EUR/USD ticked up on Wednesday but stayed locked in its downtrend from the May 11 high, trading below both the 10- and 21-day moving averages—technical signals that are bearish in their own right. More troubling for investors, though, is that the pair isn't capitalizing on a notable rise in euro zone interest rates, suggesting underlying weakness.

The catalyst for those higher euro zone rates has been the sharp rally in oil prices following the escalation of the U.S.-Iran conflict, which raises the risk of hotter euro zone inflation. This has pushed euro zone rates markets to price in a more hawkish ECB stance: the German 2-year government yield

broke above a bull pennant pattern that had been forming since March, while June 2027 Euribor futures dropped below the base of a bear pennant. Both developments point to markets anticipating the ECB may need to raise rates.

Yet despite these upward moves in euro zone rates, EUR/USD hasn't been able to rally—it's actually trading slightly lower than when the U.S. resumed bombing Iran on July 8. This suggests investors are focused more on the U.S. side of the equation, with rising U.S. rates reflecting growing bets that the Fed could hike rates later this year.

Given this dynamic, EUR/USD is likely to struggle to sustain any meaningful rally. A genuine turnaround would probably require a downward shift in U.S. inflation expectations, which could prompt markets to price in a less-hawkish Fed.
june2027euribor


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(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research sees NZD upside vs GBP and EUR over the coming weeks.

"A more hawkish RBNZ stands in contrast to our expectations for the rest of the G10 commonwealth countries makes it an attractive G10 long. This is compounded by significantly short speculative market positioning in NZD," BofA notes.

"We would generally prefer NZD shorts funded in GBP or EUR. This week also saw the official transition to the Burnham government in the UK, which has already brough on some financial market noise, injecting more 2-way risk into gilts and the pound. As it relates to the EUR, the NZD is attractive on a vol-adjusted carry basis, is bi-laterally insulated from potential energy terms-of-trade deterioration, and stands to benefit from higher agricultural and metals outlook," BofA adds.

Goldman Sachs Research reviews New Zealand's 2Q CPI and adds a December  hike to its RBNZ rate call.

"New Zealand's headline CPI increased 1.5% qoq in 2Q2026, with the year-over-year rate accelerating 100bp to 4.1%yoy. The outcome was above both our expectations and the RBNZ's updated July forecast (GSe/RBNZ: +3.9%yoy; BBG: +4.0%yoy)," GS notes.

"Against the backdrop of renewed upward pressure on oil prices, we expect today's CPI data will reinforce the RBNZ's recent hawkish reaction function reset. We continue to expect the RBNZ to hike the policy rate in September (+25bp to 2.75%) but now expect a final 25bp hike at December's meeting to 3.00% - following a period of assessment, the 7 November election, and with updated forecasts on hand," GS adds.

USD/JPY is pushing 40-year highs, trading above 163.00, even as sources suggest the BOJ could be open to raising rates faster than its usual six-month cadence. That hawkish signal has barely dented price action, with the pair holding higher levels regardless. Options markets are flagging the intervention risk even if spot isn't. Sub-1-month 25 delta risk reversals are holding a strong premium for JPY calls over puts — the right to buy JPY versus sell JPY. That skew is the options market's way of pricing a higher probability of a sharp downside (JPY-positive) shock than the calm spot chart and low implied volatility suggest.

Separately, realised volatility remains very low — and that's a double-edged sword for option buyers. Cheap realised vol means a straightforward option can quickly become an expensive way to protect against intervention: if spot keeps drifting quietly and realised stays subdued, the holder ends up bleeding premium for a scenario that never materialises.

A cheaper alternative is to buy out-of-the-money JPY calls — i.e., the right to sell USD/JPY (buy JPY) at a strike well below current spot. The further the strike sits from spot, the lower the upfront premium, since there's less intrinsic value and a lower probability of finishing in-the-money under normal drift. But should Japanese authorities step in to intervene, USD/JPY has historically been capable of dropping five big figures or more within minutes — more than enough to bring even a deep OTM strike into play.

Example: With USD/JPY spot at 163.00 and 1-month implied volatility at 6.2, a 1-month 163.00 JPY call — allowing the holder to sell USD/JPY at 163.00 at expiry — costs around 137 pips. That's the maximum loss if nothing happens and the option expires worthless.

Compare that with a 1-month 160.00 JPY call, which costs just 49 pips. The lower premium means less capital at risk if spot simply grinds higher and intervention never comes, yet the structure still leaves the holder positioned to profit from a sharp intervention-driven drop, since a move of that magnitude should easily push spot through 160.00.

