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Japan’s manufacturing sector contracted further in September, with the PMI finalized at 48.5, down from August’s 49.7. S&P Global’s Annabel Fiddes said the sector ended Q3 “on a weaker note,” as output and new orders declined at a faster pace, driven by softer demand across key markets such as China and the drag from US tariffs.

Weaker demand weighed on business confidence, leading firms to scale back activity. Employment expanded at the slowest pace since February, while purchasing activity dropped at the second-steepest rate since early 2024. The cautious stance underscores concern that the sector may “struggle to see much growth in the near term.”

Price dynamics offered some relief, with cost pressures “less pronounced” than earlier in the year. Still, selling prices rose at a "historically strong pace" as firms sought to protect margins.

Full Japan PMI manufacturing final release here.

Japan’s Q3 Tankan survey showed large manufacturers growing more confident, with the index rising from 13 to 14, in line with expectations and the highest since Q4 2024. While the manufacturing outlook held steady at 12, suggesting some softening ahead, sentiment remains resilient despite trade headwinds.

Non-manufacturing confidence also stayed firm, with the index unchanged at 34, beating forecasts, and the outlook improving to 28 from 27.

Large firms signaled robust investment plans, projecting a 12.5% increase in capital expenditure for the fiscal year to March 2026, up from June’s forecast of 11.5%.

The results suggest Japan’s economy is weathering tariff pressures and steady domestic demand continues to support activity. For the Bank of Japan, the data bolster expectations that further tightening is coming — the debate is less about if and more about when policymakers will move.

Full BoJ Tankan release here.

AUD/USD has risen 0.6% from its Tuesday low of 0.6572 as the US Dollar continued its slide. The Dollar struggle is partly linked to a potential US Government shutdown with Congress needing to agree to temporary funding before 04h00 GMT on Wednesday.

RBA Rate Hold Boosts Aussie Dollar

The Reserve Bank of Australia (RBA) decided to keep its main interest rate, known as the cash rate, unchanged at 3.6%. This decision was expected by the markets and indicates a more cautious approach by the central bank.

This careful stance is due to concerns that overall inflation is starting to creep up toward the top of the RBA's target range of 2% to 3%. Because of this decision, the chances of the RBA cutting rates at its next meeting in November are now much lower, which is helping to keep the Australian dollar strong.

According to LSEG data, markets are now pricing in a 60% probability of a rate hold from the RBA at the November meeting.

Source: LSEG

The recent rise in annual CPI inflation to 3% is causing uncertainty about whether it is just a temporary spike or a sign of deeper, lasting inflation problems.

Specifically, prices for housing-related items, like rent and new homes, showed renewed strength, which might suggest the housing market is reacting to the RBA's earlier rate cuts.

Furthermore, the sharp increase in prices for services, such as holidays, travel, and insurance, points to a rebound in consumer spending.

As things stand, the RBA would like to see inflation pushing lower toward the 2.5% mark and sustainably so. If this happens, there is a chance that a rate cut in November could yet materialize.

In the interim though, the Aussie Dollar should get a boost from the RBA decision and rhetoric.

US Data and Government Shutdown Now in Focus

The rest of the week will see attention shift to the US Dollar and its reaction to a potential US Government shutdown. A shutdown could lead to the NFP data release being delayed and that could bring about some form of volatility.

If temporary funding is agreed, then attention will immediately shift to NFP and jobs data from the US. A weaker NFP print could aid the AUD/USD to rise further and test the YTD high.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Technical Analysis - AUD/USD

From a technical point of view, AUD/USD is on a three day winning streak after bouncing off support at the 100-day MA.

Structure has been broken with Tuesday's daily candle closing above the recent swing high at 0.6600.

Further strengthening the case for further upside, is the bull flag breakout which occurred on Tuesday as well.

Immediate resistance rests at 0.6684 before the 0.6750 and 0.7000 psychological level comes into focus.

If AUD/USD pushes lower from here, immediate support rests at 0.6542, 0.6522 and 0.6500. A break below 0.6500 could open up a retest of the 200-day MA, which rests at the 0.6408 handle.

AUD/USD Daily Chart, September 30, 2025

Source: TradingView.com

The Japanese yen is stepping into the FX spotlight, battling the Australian dollar for top weekly performer — with the AUD lifted by the RBA’s hawkish pause and firm domestic data.

A rare sight in 2025, the yen is beginning to dominate broader currency performance, as fundamentals start to assemble in its favor.

Political momentum is shifting, with LDP contenders Takaichi and Koizumi pulling ahead in Friday’s LDP party leadership race and hinting at a possible renegotiation of Japan’s trade deal with the US.

Both stances, seen as less supportive of Abenomics and Ishibanomics’ era of ultra-low rates, fuel growing speculation that BoJ hikes may be closer than expected.

Economic data has been mixed for Japan — stronger GDP, firm retail sales and low unemployment point, even as some sectors still show weakness — inflation momentum building also gives some reasons for the BoJ to move.

Recent remarks from Noguchi and other officials underline that policy has entered a phase demanding “careful assessment,” as hawks and doves grow more divided.

