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Yen staged a broad rebound today after the BoJ held rates steady at 0.50% but delivered a hawkish signal with two members dissenting in favor of a hike. The shift in the board underlined growing momentum toward policy normalization. At the same time, the Nikkei pulled back sharply from record highs reached earlier this week, reflecting investor caution around the prospect of tighter conditions.

The changing balance within the BoJ highlights a gradual move closer to resuming rate hikes, even as inflation pressures ease. Yet, political developments could complicate the path ahead. The departure of Prime Minister Shigeru Ishiba and uncertainty over his successor may encourage policymakers to tread carefully, waiting for a clearer political backdrop before committing to a move.

In currency markets, Kiwi remains the weakest performer of the week, weighed down by a shock contraction in Q2 GDP that fueled speculation of a deeper easing cycle by the RBNZ. The Aussie also lags following soft labor market data. Sterling is under pressure after the BoE left policy unchanged, with two members voting for a cut. By contrast, Swiss Franc leads the pack, followed by Loonie and Euro. Dollar and Yen are holding mid-table, though today’s rebound leaves the Yen better positioned than earlier in the week.

Looking ahead, focus will shift to upcoming data releases including Germany’s PPI, UK retail sales, and Canadian retail sales. While these could generate short-term volatility, they are unlikely to provide lasting direction heading into the weekend, with broader themes of central bank divergence still dominating market sentiment.

In Asia, at the time of writing, Nikkei is down -0.27%. Hong Kong HSI is down -0.02%. China Shanghai SSE is up 0.14%. Singapore Strait Times is down -0.17%. Japan 10-year JGB yield is up 0.04 at 1.641. Overnight, DOW rose 0.27%. S&P 500 rose 0.48%. NASDAQ rose 0.94%. 10-year yield rose 0.028 to 4.104.

BoJ holds with two members calling for hike, starts selling ETFs and J-REITs

The BoJ kept rates steady at 0.50% in September, but the 7–2 vote revealed a growing hawkish bias. Naoki Tamura and Hajime Takata broke ranks to support a rate increase, citing upside risks to inflation and progress toward achieving the 2% price stability target. Takata said that Japan has more or less achieved its inflation goal, while Tamura argued that the key rate should move closer to neutral given skewed risks to the upside.

Alongside the decision, the BoJ unveiled plans to shrink its massive balance sheet by selling assets. The Bank will sell ETFs at a pace of JPY 330B annually and J-REITs at JPY 5B, with the principle of minimizing market disruption. With its balance sheet at 125% of GDP—far larger than other major central banks—the BoJ’s move marks a notable shift toward normalization, even as rates remain unchanged for now.

Japan core CPI Slows to 2.7%, lowest since late 2024

Japan’s consumer inflation eased notably in August, with both headline CPI and core CPI (excluding fresh food) falling to 2.7% yoy from 3.1% in July, the lowest since November 2024. Despite the slowdown, inflation has remained above the BoJ’s 2% target for over three years.

Core-core CPI, which strips out both fresh food and energy and is seen as a key gauge of underlying price dynamics, ticked down to 3.3% yoy from 3.4%. The moderation suggests a gradual cooling in inflationary pressures, though price growth remains elevated relative to historical norms.

Food prices continued to drive the cost-of-living squeeze, with processed food up 8.0% yoy, though slower than July’s 8.3%. Rice inflation also eased to 69.7% yoy from an eye-watering 90.7%. Energy prices provided some relief, falling -3.3% yoy after a -0.3% drop in July.

NZ exports jump 23% in August, imports flat, deficit at NZD -1.2B

New Zealand recorded a goods trade deficit of NZD 1.2B in August as imports outpaced a sharp rise in exports. Goods exports climbed NZD 1.1B, or 23% yoy, to NZD 5.9B, supported by strong shipments to major partners. Imports slipped slightly, falling NZD 30m (-0.4% yoy) to NZD 7.1B, but remained elevated enough to keep the monthly balance in deficit.

Export growth was broad-based, with China (+35% yoy, the EU (+52%), Australia (+17%), and the U.S. (+14%) all showing strong gains. Japan was the notable exception, where exports fell -11% yoy, driven by a NZD 28m decline in milk powder, butter, and cheese.

On the import side, flows from China rose 6.2% yoy, while purchases from the EU fell -6.0% and from the U.S. declined -1.3%. The largest pullback came from South Korea, where imports dropped -32% yoy.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 200.00; (P) 200.64; (R1) 201.22; More...

GBP/JPY spikes higher to 201.24 but quickly retreated. Intraday bias remains neutral first. Further rise is expected as long as 197.93 support holds. Firm break of 201.24 will target 100% projection of 180.00 to 199.79 from 184.35 at 204.14. However, considering bearish divergence condition in both D and 4H MACD, firm break of 197.93 will indicate bearish reversal and bring deeper fall back to 195.01 support first.