In a market where realised volatility is low but the intervention tail-risk is real, sizing the hedge via strike selection — trading a bit of protection for a much smaller premium outlay — looks the more efficient way to stay covered without paying for volatility that isn't showing up.

Related — FX options wrap — How low can vol premiums go?
USD/JPY implied vs realised vol


USD/JPY 25 delta option risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

Gold, considered both a safe haven and an inflation hedge, should thrive under current conditions. Because rallies in the precious metal tend to precede dollar declines, the prospect of a significant increase in gold prices is reason to anticipate larger moves in currencies. The escalation of conflict in the Middle East, which has lifted oil and gas prices, along with the enduring war in Ukraine and a global trade war that looks set to intensify with new U.S. tariffs, should support safer assets.

This backdrop seems ideally suited for gold, following a correction from near $5,600 to just below $4,000/oz, which has alleviated overbought conditions and reduced the number of wagers that had been restraining gold's rise. Gold is freer to rise amid an uncertain environment that has inflation worries at its heart.

The precious metal, which rose almost $3,000/oz between January 2025 and January 2026, has great potential to rise again, weighing on the dollar index, which plunged by around 15% over the same period. With speculators sitting on one of the largest-ever bets on a rising dollar, a slide led by gold now could be far more damaging for the U.S. currency.

Gold and betting


(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

• Shares of Hochschild Mining up about 2.5% at 456.8p

• Co posts Q2 attributable production of 76,231 gold equivalent ounces, up 0.8% from last quarter; remains on track to meet its 2026 production guidance of 300,000–328,000 gold equivalent ounces

• Inmaculada and San Jose generated robust cash flow in Q2, while Mara Rosa improved production due to better plant stability and progress in its operational turnaround

• Gold prices at 2-week highs on Wednesday, supported by technical buying as investors monitor escalating Middle East conflict and ahead of next week's U.S. Fed meeting

• Including session gains, shares are down about 10.69% YTD

(Reporting by Jahanvi Kothari in Bengaluru)

• Shorter dated expiry GBP related FX option implied volatility is under the cosh early Wednesday

• Sales of 1-week vol from the mid 5s and 1-month at 5.9 and 5.85, plus various sub 1-month strikes

• Implied vol sales that cheapen option premiums typically indicate expectations of low realised volatility

• That fits as GBP eases now Andy Burnham is UK PM and cabinet picks remove FX surprise risk

• GBP/USD has dropped back from July 15 high since May at 1.3556 to the middle of long term ranges in the mid 1.33's

• For benchmark 1-month vol, 5.5 marks the recent and 2026 low — a likely support level

• Related comment - FX option pricing nears its limits
GBP/USD FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• USD/JPY extended 40-year highs above 163.00 on Tuesday, pushing deeper into intervention risk territory

• Options have seen downside strike premiums increasing in value compared to upside strikes - reflects intervention risk

• Sub 1-month 25 delta risk reversals marginally firmer for JPY calls over puts - the right to buy JPY vs sell JPY

• Option implied volatility increased with spot - benchmark 1-month rising from 4-year lows near 5.95 to 6.5 (now 6.3)

• A lack of follow through and continued low realised volatility continues to weigh on implied vol across all currency pairs
USD/JPY 25 delta option risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• FX option strikes expire at 10am New York/14:00 GMT on Wednesday July 22

• EUR/USD: 1.1350-60 (802M), 1.1375-85 (1BLN), 1.1395 (450M), 1.1400 (3.6BLN), 1.1430 (430M), 1.1455-65 (583M)

• USD/CHF: 0.8065-75 (1BLN), 0.8100 (292M), 0.8200 (267M)

• EUR/GBP: 0.8500 (247M), 0.8550-60 (290M). GBP/USD: 1.3500-05 (364M)

• AUD/USD: 0.6900 (1.8BLN), 0.6975-80 (448M), 0.7040-45 (610M)

• NZD/USD: 0.5825 (352M), 0.5840 (380M). AUD/NZD: 1.2000 (300M)

• USD/CAD: 1.4075 (666M), 1.4100 (210M), 1.4115-25 (502M)

• USD/JPY: 162.50 (1BLN), 163.00 (2BLN), 163.50 (895M), 163.75 (400M)

• AUD/JPY: 113.50 , 114.00 (546M)

• Tuesday's FX options wrap - How low can vol premiums go? (Richard Pace is a Reuters market analyst. The views expressed are his own)

