The dollar weakened broadly on Tuesday as safe-haven currencies struggled in the face of falling oil prices caused by a report that Iran's president discussed mediation efforts and regional developments during a meeting with Pakistan's army chief.

US Defense Secretary Pete Hegseth discussed Iran with Israeli PM Benjamin Netanyahu during an unannounced visit on Monday.

US Treasury Secretary Scott Bessent downplayed the impact of midterm election on the Trump administration's agenda.

BOE policymaker Megan Greene said Iran war energy shocks pose greater inflation risks and reiterated her call for higher rates.

Germany Chancellor Friedrich Merz said the country is ramping up investment in defense, semiconductors and AI to boost productivity and economic sovereignty.

France's debt agency head said it was not seeing selling pressure from Japanese investors.

The dollar index nearly reversed October gains before settling beneath its 21-day moving average of 101.79.

EUR/USD's rise left a slightly bullish bias above its 10-DMA of 1.1202.

GBP/USD hit a four-week high at 1.3409 before stalling ahead of the 50-DMA at 1.3412, with stronger UK payrolls supporting a hawkish BoE outlook.

USD/JPY rebounded from the 157.83 session low as oil reversed an earlier surge and equities rose, leaving the pair in a narrow range between its 55-DMA of 157.78 and cloud top of 158.44.

AUD/USD climbed to a 15-session high of 0.7017 on broad USD weakness before pair settled near 0.70, though a rising RSI and position above its 21-DMA kept the bias bullish.

Treasury yields were mixed as the curve flattened. The 2s-10s curve fell about 3 basis points to +33.0bp.

The S&P 500 rose 0.30% with most sectors rising while tech lagged.

WTI oil slipped 2.4% after being sharply higher at the New York open.

Gold fell 0.39% while copper rose 0.69%.

Heading toward the close: EUR/USD +0.22%, USD/JPY -0.20%, GBP/USD +0.58%, AUD/USD +0.32%, DXY -0.25%, EUR/JPY +0.04%, GBP/JPY +0.41%, AUD/JPY +0.12%.(Editing by Burton Frierson Robert Fullem is a Reuters market analyst. The views expressed are his own)

• GBP$ firm in NY afternoon trade +0.57% at 1.3379; NorAm range 1.3409-1.3306

• Pair puts in fresh 4-week high just above 1.34, finds resistance ahead of 50-DMA by 1.3412

• UK payroll data comes in above f/c, wages either side of f/c, supports hawkish BoE view

• Wednesday's UK CPI/PPI in focus for clues to BoE policy; futures price BoE Nov 25bp hike

• Further down the road, traders cautious ahead of UK Autumn Budget on Oct 28

• GBP$ res 1.3409/12 Tues high/50-DMA, 1.3433 flat 200-DMA, 1.3474 daily cloud base

• Supt 1.3319 falling daily base line, 1.3300 psychological lvl, 1.3273 daily conversion line

GBP$ Chart:

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

MUFG Research discusses BoC rate hike expectations.

"The Canadian dollar has been boosted by the hawkish repricing of BoC rate hike expectations. The Canadian rate market has moved to more fully price in a 25bps hike as soon as next week. There are currently around 21bps of hikes priced in compared to only 9bps at the end of last week. Those expectations have been encouraged by three major Canadian banks all changing their rate calls to a hike at next week’s policy meeting," MUFG notes.

"The BoC has recently signalled that they are moving closer to hiking rates. If they place more weight on forward looking measures of inflation risks, and the Candina rate market continues to price in a high probability of a hike heading into next week’s meeting, we expect the BoC to pull the trigger and tighten policy. However, it is not a done deal given the recent softer economic data flow from Canada including the second consecutive month of heavy job losses in September. A decision to raise rates this month would then encourage speculation that they could follow that up quickly with a second hike before the end of this year in December providing more support for the Canadian dollar," MUFG adds.

• NY opened near 0.6985 after 0.6971 traded overnight, rally extended early on

• Broad-based USD selling, US yield drops & copper, silver, stock gains lifted AUD/USD

• A 15-session high of 0.7017 traded, the rally stalled and some gains were eroded

• USD, US yields firmed up & stocks gave up some gains and gold traded down

• AUD/USD neared 0.6995 late, the pair was up +0.24% in NY's afternoon

• Techs lean bullish; RSIs indicate upward momentum, pair above 10- & 21-DMAs

• Monthly bull hammer, bull pennant on monthly chart reinforce the bullish signals
audusd

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

ANZ Research discusses USD/CHF outlook and targets.

