FX OVERVIEW
FX remained dominated by safe-haven dollar demand and geopolitical risk, with Middle East tensions, oil near $84–$88, and threats to Red Sea and Strait of Hormuz shipping keeping investors defensive. Rate differentials reinforced the dollar, particularly against the yen and high-beta currencies, although softer US inflation limited the scope for a fresh broad-based USD rally. Commodity currencies remained constrained despite relatively hawkish domestic central banks.
MAJOR PAIRS
EURUSD — EUR/USD remains range-bound between roughly 1.1500 and 1.1580 as stronger German HICP inflation at 2.8% failed to overcome dollar demand linked to geopolitical risk and higher energy prices. Bias remains mildly bearish below 1.1580, with a hot US inflation signal targeting 1.1435–1.1450; support around 1.1510–1.1540 is the immediate technical pivot.
GBPUSD — Sterling pulled back from recent highs after US inflation at 3.4% reinforced dollar resilience, despite core inflation easing to 2.5%. The pair retains a fragile bullish structure above 1.3515, with a break below that level opening 1.3465–1.3480 and potentially 1.3335–1.3350; sustained trade above 1.3515 would target 1.3550–1.3565.
EURGBP — The euro has support from persistent UK fiscal uncertainty, flexible fiscal rules, and expectations that infrastructure spending will not deliver a near-term growth improvement. The structural bias favors buying EUR/GBP dips, with sterling vulnerable if UK growth data disappoints or tax speculation intensifies.
AUDUSD — AUD/USD is consolidating around the mid-0.7000s as the RBA’s hawkish stance offsets resilient US dollar demand and oil-driven inflation concerns. 0.7071 is the decisive resistance, combining the 50% Fibonacci retracement with the 100-day SMA near 0.7054; a sustained break would target 0.7120, then 0.7189, while failure below 0.7054 exposes 0.7023–0.6963 and potentially the 200-day SMA at 0.6931.
NZDUSD — NZD/USD broke below 0.5860 as domestic political instability, Middle East risk, and renewed concern over Fed hawkishness drove a flight to safety. The bearish break targets 0.5830–0.5835, defined by the 200-day SMA and trendline, with a deeper move toward 0.5760 if that support fails.
USDJPY — USD/JPY rose to 159.17 as the US-Japan yield gap, higher Treasury yields, and Japan’s fragile fiscal position revived yen selling after the July intervention rebound faded. The pair is biased toward a test of 160, but intervention risk is acute: renewed official action could produce a sharp, disorderly reversal rather than a gradual correction.
USDCHF — USD/CHF advanced 0.30% to 0.8138 and reached a 10-day high as the dollar outperformed despite the franc’s safe-haven status. A break above 0.8150 would confirm a bullish technical extension through short-covering and speculative buying; a broad risk-off shock remains the main threat to the long-USD setup.
USDCNY — The PBOC set the central rate at 6.7882 versus 6.7900 previously, signaling a modest preference for yuan stability or appreciation despite external volatility. A sustained sequence of stronger fixings would support CNY and pressure USD/CNY, although the managed band and concern over export competitiveness limit the pace of any appreciation.
USDSGD — USD/SGD fell to 1.2797 from late-June highs near 1.3000 as stronger Singapore GDP, upgraded 2026 growth forecasts of 4.5%–5.5%, and an 18.6% rise in H1 NODX improved the SGD outlook. The fundamental bias remains lower, with Singapore’s AI manufacturing and financial-services strength supporting further SGD appreciation unless geopolitical escalation reverses regional risk sentiment.
CENTRAL BANK WATCH
- Federal Reserve: US inflation at 3.4% year-on-year, with core at 2.5%, reduced the immediate case for another hike, although oil-price volatility and geopolitical inflation risks keep the Fed’s stance uncertain. Markets are balancing expectations for a September hold against still-elevated longer-term rate risk.
- Reserve Bank of Australia: The RBA’s hawkish stance remains a key source of AUD support, but high nominal rates are not translating into a strong carry trade because of weak growth and stagflation concerns.
- European Central Bank: Elevated energy inflation has complicated the ECB outlook. The bank faces a damaging trade-off between renewed price pressure and fragile growth, leaving policy guidance effectively dovish relative to the inflation impulse.
- Bank of England: The BoE is expected to hold rates, leaving GBP direction dependent on Q2 GDP and other UK data relative to the US inflation path.
- People’s Bank of China: The stronger-than-expected yuan fixing points to a preference for currency stability and confidence, though the move must be sustained before it represents a broader policy shift.
- Bank of Japan and intervention risk: Yen weakness has revived expectations of renewed Japanese intervention. The 160 level in USD/JPY is a clear policy flashpoint, particularly if the BoJ remains dovish while US yields stay elevated.
MACRO DRIVERS
- Geopolitical risk is supporting the dollar: Stalled US-Iran diplomacy, maritime attacks, and threats around Hormuz and the Red Sea are lifting oil and reinforcing demand for liquid safe-haven assets.
- Rate differentials remain dollar-positive: US yields continue to exceed Japanese and European yields, while markets have not fully removed the possibility of further Fed restraint if energy prices revive inflation.
- Commodity FX lacks fundamental follow-through: High Australian and Norwegian rates are being offset by weak growth and stagflationary pressures, limiting the durability of carry-driven rebounds.
- Asian capital flows are diverging: Singapore’s stronger export and growth outlook supports SGD, while China’s managed fixing signals currency stability; both stand apart from the broader pressure on high-beta currencies such as NZD.
POSITIONING IDEAS
Bullish
- USDJPY — Buy dips while the US-Japan yield gap remains wide and price holds below, but close to, 160; intervention risk makes position sizing critical.
- USDSGD downside / SGD longs — Singapore’s upgraded growth outlook, AI-led manufacturing demand, and 18.6% H1 NODX growth support continued SGD outperformance.
- EURGBP — Buy dips as UK fiscal uncertainty and delayed growth benefits undermine sterling’s structural support.
- AUDUSD above 0.7071 — A confirmed break above the 50% retracement and 100-day average would open 0.7120 and 0.7189, validating the RBA-led bullish case.
Bearish
- NZDUSD — The break below 0.5860, domestic political instability, and geopolitical risk favor a move toward 0.5830–0.5835 and potentially 0.5760.
- EURUSD — Maintain a cautious short bias below 1.1580 as geopolitical risk, energy exposure, and an uncertain ECB path outweigh German inflation strength.
- GBPUSD below 1.3515 — A break of this threshold would invalidate the recent bullish structure and expose 1.3465–1.3480, with 1.3335–1.3350 as the next downside zone.
- USDCHF above 0.8150 — A confirmed breakout would favor further dollar gains through technical buying and short-covering, provided global risk aversion does not trigger a renewed franc surge.