In the bigger picture, price actions from 208.09 (2024 high) are seen as a correction to rally from 123.94 (2020 low). The pattern might still extend with another falling leg. But in that case, strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. Meanwhile, decisive break of 208.09 will confirm long term up trend resumption.

The BoJ kept rates steady at 0.50% in September, but the 7–2 vote revealed a growing hawkish bias. Naoki Tamura and Hajime Takata broke ranks to support a rate increase, citing upside risks to inflation and progress toward achieving the 2% price stability target. Takata said that Japan has more or less achieved its inflation goal, while Tamura argued that the key rate should move closer to neutral given skewed risks to the upside.

Alongside the decision, the BoJ unveiled plans to shrink its massive balance sheet by selling assets. The Bank will sell ETFs at a pace of JPY 330B annually and J-REITs at JPY 5B, with the principle of minimizing market disruption. With its balance sheet at 125% of GDP—far larger than other major central banks—the BoJ’s move marks a notable shift toward normalization, even as rates remain unchanged for now.

Full BoJ statement here.

Key Highlights

• USD/JPY started a fresh increase after a sharp drop to 145.50.
• It cleared a major bearish trend line with resistance at 147.50 on the 4-hour chart.
• The Fed’s interest rate cut sparked swing moves, but ultimately the bulls had the upper hand.
• EUR/USD and GBP/USD started a downside correction.

USD/JPY Technical Analysis

The US Dollar declined sharply against the Japanese Yen during the Fed rate decision. USD/JPY spiked to 145.50 before there was a sharp recovery.

Looking at the 4-hour chart, the pair climbed above the 146.50 and 147.00 resistance levels. More importantly, the pair cleared a major bearish trend line with resistance at 147.50. It opened the doors for more gains above the 50% Fib retracement level of the downward move from the 149.13 swing high to the 145.48 low.

The pair settled above the 147.50 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour).

On the upside, the pair could face resistance near the 148.25 level or the 76.4% Fib retracement level of the downward move from the 149.13 swing high to the 145.48 low. The first major hurdle for the bulls could be 148.50.

A close above 148.50 could set the pace for a steady recovery wave. In the stated case, the pair could rise toward 149.20, above which the bulls could aim for a move toward 148.65. Any more upsides could send the pair toward 150.00.

On the downside, immediate support is 147.50. The next key area of interest might be near the 147.20 zone. The main support could be 146.50. Any more losses might increase selling pressure and send USD/JPY toward 146.00.

Looking at EUR/USD, the pair failed to continue higher above 1.1920 and recently started a downside correction.

Upcoming Key Economic Events:

• BoJ Press Conference.
• ECB's Sleijpen speech.
• EcoFin Meeting.
• Eurogroup Meeting.

Japan’s consumer inflation eased notably in August, with both headline CPI and core CPI (excluding fresh food) falling to 2.7% yoy from 3.1% in July, the lowest since November 2024. Despite the slowdown, inflation has remained above the BoJ’s 2% target for over three years.

Core-core CPI, which strips out both fresh food and energy and is seen as a key gauge of underlying price dynamics, ticked down to 3.3% yoy from 3.4%. The moderation suggests a gradual cooling in inflationary pressures, though price growth remains elevated relative to historical norms.

Food prices continued to drive the cost-of-living squeeze, with processed food up 8.0% yoy, though slower than July’s 8.3%. Rice inflation also eased to 69.7% yoy from an eye-watering 90.7%. Energy prices provided some relief, falling -3.3% yoy after a -0.3% drop in July.

New Zealand recorded a goods trade deficit of NZD 1.2B in August as imports outpaced a sharp rise in exports. Goods exports climbed NZD 1.1B, or 23% yoy, to NZD 5.9B, supported by strong shipments to major partners. Imports slipped slightly, falling NZD 30m (-0.4% yoy) to NZD 7.1B, but remained elevated enough to keep the monthly balance in deficit.

Export growth was broad-based, with China (+35% yoy, the EU (+52%), Australia (+17%), and the U.S. (+14%) all showing strong gains. Japan was the notable exception, where exports fell -11% yoy, driven by a NZD 28m decline in milk powder, butter, and cheese.

On the import side, flows from China rose 6.2% yoy, while purchases from the EU fell -6.0% and from the U.S. declined -1.3%. The largest pullback came from South Korea, where imports dropped -32% yoy.

Full NZ trade balance release here.

Key insights from the week that was.

