EUR/USD is trying to stabilise near 1.1450 after last week’s Fed-driven selloff. However, technical support does not remove the pressure from elevated US yields and Europe’s energy risks.
The Federal Reserve raised rates on Wednesday and left the door open to further tightening. The Bank of Japan also raised rates, while the Bank of England held steady. Together, those decisions provide the backdrop for this trading week ahead.
This week’s selected events include the Swiss National Bank’s decision, Australian employment data and two central bank speeches. Meanwhile, the dollar’s gains against the euro, Canadian dollar and yen deserve separate explanations.
Why the Fed’s Guidance Still Matters
The Fed’s message extended beyond the rate increase itself. It also challenged expectations that this would be a single hike rather than the start of further tightening.
The US 10-year Treasury yield approached 5% as markets reassessed the outlook. Higher yields can make dollar assets more attractive relative to alternatives. However, a currency move alone does not establish the size or direction of investment flows.
USD/CAD: Rates and Trade Tensions
USD/CAD rose last week as the Fed’s message supported the dollar. Meanwhile, US-Canada tariff tensions added uncertainty for the Canadian currency.
These are separate pressures. Interest-rate differences affect relative returns, while trade tensions can change expectations for growth and cross-border activity.
As a result, a Fed-only explanation misses part of this pair’s backdrop. Trade developments remain relevant even when US rates dominate the headlines.
EUR/USD: Support Meets an Energy Problem
EUR/USD is trying to stabilise near 1.1450. That level previously acted as resistance, and it is now attempting to hold as support.
The stochastic oscillator also shows oversold conditions. This momentum indicator compares the closing price with its recent trading range. However, an oversold reading does not guarantee a rebound or establish that selling has ended.
A technical recovery would not resolve the euro’s wider challenges. Elevated US yields remain part of the picture, alongside uncertainty about European energy supplies.
Europe relies on imported energy, so supply disruptions can affect business costs and household spending. Higher costs can also raise inflation while weakening demand. As a result, energy risks complicate both the growth outlook and the ECB’s policy choices.
The distinction matters: support describes recent price behaviour, while yields and energy risks describe the economic backdrop. Neither alone provides a complete explanation of the pair.
USD/JPY: Why a BoJ Hike Did Not Lift the Yen
USD/JPY rose last week despite the Bank of Japan’s rate increase. The Fed’s stronger tightening message helps explain that contrast.
A rate hike does not automatically strengthen a currency. Instead, markets weigh the decision against prior expectations and the guidance that follows. The relative outlook for US and Japanese rates therefore matters alongside each bank’s latest action.
That rate gap also helps explain interest in carry trades. In a carry trade, an investor borrows in a lower-yielding currency to gain exposure to a higher-yielding asset.
However, exchange-rate moves can outweigh the interest advantage. Last week’s price action alone does not prove that new carry-trade flows caused the yen’s decline.
The 50-week exponential moving average provides additional technical context around resistance. Like EUR/USD’s support zone, it describes market structure rather than guarantees the next move.
Key Events This Week (ET)
This is a selected calendar, not an exhaustive list of global releases. All times use Eastern Time and may change.
- Mon Sep 21, 11:10 PM: RBA Gov Bullock Speaks (AUD)
- Wed Sep 23, 9:30 PM: Employment Change · Unemployment Rate (AUD)
- Thu Sep 24, 3:30 AM: SNB Policy Rate · Monetary Policy Assessment (CHF)
- Thu Sep 24, 4:00 AM: SNB Press Conference (CHF)
- Fri Sep 25, 5:15 AM: BOE Gov Bailey Speaks (GBP)
Thursday brings the SNB’s decision and press conference. Beyond the rate itself, its assessment provides context on inflation and Swiss economic conditions.
Australian employment data on Wednesday adds information about the labour market. Meanwhile, the RBA and BoE speeches may clarify policymakers’ views. Their significance depends on what they reveal relative to expectations.
One Dollar, Three Different Currency Relationships
The three pairs share exposure to the dollar, but they do not quote it in the same position.
EUR/USD expresses the euro’s value in dollars. By contrast, USD/CAD and USD/JPY express the dollar’s value in Canadian dollars and yen.
All else equal, dollar strength means a lower EUR/USD and higher USD/CAD and USD/JPY. Therefore, describing all three pairs as rising or recovering together can obscure what is happening.
The local influences also differ. European energy risks, Canadian trade tensions and Japanese rate expectations each add context to the shared Fed story.
Likewise, stable US yields would not automatically reverse those local pressures. The useful distinction is between a change in price and a change in the underlying economic outlook.
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Frequently Asked Questions
Which Events Feature in This Week’s Forex Calendar?
The selected calendar includes the SNB decision, Australian employment data and speeches from the RBA and BoE governors. However, their importance varies by currency pair and by how much they surprise markets.
Why Does 1.1450 Matter for EUR/USD?
The area previously acted as resistance, and EUR/USD is now trying to establish support there after the selloff. However, stabilisation does not remove the wider pressures from US yields and European energy risks.
Why Did the Yen Weaken Despite the BoJ Hike?
The Fed delivered a stronger tightening message than the BoJ. As a result, the relative policy outlook helps explain why the yen weakened despite Japan’s rate increase.
Do Higher US Yields Always Mean a Stronger Dollar?
No. Higher yields can improve relative returns, but their cause also matters. Inflation concerns, growth expectations and developments abroad can change how currencies respond.
Disclaimer
This article serves educational purposes only. It does not constitute investment advice, a recommendation, or a solicitation to trade any financial instrument. ThinkCapital’s challenge programs use simulated trading in a virtual environment; they do not place real capital in live markets. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Technical levels discussed here describe current market structure; they do not predict future results.