With US rate differentials projected to narrow on the back of FOMC cuts, and the BoJ inching toward normalization, the yen’s case for strength into year-end looks interesting.

Let's explore USDJPY multi-timeframe charts (and a few other yen crosses) to see where the it stands.

USDJPY multi-timeframe analysis

Daily Chart

USDJPY Daily Chart, September 30, 2025 – Source: TradingView

Combined with a sudden u-turn in the USD, the yen started to price a more hawkish BoJ policy going forward forming the most consistent selloff in the pair since May 2025.

The three daily candles took prices from a failed test of the 150.00 handle (149.960 Monday highs) to two handles lower as we speak.

The 50-Day Moving average is coming at the mid-range pivot and will be one of the last level for USDJPY bulls to show up.

Daily momentum is turning negative, and when looking at these candles closing at their lows, it seems that this is the beginning of a move.

Of course, the 146.00 to 150.00 range holds until it breaks, but fundamentals could be pointing to a breakout

USDJPY 2H Chart and levels

USDJPY 2H Chart, September 30, 2025 – Source: TradingView

The pair is evolving in an intraday steep downward channel, with prices now becoming oversold.

With the tight price action, it would be surprising to see a sudden reversal higher (if it does, look for a breakout of the channel) – The overall bearish flows and daily outlook are strong so keep that in mind.

Month-end flows could also be coming into play – Watch the reactions at a potential break of the 50-Day MA (147.75).

Levels of interest for USDJPY trading:

Resistance Levels

• Top of channel and 4H MA 50 – 148.350
• May range extremes and past week highs from 148.70 to 149.50
• 150.00 psychological resistance
• 150.90 July highs

Support Levels

Immediate pivot, mid-range and 50-day MA 147.80 to 148.00 (testing)

• 146.50 range support
• 145.00 psychological support
• 142.35 low of the May range, main support

Other yen crosses showing at key levels

GBPJPY now way below 200.00

GBPJPY 4H Chart, September 30, 2025 – Source: TradingView

A gigantic weekly bearish divergence in CHFJPY

CHFJPY Weekly Chart, September 30, 2025 – Source: TradingView

Safe Trades!

AUDUSD: ⬆️ Buy

• AUDUSD reversed from support area
• Likely to rise to resistance level 0.6700

AUDUSD currency pair recently reversed from the the support area between the support level 0.6525, support trendline from April and by the 61.8% Fibonacci correction of the upward impulse C from the end of August.

The upward reversal from this support area created the daily Japanese candlesticks reversal pattern Morning Star.

Given the clear daily uptrend and the strongly bullish Australian dollar sentiment seen across the FX markets today, AUDUSD can be expected to rise to the next resistance level 0.6700 (top of the previous wave C).

Gold spiked to new record high at $3871 on Tuesday, in extension of Monday’s strong acceleration higher when the metal advanced 2%, in a biggest daily gain since May 6.

Mounting concerns about potential US government shutdown on Oct 1 and expectations for further Fed rate cuts sparked fresh wave of strong safe-haven demand.

The yellow metal extended its larger and steep uptrend in August after a three-month consolidation, with strong acceleration in September resulting in the massive gains (gold was up around 11% for the month.

Worsening geopolitical situation, fragile conditions in most developed economies and deepening political crisis in the number of countries, contribute to the cocktail of factors that continue to prompt investors into safety.

The fact that bulls took only six days to rise from $3700 to $3800 and rose near $3900 in just two days, points to the strength of bullish sentiment and a pace of metal’s price rise.

Bulls already eye magic $4000 barrier, which, I believe will be reached before the end of the year.

Monday’s pullback from new all-time high, could be described as limited correction of strong rally previous day and positioning for fresh push into uncharted territory, as initial and solid supports at $3800 zone contained today’s dip, keeping broader bullish bias and subsequent bounce has so far retraced the largest part of today’s correction.

Focus remains at the upside, with $3871 peak being immediate target ahead of psychological $3900.

However, caution on developments with US government, as well as potential month-end profit-taking.

Res: 3871; 3880; 3900; 3920
Sup: 3841; 3830; 3820; 3800

No matter how strong the trend, corrections are inevitable. The EURUSD pullback was driven by the closing of speculative longs after the Fed cut the federal funds rate, the fall in US stock indices, and strong macroeconomic data. However, as soon as investors bought up the S&P 500 dip and Fed officials started talking about continuing the monetary policy easing, the euro spread its wings.

Jerome Powell and his colleagues are ready to rescue the cooling labour market and ignore accelerating inflation. As a result, the futures market gives a 91% probability of a cut in the fed funds rate in October and an 81% chance of another cut to 3.75% in December. Moreover, the derivatives estimate a 27% probability of a rate cut to 3.5% by the end of the year.

ECB Chief Economist Philip Lane said that the chances of inflation in the eurozone returning to low pre-pandemic levels are slim. The probability of it rising significantly above the 2% target is negligible. Such rhetoric suggests that the European Central Bank has ended its cycle of monetary policy easing.

