Dollar weakened broadly overnight and selling pressure persisted in Asia on Tuesday, with the greenback on the verge of breaking recent lows against Euro, Swiss Franc, and Aussie. The decline comes amid falling U.S. Treasury yields and growing conviction that the Fed will move toward faster easing.
With no major U.S. releases scheduled today and the Fed in blackout mode ahead of next week’s FOMC, traders are still appearing impatient. Thursday’s CPI looms large, but speculative selling has already picked up, raising the risk that Dollar’s decline becomes self-reinforcing if technical levels give way.
Whether the move extends into a broader selloff remains a key focus. A break of recent lows in multiple pairs could invite further technical selling, especially if Thursday’s CPI shows softening price momentum. While a 50bps Fed cut next week is still unlikely, markets are increasingly pricing a dovish dot plot and statement.
At the same time, Euro is struggling under its own weight. France’s Prime Minister François Bayrou lost a confidence vote on Monday, ending a turbulent nine months in office. His departure makes him the fourth prime minister to collapse under President Emmanuel Macron’s second term, highlighting the persistent instability in French politics.
France now faces yet another stretch of political drift and uncertainty. Macron must quickly find a candidate palatable enough to avoid being brought down immediately, but precedent suggests the process could drag on. This instability has weighed on Euro, particularly against the Swiss franc, with investors turning defensive.
For the week so far, Dollar sits at the bottom of performance table, followed by Loonie and Yen. Yen, however, is rebounding as Nikkei retreats from record high and falling U.S. yields offer support. At the other end, Kiwi leads, followed by Aussie and Swiss franc, with Sterling and Euro mixed in the middle.
In Asia, at the time of writing, Nikkei is down -0.32%. Hong Kong HSI is up 0.64%. China Shanghai SSE is down 0.61%. Singapore Strait Times is down 0.42%. Japan 10-year JGB yield is down 0.004 at 1.564. Overnight, DOW rose 0.25%. S&P 500 rose 0.21%. NASDAQ rose 0.45%. 10-year yield fell -0.040 to 4.460.
Gold rally may stretch to 3765 if US 10-year yield breaks 4%
The benchmark U.S. 10-year yield extended its recent slide on Monday, dropping to a five-month low. At the same time, Gold surged to another record high, reflecting strong demand for safety and conviction that inflation data due this week could steer the Fed toward faster easing.
Markets are squarely focused on the August PPI release on Wednesday, followed by Thursday’s CPI, which will be critical in shaping expectations ahead of next week’s FOMC meeting. Any evidence of cooling inflation risks could soften Fed hawks’ resistance to faster rate cuts. While a 50bps move in September remains unlikely, the statement and dot plot could flag a steeper path of easing.
That possibility is keeping pressure on U.S. yields. Key attention is on the 4% mark for the 10-year yield. A clean break below this psychological level could spur an even deeper slide
Technically, 10-year has already broken through 100% projection of 4.629 to 4.205 from 4.493 at 4.069, with no sign of bottoming yet. It is also pressing against the lower bound of its near-term falling channel. Sustained break there will indicate further acceleration to 138.2% projection at 3.907 next, with prospect of diving to 3.886 support. In any case, outlook will stay bearish as long as 4.188 support turned resistance holds.
Gold, meanwhile, remains in a phase of upward re-acceleration, as indicated by 4H MACD. It’s on track to 261.8% projection of 3267.90 to 3408.21 from 3311.30 at 3678.63. Overbought condition as seen in 4H RSI could limit upside there on first attempt. But break of 3579.44 support is needed to indicate temporary topping first.
Meanwhile, if the 10-year yield breaks below 4% in the coming days, Gold’s rally could extend further, eyeing 323.6% projection at 3765.34 before a peak is established. For now, both Treasuries and bullion look unstoppable, with inflation data set to determine the next leg of momentum.
Westpac: Australia consumer optimism elusive, RBA to pause in September
Australia’s Westpac Consumer Sentiment Index dropped -3.1% mom to 95.4 in September, reversing part of last month’s boost from the RBA’s third rate cut. While sentiment remains modestly above July levels and well above the April tariff-driven low, the index has slipped back into “cautiously pessimistic” territory. Westpac said outright optimism remains “elusive”, with households still uneasy about the path ahead despite relief from the cost-of-living crisis.
The RBA is expected to keep its cash rate steady at 3.6% when it meets later this month. Westpac noted recent data on inflation and demand came in “somewhat firmer than expected”, reinforcing the case for caution. Policymakers are seen waiting for further confirmation that underlying trends remain benign before resuming cuts.
For now, consumer recovery looks sluggish, and Westpac expects “further easing will likely be needed” to sustain momentum. It forecasts another 25bp cut in November and two additional moves in 2026, underscoring the gradual path ahead for both sentiment and policy.
Australia NAB business survey: Confidence falls, costs ease, capacity still tight
Australia’s NAB Business Confidence index slipped from 8 to 4 in August, but conditions showed improvement, rising from 5 to 7. Trading remained steady at 12, while profitability rose from 2 to 4 and employment from 2 to 5. NAB Chief Economist Sally Auld said the results support the view that “the outlook for businesses continues to improve,” with both confidence and conditions now near long-run averages.
Capacity utilisation rose to 83.1% from 82.5%, staying two percentage points above its long-run norm. Capital expenditure intentions also improved, climbing from 8 to 10. Together, these suggest firms are still operating at high levels of resource use despite broader uncertainties.
At the same time, cost pressures eased further. Purchase cost growth slowed from 1.3% to 1.1%, its lowest since 2021, while labour costs moderated to from 1.9% 1.5% and product price growth dipped to from 0.8% 0.6%. The survey points to an environment of resilient business activity and capacity tightness, but with inflation pressures continuing to recede.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.1723; (P) 1.1745; (R1) 1.1785; More…
EUR/USD’s rally continues today and intraday bias stays on the upside for retesting 1.1829. Firm break there will resume larger up trend to 1.1916 projection level. On the downside, below 1.1702 minor support will turn intraday bias neutral first. But risk will stay on the upside as long as 1.1607 support holds, in case of retreat.
In the bigger picture, rise from 0.9534 (2022 low) long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.
