for spot prices.

The initial market reaction to the in-line US Consumer Price Index (CPI) report, released on Wednesday, fades rather quickly amid concerns about inflation risks stemming from volatile oil prices and the US-Iran standoff. President Donald Trump again claimed that the US has total control over the Strait of Hormuz, while Iran has pledged to keep the vital waterway closed until all its demands are met. Moreover, Iran-backed Houthis in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb Strait, increasing war-risk premiums, which continue to support crude oil prices.

Analysts at HSBC highlight that “uncertainties over the path to a resolution of the Middle East conflict have caused the oil price to move in a volatile manner in recent weeks – firstly back up to USD100/b, then back below USD80/b – the difference having quite a sizeable impact on the global economic outlook.” Against this backdrop, the bank cautions that “headline inflation risks, therefore, remain acute: beyond oil and gas, other commodity prices remain elevated,” underscoring the persistence of price pressures even as energy markets swing sharply.

Investors seem convinced that higher energy prices will rekindle inflationary pressures and force the US Federal Reserve (Fed) to stick to its hawkish stance. According to the CME Group’s FedWatch Tool, traders are currently pricing in a nearly 80% chance that the US central bank will raise borrowing costs at least once by the end of this year. This, along with persistent geopolitical uncertainties, helps the safe-haven USD build on the previous day’s goodish rebound from the post-CPI swing low and climb to a one-week high, which, in turn, is seen as acting as a tailwind for the USD/CHF pair.

Market participants now look to the US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data. This, along with speeches from influential FOMC members, would drive USD demand and provide some impetus later during the North American session. Apart from this, the incoming geopolitical headlines should produce short-term trading opportunities around the USD/CHF pair. Nevertheless, the aforementioned supporting factors suggest that the path of least resistance for spot prices remains to the upside.

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EUR/JPY Price Falls to near 183.50 near nine-day EMA

  • EUR/JPY finds immediate support at its nine-day EMA of 183.49.
  • The 14-day Relative Strength Index at 47.11 signals neutral-to-soft momentum.
  • The Primary resistance sits at the 50-day EMA at 184.51.

EUR/JPY extends its losses for the third successive day, trading around 183.60 during the Asian hours on Thursday. The 14-day Relative Strength Index (RSI) at 47.11 reinforces a neutral-to-soft momentum backdrop rather than a decisive directional push.

The EUR/JPY cross is retaining a mildly bearish near-term bias as it holds below the 50-day Exponential Moving Average (EMA) while trading just above the nine-day EMA. This split in moving averages suggests the currency cross is capped by medium-term trend resistance despite nearby short-term support.

The EUR/JPY cross faces immediate support at its nine-day Exponential Moving Average of 183.49. A decisive break below this short-term indicator would strengthen the prevailing bearish bias, potentially pressing the currency cross down toward its eight-month low of 179.37, recorded on August 3. If downward momentum continues, the next key technical target lies at the nine-month low of 175.70.

A turn to the upside would see EUR/JPY cross head toward primary resistance at its 50-day EMA near 184.51. Clearing this medium-term hurdle could signal a broader bullish resurgence, opening the path for the pair to retest the area surrounding its all-time peak of 187.95 set on April 17.

Analysts at Scotiabank note that, while “there have been no comments from FinMin Katayama or ViceMin Mimuri,” local media coverage is increasingly “highlighting the potential for tension between US officials and Japan’s government as the US pushes for BoJ tightening.”

Chart Analysis EUR/JPY
EUR/JPY: Daily Chart
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Indian Rupee opens marginally lower as US Dollar trades firmly

  • The Indian Rupee ticks lower against the US Dollar as the latter holds on to Wednesday’s gains.
  • The US Dollar gains despite an expected slowdown in the US CPI data for July.
  • Oil prices recover opening gains amid prolonged Hormuz closure.

The Indian Rupee (INR) opens on a cautious note against the US Dollar (USD) on Thursday due to overnight gains in the latter. The USD/INR pair edges up to near 95.35 after a corrective move the previous day, as fears of a prolonged global energy supply disruption have strengthened the US Dollar.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near Wednesday’s high at 100.00.

Investors doubt sustainability of US Dollar’s recovery

Though the US Dollar is outperforming its peers as continued Middle East tensions have increased its safe-haven demand, easing fears of a near-term Federal Reserve (Fed) interest rate hike due to an expected slowdown in the United States (US) Consumer Price Index (CPI) growth in July have raised concerns over its strength.