Thus, the rate differential between the ECB and the Fed will narrow, reducing the yield spread between US and German bonds. Historically, this has resulted in the euro rising against the dollar.

The rally in US stock indices is putting pressure on the USD. Foreign investors did not flee the US market after the White House introduced tariffs. They increased their stock holdings to $18 trillion, equivalent to 30% of the value of all US stocks. At the same time, non-residents are hedging currency risks by selling the dollar. As a result, a direct correlation between the euro and stock indices has become apparent.

As long as US stock indices continue to climb and the Fed lowers rates amid a cooling labour market, the chances of euro growth will increase. The main risks are a pleasant surprise from US employment in September and consolidation of the S&P 500 against the backdrop of seasonal volatility in October. A shutdown could be the reason for this.

Markets

Today’s release of some national inflation figures points, if any, to slight upside risks for tomorrow’s euro area outcome. Consensus expects upward price pressures to intensify from 2% in August to 2.2% while the core measure should match last month’s 2.3%. Both being above the ECB’s 2% target validates the central bank’s steady-barring-shocks approach. As ECB’s VP de Guindos put it yesterday: “The ECB’s rates level at 2% is adequate under the current circumstances.” Going into the individual numbers, a French miss (1.1% y/y vs 1.3% expected, up from 0.8% in August) was offset by both Italy and Germany. Prices in the former country rose 1.8% vs a 1.7% consensus while German inflation quickened to 2.4% from 2.1%, to be compared to 2.2% analysts had penciled in. Germany’s statistical office referring to the national (non-harmonized) CPI showed that price gains in the services sector and a smaller drag coming from energy supported the inflation uptick. Goods inflation meanwhile intensified to 1.4%, an 18 month year high on par with December 2024. It barely made a dent in FX and FI markets. German rates fluctuated in a 2 bps trading range and currently trade flat on the day. The euro is similarly lacking inspiration. EUR/USD’s intraday swing amounts to half a big figure with the pair currently trading slightly higher than yesterday in the 1.174 area. JPY and AUD show some of the biggest moves, with the former benefiting from rising rate hike expectations and the latter on signs of a long(er) break in the easing cycle. US Treasuries outperform marginally with yields down around 2 bp across the curve. Stock markets are treading water.

The muted moves may be rooted in uncertainty going into a midnight (US time) deadline to prevent the US government from shutting down for the first time in seven years. House Speaker Johnson said he was skeptical on a last-minute deal, echoing Vice-President Vance yesterday. President Trump repeated his threat that a lot of employees would be sacked instead of being furloughed. If anything, it adds do the downside risks the labour market many at the Fed say is facing. Fed vice chair Jefferson was the latest to do so, though he added that it comes with upside risks to inflation. He sees disinflation to resume after this year and to return to 2% in the coming years. Jefferson supported this month’s 25 bps rate cut but refrained from making calls for the future. Fed Collins said she doesn’t expect the labour market to soften much further but sees some risk of a more meaningful unemployment increase. According to the Boston Fed president it may be appropriate to ease a bit further this year.

News & Views

The KOF Swiss economic institute’s economic barometer rebounded from a 23-month low (96.22) in August to 97.96 in September. The barometer remains below its medium-term average, continuing to paint a subdued picture for the Swiss economy. Separately, the Swiss National Bank announced that it sold CHF 5.1bn in the second quarter, its biggest interventions since Q4 2023 and the largest amount of selling since Q1 2022. Unwanted CHF-strength in the wake of US liberation day triggered the FX interventions. The data came a day after Switzerland and the US Treasury released a joint declaration in which they aligned views on FX matters. Both promised not to “target exchange rates for competitive purposes” but also recognised that such market interventions are a valid tool for addressing currency volatility or “disorderly” moves.

Polish inflation remained steady on a monthly basis for a second consecutive month in September. Preliminary details showed rising electricity, gas & other prices (+0.2% M/M) cancelling out lower prices for food & non-alcoholic drinks (-0.5% M/M) and for fuel (-0.4% M/M). In annual terms, price growth was also unchanged at 2.9% Y/Y. Compared with September of last year, fuel prices fell by 4.9% while prices for food & non-alcoholic drinks and for electricity, gas & other rose by respectively 4.2% and 2.4%. Detailed and final figures will be published on October 15 with the National Bank of Poland releasing its core inflation numbers the day after.

US consumer confidence fell in September, with Conference Board index slipping to 94.2 from 97.8, missing expectations of 95.9 and marking the weakest reading since April. Present Situation Index dropped -7 points to 125.4, its largest decline in a year. Expectations Index edged lower by -1.3 points to 73.4, remaining below the recession threshold of 80 for the eighth consecutive month.

According to Stephanie Guichard of the Conference Board, the present situation component registered its largest drop in a year, with consumers less positive on business conditions and increasingly cautious about job availability. She noted that the appraisal of current job openings has now declined for nine straight months to a multi-year low.

While consumers were somewhat more pessimistic on future jobs and business conditions, optimism over future incomes improved. That helped limit the drop in the Expectations Index, but overall sentiment points to lingering household caution heading into Q4.

Full US consumer confidence release here.