"We have raised our USD/CHF forecast from 0.79 to 0.83 end2026, and now expect the pair to ease only gradually to 0.80 by end-2027. The revision reflects the stronger influence of carry and relative rates. Swiss inflation remains subdued, with the SNB seeing only modest underlying inflation pressure and keeping its policy rate at 0%. This leaves limited scope for a policy shift in either direction, while the slightly higher inflation outlook, partly reflecting the weaker CHF, also reduces the need for the SNB to actively reinforce CHF weakness through intervention," ANZ notes.

"Against this backdrop, the widening US-Swiss yield differential has increased the CHF’s appeal as a funding currency and should keep USD/CHF supported in the near term," ANZ adds.

Sterling surged to fresh four-week highs just below 1.34, buoyed by above-forecast UK employment and healthy payroll data, which likely cements a Bank of England rate hike at the November 5 Monetary Policy Committee meeting.

However, Tuesday's gains may be tempered as the market turns its attention to Wednesday's UK Consumer Price Index data. According to Reuters consensus, both core and headline CPI are expected to rise on a year-on-year basis, which has provided further support for the anticipated rate hike next month.

A potential complication ahead of the BoE's decision is the Autumn Budget, scheduled for October 28. While rising employment and wages could contribute to increased inflation, thus necessitating rate hikes, higher interest rates may exacerbate financial pressures on the UK populace. Should the Labour government adopt a more accommodative stance to alleviate these burdens, concerns may arise that could prompt bond vigilantes to resume selling gilts, consequently applying downside pressure on GBP/USD.

For now, unless Wednesday's UK price data delivers a significant negative surprise, GBP/USD is likely to stay supported. The similar outlook for global inflation outlook and the unwinding of USD long positions – previously driven by more hawkish Fed expectations and European fiscal turmoil – are benefiting sterling, while also impacting EUR/GBP.

Key upside targets for GBP/USD include 1.3406, the September 17 high, followed by 1.3433, the 200-day moving average. Bulls are expected to maintain control as long as GBP/USD remains above 1.3263, the rising 10-day moving average.
GBP Chart:

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

Goldman Sachs Research discusses the performance of FX carry strategies.

"FX carry has faced a series of headwinds over the past month - a higher-velocity phase of the fixed-income sell-off in September, recent AI/risk wobbles, continued vulnerabilities to energy pressures (including an uneven impact from concerns around a potential US diesel export ban), and stress in European sovereign credit," GS notes.

"Despite these challenges, FX carry performance at an aggregate level has remained firm. Through a factor lens, procyclical currencies have underperformed following the risk-off in equities, energy importer-vs-exporter currencies have plateaued recently, while our carry factor hit fresh year-to-date highs earlier this week," GS adds.

Bank of America Global Research discusses AUD outlook in light of Australia's A$180bn data centre investment pipeline.

"Australia's A$180bn data centre investment pipeline, including around A$100bn over the next three years, is set to drive the largest investment cycle since the mining boom. We expect this to support AUD through a higher-for-longer RBA cash rate and higher commodity prices, particularly copper. But we don't expect a repeat of the mining boom which took AUD to 1.10," BofA notes.

"Our AUD model estimates fair value is currently at 0.7140 vs spot at 0.6960. With BofA's metals team forecasting further gains in copper prices, we see scope for AUD to appreciate towards 0.73 over 2027. That said, upside against USD looks capped with the US undergoing an even larger investment cycle and risks skewed towards further Fed tightening. Instead, we see more opportunities on the crosses. We see upside risks to AUD/NZD ahead of the NZ election and continue recommend long AUD/ZAR (entry: 11.57, target 12.15 and stop 11.22)," BofA adds.

• EUR/USD 0.04%, USD/JPY -0.23%, GBP/USD 0.35%, AUD/USD 0.16%

• S&P E-minis -0.05%, DAX -0.92%, Nikkei 225 -1.3%, FTSE -0.74%

• Sharp narrowing in current account will undermine EUR/USD

• Yen perks up after JGB auction, but USD/JPY cloud support holds

• GBP/USD rises as UK jobless rate unexpectedly falls

• AUD/USD rises to eye 0.70 resistance level

• Option expiries . U.S. Open ​

(Martin Miller is a Reuters market analyst. The views expressed are his own)

• AUD/USD implied volatility edges lower as spot recovers from 15 Oct lows since June at 0.6895

• Benchmark 1-month expiry last traded 7.4 from 5-month highs at 8.3 in early October

• Risk reversals maintain a downside over upside strike risk premium, but it's also edging away from recent highs

• NZD/USD options follow suit, but shorter date expiries underpinned by impending 7 Nov NZ election risk

• 1-month NZD implied vol is 8.7 from recent and multi month highs at 9.0
AUD/USD FXO implied volatility