According to TD Securities, the July US CPI report “should continue to bring relief to the Fed regarding the need for tighter policy, at least in the near horizon.” The bank points to “signs of normalization in services prices along with tariff pass-through that remains under control” as factors that “bode well for concerns around sticky core inflation.” On that basis, TD Securities reiterates that “we remain of the view that the Fed will keep its policy stance unchanged this year.”

In terms of market reaction, TD Securities notes that “markets remain relatively unchanged in the wake of the July report, with the pricing for a hike in the September meeting still sitting just under 50%.

Oil prices bounce back

The absence of progress in US-Iran negotiations on the reopening of the Strait of Hormuz, a critical chokepoint for almost 20% of global energy supply, has staged a strong recovery in oil prices.

In the opening trade, the MCX Crude Oil contract expiring on August 19 trades almost flat at around Rs. 7,920 after a weak opening, tracking losses in global oil prices.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

On Wednesday, oil prices faced sharp selling pressure as OPEC revised its global oil demand growth forecast for the current year to 580,000 barrels per day (bpd) from the previous forecast of 780,000 bpd.

India’s retail CPI accelerates in July

Inflation in India at the retail level accelerated to 4.45% Year-on-Year (YoY) in July from 4.38% in June, almost in line with estimates of 4.50%. The retail CPI remains within the Reserve Bank of India’s (RBI) tolerance band of 2%-6%.

Technical Analysis: USD/INR holds advancing trendline

USD/INR trades at around 95.35, keeping a mild bearish near-term bias as it holds below the 20-period Exponential Moving Average (EMA) at 95.50. Price action remains under this short-term trend proxy, suggesting rallies are capped for now, while the Relative Strength Index (14) at 46.74 stays in neutral-to-soft territory, hinting at lacklustre bullish momentum rather than a decisive selloff.

On the downside, initial support is aligned with the former break point of the rising trend line at 95.30, which now acts as an underlying floor for the pair; below that, the August 5 low at 94.83 is the critical support level. On the topside, a recovery would first need to clear the 20-period EMA at 95.50 to ease bearish pressure, with a sustained move above this level required to shift the bias towards a more constructive stance. Looking up, the 96.00 level would be the next hurdle for the pair.

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EUR/USD Price Flatlines below 1.1550, while staying bearish under 100-day SMA

  • EUR/USD steadies around 1.1520 in Thursday’s early European session. 
  • The major pair maintains a bearish tone, with the price holding below the 100-day SMA. 
  • The immediate resistance level is seen at 1.1565; the first downside target to watch is 1.1500.

The EUR/USD pair holds steady near 1.1520 during the early European trading hours on Thursday. US inflation cooled on a ‌year-over-year basis for a second straight month, easing pressure on the US Federal Reserve (Fed) to raise interest rates as soon as next month. The US Producer Price Index (PPI) report for July is due later on Thursday. 

Data released by the Bureau of Labor Statistics on Wednesday revealed that the US Consumer Price Index (CPI) rose 3.4% YoY in July, compared to 3.5% in the previous reading. Additionally, the core CPI, excluding food and energy, increased 2.5% YoY in July, versus 2.6% prior. Both readings came in line with expectations.

Traders further cut the chance for a September Fed rate hike, lowering the odds to 40%, according to the CME FedWatch tool. Fed officials will get August CPI and jobs reports before their September meeting.

Nonetheless, escalating geopolitical tensions in the Middle East could boost a safe-haven currency such as the US Dollar (USD) and create a headwind for the major pair. Reuters reported that the US and Iran remain at loggerheads over efforts to agree a permanent end to the war in the Gulf. A senior Iranian official said that there ‌had been no progress in talks to revive the interim deal agreed in June and define a time frame to implement it.

Euro holds steady as post-FOMC consolidation persists

Analysts at Scotiabank observe that the Euro is “entering Wednesday’s NA session flat vs. the USD while showing a mixed performance against the G10 currencies overall.” They note that the single currency “has spent much of August consolidating within a tight, flat range, lacking a catalyst in the period following the FOMC meeting in late July,” underscoring the absence of a clear directional driver in recent trading.

Chart Analysis EUR/USD

Technical Analysis: EUR/USD keeps a bearish vibe under the 100-day SMA 

In the daily chart, EUR/USD holds below the 100-day simple moving average (SMA), keeping the near-term bias bearish despite a modestly constructive tone in momentum, with the Relative Strength Index (14) hovering around 56. Price remains above the 20-day Bollinger middle band SMA, suggesting downside is cushioned for now, while the upper Bollinger band near marks a broader cap on recovery attempts.

