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Major currencies found support on Friday as softer US inflation indicators continued to reduce expectations for further Federal Reserve tightening, keeping the US Dollar below the 100.00 area. The Euro, Swiss Franc, Canadian Dollar and British Pound all benefited to varying degrees, although geopolitical uncertainty surrounding the Middle East and other global flashpoints limited stronger risk-taking. Attention now turns to US Retail Sales and consumer sentiment data for further clues on the strength of the US economy and the direction of Fed policy.
The Euro extended its recovery against the US Dollar, trading below 1.1550 after rebounding from the 1.1500 area. Receding expectations for another Fed hike weighed on the Greenback, while expectations that the ECB could deliver another 25-basis-point increase in September provided additional support for the Euro. Geopolitical risks, however, continued to limit the upside.
• Geopolitical Risks: Middle East tensions and renewed European security concerns continue to support some defensive Dollar demand.
• US Economic Data: Softer US inflation indicators have reduced expectations for further Fed tightening.
• FOMC Outlook: Receding rate-hike expectations remain supportive for EUR/USD.
• ECB Policy: Expectations for another ECB rate increase provide underlying support for the Euro.
• Risk Sentiment: Improving FX sentiment favors the Euro, although geopolitical uncertainty limits aggressive buying.
• Trend: Moderately Bullish
• Resistance: 1.1565
• Support: 1.1500 / 1.1489
• Forecast: EUR/USD could extend its recovery if buyers achieve a sustained break above 1.1565. Failure to clear that level could keep the pair range-bound, with the 1.1500 area providing initial support.
• Market Sentiment: Cautiously bullish.
• Catalysts: US Retail Sales, Fed commentary, ECB expectations and geopolitical developments.
EUR/JPY remained close to 184.00 as the pair consolidated around important moving-average levels. The cross was holding above its short-term nine-day EMA but remained below the 50-day EMA, indicating that neither buyers nor sellers had established clear control.
• Geopolitical Risks: Elevated uncertainty could generate defensive demand for the Japanese Yen.
• Euro Strength: Improving Euro sentiment provides some support for the cross.
• BoJ Expectations: Expectations surrounding further Bank of Japan normalization remain an important influence on JPY.
• ECB Policy: Expectations for another ECB hike could help support the Euro.
• Risk Sentiment: Broader market positioning remains cautious, keeping the pair in consolidation.
• Trend: Neutral to Slightly Bearish
• Resistance: 184.49
• Support: 183.59
• Forecast: EUR/JPY could remain range-bound around 184.00 unless it clears the 50-day EMA near 184.49. A sustained break higher would improve the bullish outlook, while a move below 183.59 could revive downside momentum.
• Market Sentiment: Neutral as technical consolidation continues.
• Catalysts: ECB expectations, BoJ policy outlook, global risk sentiment and geopolitical developments.
The Swiss Franc strengthened against the US Dollar as softer US inflation data reduced expectations for another Federal Reserve rate hike. Markets have scaled back the probability of a September Fed increase, while the Swiss National Bank is widely expected to keep its policy rate unchanged for the remainder of the year.
• Geopolitical Risks: CHF retains its traditional defensive appeal during periods of uncertainty.
• US Economic Data: Softer inflation readings continue weighing on the Dollar.
• FOMC Outlook: Reduced Fed hike expectations favor further downside in USD/CHF.
• SNB Policy: Expectations for steady Swiss rates provide a relatively stable domestic backdrop.
• Risk Sentiment: Shifting safe-haven flows remain important for both currencies.
• Trend: Bearish USD/CHF
• Resistance: 0.8170
• Support: 0.8100 / 0.8080
• Forecast: USD/CHF could remain under downward pressure while Fed hike expectations stay subdued, although renewed geopolitical stress could generate competing safe-haven demand for the Dollar.
• Market Sentiment: Moderately bearish for USD/CHF.
• Catalysts: US Retail Sales, Federal Reserve expectations, SNB outlook and geopolitical headlines.
The Canadian Dollar strengthened despite subdued crude oil prices as broad US Dollar weakness provided greater support than the energy market could take away. Lower oil prices nevertheless remain a potential headwind for CAD and could limit further declines in USD/CAD.
• Oil Prices: Softer crude prices remain a headwind for the commodity-linked Canadian Dollar.
• US Economic Data: Cooling US inflation has weakened the Greenback and supported CAD.
• FOMC Outlook: Reduced expectations for further Fed tightening favor USD/CAD downside.
• Geopolitical Risks: Developments around the Strait of Hormuz remain important for both oil and CAD.
• Monetary Policy: Relative Fed and Bank of Canada expectations continue influencing the pair.
• Trend: Neutral to Bearish USD/CAD
• Resistance: 1.3970
• Support: 1.3890
• Forecast: USD/CAD could continue edging lower if Dollar weakness persists, although subdued crude prices may prevent the Canadian Dollar from developing significantly stronger momentum.
• Market Sentiment: Cautiously bearish for USD/CAD.
• Catalysts: Oil prices, US Retail Sales, Fed expectations, Bank of Canada commentary and Hormuz developments.
The British Pound edged higher against the softer US Dollar, although gains lacked strong follow-through. Reduced Fed hike expectations supported Sterling, while persistent geopolitical uncertainty and mixed UK economic data prevented buyers from pushing the pair significantly higher.
• Geopolitical Risks: Middle East uncertainty continues providing some support for the safe-haven US Dollar.
• US Economic Data: Softer inflation readings have weakened expectations for further Fed tightening.
• FOMC Outlook: Receding rate-hike expectations provide support for GBP/USD.
• UK Economy: Mixed domestic data limits stronger Sterling momentum.
• Monetary Policy: Expectations surrounding the Fed and Bank of England remain central to the pair’s outlook.
• Trend: Moderately Bullish
• Resistance: 1.3550
• Support: 1.3422
• Forecast: GBP/USD could retain its constructive bias while holding above the 100-period SMA near 1.3422, although geopolitical uncertainty may continue limiting stronger upside momentum.
• Market Sentiment: Cautiously bullish.
• Catalysts: US Retail Sales, consumer sentiment, Fed commentary, Bank of England expectations and geopolitical developments.
Major currencies remained supported as softer US inflation indicators continued to reshape expectations for Federal Reserve policy and weigh on the US Dollar. The Euro maintained a modest bullish bias against the Greenback while EUR/JPY consolidated near an important technical zone. The Swiss Franc strengthened, the Canadian Dollar remained resilient despite softer oil prices, and Sterling edged higher while struggling to generate stronger follow-through. Attention now shifts to US Retail Sales, consumer sentiment and Fed commentary, while persistent geopolitical risks could continue limiting risk appetite and prevent an unchecked decline in the Dollar.
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