AUD/USD 25 delta risk reversals


NZD/USD FXO implied volatility

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

• Brent Crude oil rising above $111 per barrel

• Continuing stress apparent in eurozone bonds

• Fresh wides for French 10-yr spreads vs Italy, Spain, Portugal and Greece

• Sharp narrowing in current account will undermine EUR/USD

• A correction in stocks could quickly spill into FX carry trades, boost USD

• US/German 10-year spread has widened by 5bps this week

•
Bonds and oil

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

• Upside capped by Japanese exporter offers, other sales

• Yen jumps after JGB auction draws big demand

• USD/JPY has slumped from 158.60 to 158.04, on Thursday, according to EBS data

• However the overall bias remains on the upside as USD/JPY usually climbs in October

• The thick cloud, that currently spans the 156.28-158.44 region, continues to underpin

• USD/JPY and EUR/JPY tend to move in tandem, 30 and 60-day log correlations are high above +0.5

Daily Chart


Correlation Chart

(Martin Miller is a Reuters market analyst. The views expressed are his own)

• USD/JPY demand looks to have dried up following the Gotobi Tokyo fix

• Japanese importer buys took it up to 158.60 but no further

• Japanese exporters in wait at eye, with others hit bids thereafter

• To 158.06 EBS in Asia PM trading, tracks away from 200-DMA, Ichi cloud top

• 200-DMA up at 158.57, heavy from area, Ichimoku cloud 156.28-158.44

• Below 200 and 100-HMAs now, at 158.21 and 158.15, respectively

• Towards ascending hourly Ichimoku cloud now between 157.94-96

• Related comment , also ,
USD/JPY hourly:

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

• 1-month expiry USD/JPY implied volatility is low at 7.30, yet 1-month daily realised volatility is just 5.05

• Options price far more movement than spot is actually delivering - the 2.25 gap favours sellers

• The premium that sellers collect outweighs the moves they pay out on. 1-week implied is 5.6 vs 3.4 realised

• Persistently low realised volatility is weighing on all USD/JPY vanilla option prices

• However, 1-month risk reversal setbacks meet demand at 1.90 for JPY calls over puts

• Spot is stuck in a tight range, but risk reversals say the tail risk remains a lower USD/JPY, not a break higher
JPY implied vs realised vols


USD/JPY 25 delta risk reversals

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

• Cable rises to 1.3352 as pound strengthens on UK jobless rate fall

• 4.7% vs 4.9% previously. An increase to 5.0% was expected

• Ex-bonus pay growth 3.7% vs 3.6% f/c. 1.3352 is high since Friday

• 1.3306-1.3335 was Asia range (pre-UK data). 1.3300 was Monday low

• Resistance levels include 1.3371 (Friday's three-week peak) and 1.34

• UK data underpins expectation for BoE rate hike to 4% on Nov 5

GBPUSD

(Robert Howard is a Reuters market analyst. The views expressed are his own)

Oct 20 (Reuters) - Tokyo players see a USD/JPY cap in place ahead of 160.00. Despite this view, the pair refuses to fall by much, causing some frustration for yen bulls.

After falls from 163.99 to 155.20 between July 23-August 3 and 160.39 to 152.89 between September 2-9, USD/JPY upside has been limited to a high of 159.03 on September 24.

FX intervention in late July and official rhetoric following the early September G20 meetings have instilled the view that monetary authorities in Japan and the US could again intervene to buy yen on more USD/JPY strength , .

Fading expectations of a US Federal Reserve rate hike next week, and ongoing expectations of a Bank of Japan rate hike come December favour the yen. To wit, Totan Research/ICAP shows the probability of a December BOJ rate hike at 76% , , .

Japanese exporters, for their part, have recently been aggressively selling US dollars on upticks towards 159.00 for the current fiscal year and maybe beyond, countering still strong importer demand .

All said, the US dollar remains very bid as a haven amidst great geopolitical uncertainties. The Middle East war, the high crude oil prices (denominated in US dollars), prolonged Ukraine-Russia conflict, and widespread unrest in France have reinforced the dollar's shine.

Recent data on IMM CTAs showed a very large increase in US dollar holdings, though many question whether this is sustainable , .

Although the path of least resistance for USD/JPY may be down, moves towards 155 and even 150 may take longer than thought.
USD/JPY:

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

• AUD/USD flat Tue as markets calibrate confluence of global factors

• Curfews imposed across French cities amid widespread riots and looting

• Fears of U.S. tech stock meltdown ebbs temporarily, Nasdaq ends +1.1% Mon

• Brent crude +0.2% as Middle East risk negates potential increased RU supply

• Futures pricing implies 71.0% chance that RBA will hold OCR steady in Nov

• AUD still targets 0.6865 support zone, break would entrench downside trend

• RBA Deputy Governor Andrew Hauser speaks at Citi investment conference Wed

• Range Asia 0.6971-865 support 0.6865 0.6834, resistance 0.6988 0.7282
AUD Hourly Bollinger Study & DXY Daily 55/100/200-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Shares of Bellevue Gold fall as much as 5.2% to A$1.355, their lowest since August 5