On the topside, immediate resistance aligns at the 100-day SMA at 1.1565, ahead of the upper Bollinger band around 1.1612, where selling interest could strengthen if tested. On the downside, initial support is located at the 1.1500 psychological level, followed by the 20-day Bollinger middle band at 1.1475. A deeper bearish extension is likely to target the lower Bollinger band near 1.13375 if the current floor gives way.

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AUD/USD Price Struggles to extend rally above 0.7100

  • AUD/USD falls further to near 0.7050 as the Australian Dollar faces selling pressure.
  • Financial markets seem unconvinced by the RBA’s hawkish remarks.
  • The US Dollar gains even as traders have trimmed hawkish Fed bets.

The Australian Dollar (AUD) trades 0.17% lower at around 0.7050 against the US Dollar (USD) during the early European trading session on Thursday. The Aussie pair extends Wednesday’s correction, which started after revisiting the two-month high near 0.7090, as financial markets remain unconvinced by the Reserve Bank of Australia’s (RBA) hawkish tone.

On Tuesday, the RBA left its Official Cash Rate (OCR) unchanged at 4.35%, as expected, and explicitly said that the central bank won’t hesitate to raise interest rates further, citing upside inflation risks.

Contrary to the RBA’s hawkish remarks, financial markets believe that the RBA’s appetite to tighten monetary conditions appears very weak.

Analysts at Standard Chartered note that, at the press conference, Governor Bullock “talked up the uncertainty around the RBA’s central forecasts and did not rule out the need for more policy tightening in the immediate future if upside inflation risks materialise.”

Despite this hawkish nuance, Standard Chartered emphasises that “our base case remains no more RBA rate hikes in the foreseeable future.” The bank cautions, however, that “the risk to our view is skewed towards a hike in Q4 if demand does not slow sufficiently or if energy prices revisit recent highs, exacerbating both capacity and price pressures.”

Ultimately, “easing labour-market conditions, if sustained, should help contain underlying wage and price pressures in the economy,” supporting their view that further tightening is not the central scenario even as the RBA keeps its options open,” Standard Chartered added.

Meanwhile, an upbeat US Dollar, despite traders paring back hawkish Federal Reserve (Fed) bets for the September meeting, is also hurting the Aussie pair.

AUD/USD Technical Analysis

AUD/USD trades lower at around 0.7050, but is holding a constructive bullish bias as it remains within an upward parallel channel. The pair is trading above the 20-day exponential moving average (EMA) at 0.7024, which suggests underlying demand, while the channel top near 0.7077 caps the immediate topside.

The Relative Strength Index (RSI) at 56.69 stays in positive territory, hinting that bullish momentum is intact though not overstretched.

On the downside, initial support is located at the 20-day EMA at 0.7024, ahead of the lower boundary of the rising channel around 0.6951, with a deeper structural floor toward 0.6866. On the topside, a sustained break above the channel resistance at 0.7077 would open the way for further gains within the broader ascending structure. Above 0.7077, major hurdles are the round-level resistance at 0.7100, followed by the June 5 high at 0.7144.

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British Pound attracts bids against Japanese Yen after strong UK Q2 GDP data

  • The British Pound gains slightly against the Japanese Yen due to stronger-than-expected UK Q2 GDP data.
  • UK GDP growth remained steady at 0.6% in the second quarter this year.
  • Investors seek fresh cues regarding more US-Japan intervention to support the Yen.

The British Pound (GBP) attracts slight bids against the Japanese Yen (JPY) during the European trading session on Wednesday, following the release of the preliminary United Kingdom (UK) Q2 Gross Domestic Product (GDP) data.

The Office for National Statistics (ONS) has reported that the economy expanded at a steady pace of 0.6%, faster than estimates of 0.4%. On an annualized basis, the GDP growth also remained higher at 1.2% than the 1.1% estimates and the previous reading of 0.9%. In June, GDP growth was 0.3%, while it was expected to remain flat again.

Meanwhile, monthly Manufacturing and Industrial Production data also remained stronger than expectations. Manufacturing Production rose by 0.5%, while it was expected to decline by 0.2%. Industrial Production grew 0.2%, faster than 0.1% estimates.

Going forward, the British currency will be influenced by market expectations for the Bank of England’s (BoE) monetary policy outlook.

On the Tokyo front, the Japanese Yen trades broadly sideways as investors seek fresh cues from Japan’s Ministry of Finance (MoF) on whether there will be more United States (US)-Japan joint intervention to support the currency.

The US-Japan jointly intervened on the last day of July to counter “excessive volatility and disorderly movements in the Japanese yen in recent months”, Japan MoF reported.