• Shares of Australia's Westgold Resources rise as much as 6.4% to A$4.86

• Stock on track for its strongest intraday trading session since July 3, if moves hold

• Gold producer posts FY26 gold production of 387,354oz, above FY26 forecast range of 345,000 to 385,000oz

• Company says it has not experienced any diesel supply disruptions, retains contingency plans to manage potential supply disruptions due to Middle East geopolitical developments

• Nearly 5.0 million shares trade hands, about 1.5x the 30-day average volume

• Stock down 25.2% YTD, including current session's moves

(Reporting by Subhalakshmi Dey in Bengaluru)

• USD/JPY 163.03-22 EBS in Asia, consolidating gains to 163.24 yesterday

• High yesterday best in 40 years, specs eyeing 164.00, 165.00 tests now?

• Japan FinMin Katayama jaw-boning, threat of intervention helped cap for now

• That said, some feel MOF reluctant to act with USD broadly bid

• Factors include Middle East war and crude price re-rise, higher US yields

• Support on dips from $2 bln option expiries today at 163.00

• Upside spot action likely contained for now by 163.07-80 $1.6 bln expiries

• Support on dips from 163.00 then hourly Ichi kijun at 162.85, 100-HMA 162.50

• Support too from foreign ccy hedging of fresh Nikkei buys, importer buys

• AUD/JPY and NZD/JPY shine some more on suspected additional carry trades

• AUD/JPY 114.05-39 and best since 114.91 June 2, 115.00 test seen possible

• Up with hourly Ichi kijun at 114.06, cloud 113.50-71 below, 100-HMA 113.67

• A$546 mln in option expiries today at 114.00 strike likely supportive

• NZD/JPY 94.94-95.22, below 95.42 yesterday, best since 95.41/42 May 29/Jun 1

• Clean break above 95.50 projects test of 96.00, 94.40 July 17, 2024 June

• EUR/JPY buoyant with JPY under the gun again, Asia 186.00-04 EBS

• Above 185.92 hourly Ichi tenkan, cloud 185.68-73 below, 100-HMA 185.66

• CHF/JPY on hold, 200.57-89, below 201.28-95 daily Ichi cloud, 201.44 100-HMA

• In 200.63-84 hourly Ichimoku cloud, 100-HMA 200.80 in cloud, 200-HMA 200.52

• GBP/JPY 218.05-39 and tad heavy, down from 219.60 high July 15

• Into thinning 218.30-38 hourly cloud, between 217.89/218.48 200/100-HMAs

• Related comment , also , on Japan trade
USD/JPY hourly:


AUD/JPY daily:


NZD/JPY daily:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• Australian gold stocks rise as much as 3% in early trade, while the broader benchmark trades up 0.4%

• Sub-index logs the largest intraday pct jump since July 16

• Gold prices rose overnight on hopes of a diplomatic breakthrough between the U.S. and Iran, which could ease energy prices and temper expectations of a hawkish Federal Reserve [GOL/]

• Index leaders Northern Star Resources and Evolution Mining rise 3% and 4.5%, respectively

• YTD, AXGD down 18.7%, including the day's moves, lagging behind a 1.3% gain on the AXJO
(Reporting by Nikita Maria Jino in Bengaluru)

July 22 (Reuters) - Japan's Ministry of Finance has been conspicuously absent regarding the ordering of Bank of Japan FX intervention despite USD/JPY rallying to as high as the 163 handle Tuesday. Barring action Wednesday, a new equilibrium is likely on 163, following those at lower handles beginning from 157 after interventions in late April and early May . Although there has been recent news of Finance Minister Satsuki Katayama and MOF taking a new tack on FX policy and towards the BOJ, there is little evidence this is actually the case. Tokyo pundits suggest the Takaichi administration's policies remain tied to 'Abenomics', which had as its two pillars a weak yen and loose monetary policy. Despite the new Takaichi economic blueprint giving assurances of BOJ independence , it appears that pressure on the central bank to hold off more rate hikes as long as possible hasn't changed. Barring actual FX action to take USD/JPY lower and/or BOJ action on rates, the USD/JPY uptrend in place from the April 22, 2025 low of 139.89 will likely continue, albeit with intermittent retracements. Tokyo players and especially Japanese importers fret USD/JPY will soon test 165, where massive importer option barriers have been placed. Taking out of these barriers will knock out lower level buy-side contracts, forcing this bloc to buy even more U.S. dollars at spot prices .

Related comments , , , , , , also ..

USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Ewen Chew)

• Lack of Japan FX intervention allowed USD/JPY to pop higher to 163 handle

• Yesterday saw 162.44 to 163.24 rise, Asia so far today 163.18-22 EBS so far

• Renewed US-Iran hostilities, closing of Red Sea too, higher US rates factors

• Wall St rally, expectations of Nikkei rally, foreign currency hedges too

• USD/JPY highest in 40 years, next resistance 164.00, then 164.74 in Nov '86

• Market moving ever closer to especially massive 165.00 option barriers

• In expiries today, $2 bln at 163.00, supportive, also 163.07-80 $1.6 bln

• Tech support on dips from 163.10 hourly Ichimoku tenkan

• Option-related bids pre-163.00, hourly kijun 162.84, cloud 162.37-46

• Barring MOF-ordered FX intervention, USD/JPY to see new equilibrium on 163

• Related comments , , ,

• Also , on Middle East ,

• US markets , , ,

• On "new" Trump tariffs , for more click on [FXBUZ]

USD/JPY:


Nikkei 225:


NYMEX crude oil futures:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• AUD/USD opens unchanged after failing to sustain a rise to a 1-month high

• Rally thwarted by USD strength; DXY at 1-week high as Treasury yields climb

• Iran war escalation and elevated oil prices boost Fed rate hike bets

• U.S.-10 year yield rises to 2-mth high on inflation concerns, capping AUD

• AUD outperforms as stocks, metals rally; AUD/JPY +0.45%, hits 7-week high

• But failure to sustain break of 0.7023, 38.2% Fibo of May-June drop bearish

• More resistance at 0.7050, 0.7070-75; support 0.6985-90, 0.6960-65

• Tuesday range 0.6993-0.7027
AUD:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

Danske Research maintains a bearish bias on EUR/CHF over the medium-term.

"Over the past month, EUR/CHF has edged higher to above the 0.92 mark, with the ECB delivering hikes and the Swiss National Bank (SNB) pushing back on hike expectations. We remain bearish on EUR/CHF and think the environment continues to favour a stronger CHF. We target the cross at 0.90 in 6-12 months," Danske notes.

"The SNB remains firmly on hold with its policy rate at 0% and we expect this to remain the case. At its most recent meeting, the SNB highlighted that underlying inflationary pressures remained broadly unchanged, despite headline inflation edging slightly higher. This is only further underpinned by the strong CHF and Switzerland’s favourable energy mix. We think this will keep the SNB from hiking rates. Combined with strong fundamentals, we think persistently diverging price levels favour a stronger CHF via the PPP. Additionally, a global investment environment characterised by weak global growth and elevated uncertainty benefits CHF. " Danske adds.

(Corrects typo in bullet #2)

• GBP$ soft in NorAm afternoon trade, -0.34% at 1.3385; NY range 1.3420-1.3360

• UK employment data marginally lower, unemployment a touch higher holds no sway on rates

• Wednesday's UK CPI moves into focus, headline and core both seen a touch lower

• UK data aside, lingering Mideast tensions rising oil hints at steady UK inflation

• UK politics also in mix; post regime change UK fiscal angst higher; UK 10-yr gilt abv 5%

• GBP$ supt 1.3374 falling 55-DMA, 1.3360 Tuesday low, 1.3348 50% Fib of 1.3140-1.3556

GBP Chart:


(Paul.Spirgel is a Reuters market analyst. The views expressed are his own)

ANZ Research likes buying the dips in EUR/GBP.

"EUR/GBP fell below 0.85 last week, breaking below key longterm support. However, momentum indicators are becoming stretched, with the 14-day RSI near 20, in oversold territory. Also, one-month risk reversals have fallen but remain above zero, suggesting options markets are not yet signalling a structurally GBP-bullish outlook," ANZ notes.

"We see an opportunity to buy on dips. Initial support lies at 0.842, with stronger resistance near the 50-dma at 0.862," ANZ adds.

• USD/CAD edging higher, move largely a function of broader USD strength

• CAD showed limited reaction to tariff headlines - U.S. set to impose 50% tariffs from Aug 19

• Market conditioned to Trump’s “escalate to de-escalate” approach, dampening knee-jerk reactions

• Lingering doubts around legal enforceability of tariffs also keeping price action contained

• 1.40 seen as initial floor, with stronger support layered at 1.3930-67

• Spot testing 1.41, break higher brings 1.4140 into focus

• Clearance of 1.4140 opens extension towards 1.4250
USDCAD 5 minute chart


USDCAD daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

Nomura Research notes that retail FX investors’ largely stretched net short USD/JPY positions are likely influencing the MOF’s judgement on when to intervene.