• Stock logs its biggest intraday pct loss since September 21

• Gold explorer posts quarterly gold production of 35,585 ounces, down from 41,643 ounces in the previous quarter

• YTD, stock down 18.8%

(Reporting by Tejas Harish in Bengaluru)

• AUD/USD +0.5% wtd, traders reluctant to pursue serious downside test

• Pair has failed attempts to break cleanly below 52-WMA (currently 0.6947)

• Futures pricing implies 69.5% chance that RBA will hold OCR steady in Nov

• Fears of U.S. tech stock meltdown ebbs for now, Nasdaq finishes +1.1% Mon

• Brent crude -0.4% despite widening Houthi attacks on Saudi infrastructure

• RBA Deputy Governor Andrew Hauser speaks at Citi investment conference Wed

• Range Asia 0.6979-865 support 0.6865 0.6834, resistance 0.6988 0.7282
AUD Weekly 52-WMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• USD/JPY back up on 158 on late New York USD spunk, to 158.55 EBS

• Asia so far 158.50-60, holding in area of 200-DMA at 158.57

• Japanese exporter offers eyed above but Gotobi Tokyo fix, importer buys

• Exporter could wait till after any Tokyo fix demand sated

• Top of daily Ichimoku cloud in area too, cloud today 156.28-158.44

• Technically, 100-DMA at 159.44 likely cap, below since 160.39 September 2

• Support from 158.20 200-HMA, 100-HMA 158.15, hourly cloud 157.94-158.00

• Option expiries today 157.00-10 $923 mln, 158.00 $692 mln, 159.00 $1.1 bln

• No major changes in JGB-US rate differentials but BOJ Oct hike possibility?

• Still seen long shot but BOJ Ueda comments yesterday have some nervous

• Related comments , , , also

• US markets , , ,

• On BOJ Ueda , , for more click on [FXBUZ]

USD/JPY:

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

• NZD/USD +0.2% wtd, buoyed by spectre of higher OCR and improving sentiment

• Fears of U.S. tech stock meltdown abates for now, Nasdaq rallies 1.1%

• NZ Q3 CPI update due Thur, Reuters poll consensus +0.8% q/q, +3.8% y/y

• Futures pricing now implies 88.5% probability of 25 bps RBNZ hike Oct 28

• Brent crude -0.6% despite widening Houthi attacks on Saudi infrastructure

• NZD remains clear above 0.5634 21-DMA, may extend towards 0.5775 zone

• Range NZ 0.5661-635, support 0.5566 0.5485, resistance 0.5995 0.6012
NZD Daily 21/55/100-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

MUFG Research discusses the USD tactical outlook.

"The Fed is still widely expected to leave rates on hold this month after recent communication from officials, including Fed Chair Kevin Warsh, failed to signal any urgency to tighten policy again. The proximity of the US midterm elections may also discourage a back-to-back rate hike. If the Democrats take control of Congress, it could contribute at the margin to a further pullback in US yields and the USD," MUFG notes.

"The USD’s correction has also coincided with a moderation in investor optimism towards AI-related trades. Strong inflows into riskier US assets have helped to support the USD alongside higher US yields and the positive terms-of-trade shock from elevated energy prices. However, heavily overweight positioning leaves the USD vulnerable to a reversal when sentiment towards AI deteriorates," MUFG adds.

• AUD/USD +0.5% from Mon 0.6945 low as risk sentiment moderately improves

• Nasdaq +1.1% amid bargain-hunt buying of chip and AI related stocks

• Houthis strike Yemen government security force training camp

• WTI +2.2% to $103.65 a barrel in thin trade ahead of Oct 20 contract expiry

• AUD still targets 0.6865 support zone, break would open downside materially

• RBA Assistant Governor Kent sees signs that labour market is loosening

• RBA Deputy Governor Andrew Hauser speaks at Citi investment conference Wed

• Overnight range 0.69695-93 support 0.6865 0.6834, resistance 0.6988 0.7282
AUD Daily 21/100/200-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• GBP$ soft in NY afternoon trade, -0.22% at 1.3300; NorAm range 1.3339-1.3299

• USD goes bid as UST, global yields resumed climb; risk, tech/AI, regained vigor

• UK Unemployment earnings on Tuesday, CPI on Wednesday in focus for MonPol clues

• Oct 28 UK Autumn Budget of significance given UK inflation, growth conundrum

• GBP$ supt 1.3299 Monday low, 1.3268 Friday low, 1.3255/53 the 21/10-DMA

• Res 1.3348 Monday high, 1.3371 daily high Oct 16, 1.3406- 50% Fib of 1.3675-1.3137

Sterling Chart:

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