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Offshore Yuan Slips on Soft PBOC Fixing

The offshore yuan weakened to around 6.74 per dollar on Thursday, reversing gains from the previous session as a weaker-than-expected daily fixing by the People’s Bank of China weighed on the currency. The central bank set the midpoint rate at 6.7888 per dollar, 418 pips weaker than a Reuters estimate. While seasonal factors as September approaches could support the yuan, the extent of any gains will likely depend on the PBOC’s fixing strategy. The yuan’s decline was partly cushioned by a softer US dollar after inflation data reduced expectations of an imminent Federal Reserve rate hike. Meanwhile, the PBOC reiterated its commitment to rolling out targeted policy support while avoiding broad-based easing in its quarterly monetary policy report. Separately, the PBOC conducted no seven-day reverse repos for a third consecutive day on Thursday, while announcing plans to inject up to CNY 600 billion per day through overnight reverse repos on August 14 and August 17–19.

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Why is the Japanese Yen stuck near 159.25 after the first joint US-Japan intervention since 2011?

The Japanese Yen (JPY) continues to navigate complex market dynamics, consolidating near the 159.25 level against the US Dollar (USD) following a sharp upward push. While technical momentum keeps short-term upside risks alive for the currency pair, the fundamental backdrop has been reshaped by rare, coordinated foreign exchange intervention between Japanese authorities and the United States. As valuation gaps narrow from extreme lows, market participants are weighing technical range boundaries against the structural impact of joint official action.

USD/JPY daily chart
USD/JPY daily chart

Institutional Analysis: UOB vs. DBS Group Research

To compare how leading institutions view the outlook for the Yen, we highlight the core takeaways from UOB and DBS Group Research:

  • Near-Term Technical Picture: UOB expects USD/JPY to consolidate in an intraday range of 158.95 to 159.60, with deeply overbought conditions limiting immediate upside beyond 159.60.
  • Multi-Week Trading Band: UOB maintains an upside-tilted bias over a 1–3 week horizon within a broader 157.00 to 160.20 range, noting that medium-term strength remains intact as long as spot holds above its 21-day EMA.
  • Official Sector Action: DBS Group Research highlights the significance of Japan’s second FX market intervention of the year, emphasizing that rare joint participation by the US adds massive credibility and reduces volatility risks in the US Treasury market.
  • Regional Currency Impact: DBS Group Research notes that limiting JPY weakness helps alleviate unwanted selling pressure on other undervalued Asian currencies, specifically the South Korean Won (KRW) and Chinese Renminbi (RMB).

Technical overbought conditions anchor USD/JPY in elevated range

According to Quek Ser Leang and Lee Sue Ann at UOB, Monday’s sharp USD rally has transitioned into a quiet consolidation phase near 159.25. While short-term technical indicators reflect strong underlying momentum, deeply overbought conditions make a decisive breakout above major resistance unlikely in the immediate term. Over a wider multi-week period, the pair is expected to remain contained within higher boundaries, anchored by key moving average support.

“While the bias for USD is tilted to the upside, any advance is likely part of a higher range of 157.00/160.20.”

Coordinated US-Japan intervention narrows Yen undervaluation and stabilizes regional FX

Taking a broader policy perspective, Chang Wei Liang at DBS Group Research stresses that the Yen’s historical undervaluation has begun to narrow following joint FX intervention by US and Japanese authorities. The involvement of the US Treasury — a rare occurrence last witnessed 15 years ago in 2011 — greatly enhances the credibility of official actions while mitigating the need for massive unilateral Treasury sales by Japan. Furthermore, by stemming excessive Yen weakness, policymakers are effectively insulating broader Asian FX markets from spillover depreciation.

  • “Co-ordinated FX intervention between the US and Japan is rare, with the last joint intervention occurring 15 years ago to weaken an excessively over-valued JPY in the aftermath of the 2011 Tohoku earthquake… Indeed, both the KRW and RMB are quite undervalued according to our DEER model, and so interventions to limit JPY weakness also help alleviate unwanted selling pressure on regional currencies.”

Banks expect elevated range-trading backed by strong intervention credibility

Based on the assessments from both institutions, the banks project an environment where USD/JPY remains technically supported at high levels but subject to firm official capping. UOB anticipates that short-term price action will remain bound between 157.00 and 160.20, with overbought momentum limiting aggressive gains past 159.60. Concurrently, DBS Group Research maintains that the unprecedented backdrop of joint US-Japan intervention provides a credible structural floor for the Yen, helping to stabilize both the domestic currency and broader regional Asian FX over the coming weeks.