One likely big concern for the MOF is Japanese retail FX investors’ current JPY positions. As it became evident in the Financial Futures Association of Japan’s data for June that Japanese retail FX investors' net short USD/JPY positioning reached its highest level since data collection began in 2010 of $18bn. This substantial short position suggests they are trading USD/JPY in anticipation of near-term MOF intervention," Nomura notes.

This will be an issue of the MOF, as their large net short USD/JPY positions could undermine the effectiveness of intervention, as the MOF’s bold purchases of JPY would ultimately benefit retail investors' returns, and it’s reasonable that they will flip and buy USD/JPY after its dip. Therefore, these local investors will make it difficult for the MOF to meet its objective to strengthen the JPY, if it intervenes.

Considering these potential dynamics, the MOF could force retail investors to close their short positions before intervening to increase efficacy. We do not have a solid estimate of where these retail FX investors’ net short USD/JPY positions are concentrated; however, according to a Nikkei article (1 July), full-scale stop-loss orders in short USD/JPY are likely to be triggered from 163, with additional concentration around 164-165," Nomura adds.

EUR/USD's rally from the June 24 low is now at risk, and long-positioned investors may be considering an exit as yield differentials and oil's potential impact on Fed policy create downside risks for the pair.

In early July, the U.S.-German 2-year yield spread

—which EUR/USD typically correlates with—began tightening as U.S. inflation data caused yields to soften, a trend that persisted until last week and helped support EUR/USD's gains. However, the pair's rally stalled just short of resistance in the 1.1500 area, and spreads have since started widening again, increasing the dollar's yield advantage.

Compounding this, a recent sharp rally in oil prices has investors leaning toward the possibility of a more hawkish Fed

stance to combat oil-driven inflation pressures. This combination has pushed the spread back below -140 bps and toward -145 bps, becoming a growing weight on EUR/USD.

Technical factors add further pressure. EUR/USD's rally off the June low only briefly broke above the downtrend line from the May 11 high, and the pair has since fallen back below that line as well as its 10- and 21-day moving averages. The pair is now threatening to break the uptrend line drawn from the June 24 low.

Should that uptrend line break, it would suggest the recent rally was merely corrective within a broader downtrend, raising the possibility that the pair's longer-term decline could resume.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Bank of America Global Research previews this week's July ECB policy meeting.

"We expect the ECB to leave policy rates unchanged this week. With no large surprises in data (inflation a bit weaker but activity data still showing a resilient economy) and energy prices not far from the ECB’s baseline forecasts, there is not enough sense of urgency to move policy rates now. Focus, as usual, will be on communication. But also, as has been the case over the last few meetings, we expect very little new from the ECB, either in the statement or from Lagarde during the press conference. The written communication is likely to stay close to what we had in June, hence keeping a hiking bias given that the June forecasts included more hikes than just the one that month," BofA notes.

"As a reminder, we expect one final hike from the ECB in September. A hold is not unthinkable: with oil prices around USD 70/bbl, the case for the ECB to pause had strengthened considerably (although it was not our base case)," BofA adds.

Morgan Stanley Research maintains a neutral bias on JPY in the near-term.

"We remain neutral on JPY. While a deterioration in global risk sentiment, driven by the sell-off in AI-related stocks,  should weigh on USD/JPY, this is likely to be offset by factors that are negative for JPY, including elevated US terminal  rate expectations and a worsening of Japan’s terms of trade amid renewed escalation of Middle East tensions," MS notes.

"As a  result, we expect USD/JPY to remain confined to a relatively narrow range. A more meaningful decline in USD/JPY  would likely require both a sharper deterioration in risk sentiment and a repricing lower in US terminal rate expectations. However, with market attention increasingly focused on US inflation, we view such a scenario as unlikely  in the near term," MS adds.

• U.S.-listed shares of copper miners rise premarket, tracking higher prices of the red metal [MET/L]

• Benchmark three-month copper on London Metal Exchange up 1.7% to $13,851 a metric ton

• Copper prices supported by firm demand in top consumer China, declining inventories and hopes that mediators can revive a ceasefire in the Iran war

• Shares of global mining giants Rio Tinto and BHP Group gain 1.4% and ~3%, respectively

• Copper miners Southern Copper and Freeport-McMoRan up 3.4% and ~4%, respectively

• Canada's Hudbay Minerals up 4%, Ero Copper advances ~6% and Teck Resources

gains ~2%

(Reporting by Dharna Bafna in Bengaluru)