In Australia, the August labour force survey validated the judgement that the labour market is softening once again. The three-month average pace of employment growth has decelerated to 1.8%yr, down from 2.5%yr in February. Underlying the headline trend, growth in ‘care economy’ employment has throttled back from its rollicking pace, while the market sector is slowly recuperating. A fall in participation allowed the unemployment rate to hold steady at 4.2% in August, but an upward drift is likely in coming months. While the downtrend in underemployment is seemingly at odds with the broader trend, this appears to be tied to a shrinking part-time share of total employment growth not an increase in labour utilisation by employers.

The August report is unlikely to shift the calculus for the RBA, with the Bank having already acknowledged that labour market conditions have “eased slightly” in its August decision communications. Westpac continues to expect the next RBA rate cut to be delivered in November, followed by two additional 25bp cuts in the first half of 2026.

Before moving offshore, a final note on the domestic manufacturing sector. The Q3 Westpac-ACCI Survey of Industrial Trends revealed conditions in the sector deteriorated into the second half of the year, the Actual Composite slipping from 51.5 in Q2 to a contractionary read of 48.8 in Q3. This is consistent with private sector demand tracking a gradual but patchy recovery – with falling orders and weak output. Despite this, manufacturers’ optimism over the outlook is unwavering – the Expected Composite currently sits at an elevated 58.1. There is a risk these strong expectations are not met, especially if the economic recovery remains sluggish and uneven.

Over in New Zealand, GDP surprised materially to the downside in Q2, declining 0.9% in the quarter to be 0.6% lower over the year (WBC f/c -0.4%, -0.1%yr). Our New Zealand Economics team believe the RBNZ are likely to assess there is too much excess capacity in the economy and consequently accelerate the final stage of the easing cycle to counter the trend. The RBNZ is now forecast to cut by 50bps at their October meeting and a further 25bp in November to 2.25% (previously we expected two 25bp cuts to a low of 2.50%). The trough rate for policy is expansionary, and so momentum should pick up into 2026. Monetary policy will likely need to be rebalanced from late-2026, but the precise timing will depend on the pulse of the economy over the coming 6-12 months.

Further afield, the focus was on major central banks.

The FOMC cut the fed funds rate by 25bps to a mid-point of 4.125% as expected at the September meeting. The guidance in the statement and press conference made clear that risk management is the Committee’s priority, while the revised forecasts highlighted the degree of uncertainty that remains over the outlook. On a median basis, the updated forecasts are sanguine and consistent with monetary policy being effective in managing inflation and demand. GDP growth has been revised up. It is now only expected to be below trend in 2025 at 1.6% then at trend through 2026-2028, circa 1.8%. The unemployment rate is consequently forecast to peak at just 4.5% in late-2025 before edging lower through 2026-2028 to the ‘longer run’ full employment rate of 4.2%. Inflation is not expected to hinder the FOMC’s ability to manage demand risks, with PCE inflation forecast to abate from around 3.0% at end-2025 to 2.6% by late-2026 then 2.1% at the close of 2027. While the return of inflation to the medium-term target over the forecast period is ‘by design’, taken together the activity and inflation forecasts signal the consensus view of the Committee is that tariff’s effect on inflation is a one-off and that services inflation will continue to abate. This would allow the fed funds rate to be cut to 3.4% at end-2026 and 3.1% by end-2027 – a broadly neutral rate – on the FOMC’s expectation.

We see conflicting risks to the FOMC’s forecasts, believing that economic growth and the labour market are likely to come in weaker than the Committee are forecasting for 2025-2027, but also that inflation will show greater persistence. In the absence of recession, this mix is arguably most likely to result in a need to hold to a modestly restrictive stance through the forecast horizon. Whether our current 3.875% low for the cycle or a rate closer to neutral is seen over the coming 12 to 18 months will depend on the trajectory of the respective labour market / inflation trends away / to the FOMC’s mandate. Only the data flow will be able to adjudicate on progress and guide on the evolving risk outlook.

North of the border, the Bank of Canada also cut rates by 25bps to 2.50% as tariffs continue to affect activity while inflation pressures abate. The Governing Council assess that "shifts in trade continue to add costs"; how this dynamic impacts activity and inflation will determine future policy steps.

Across the pond, the Bank of England deliberated on the latest labour market and inflation data and decided to hold the bank rate at 4.0% in a 7-2 split decision. The statement suggests the MPC remain attuned to upside inflation risks – both "existing or emerging". The August CPI gave support for this approach, price growth accelerating to 0.3% in the month while the annual figure remained at 3.8%. Services inflation remains stubbornly near 5.0%yr, printing at 4.7%yr in August.

The MPC will continue to take a 'gradual and careful' approach to further easing, with the timing to depend on progress with disinflation and downside risks to activity. We view a one cut per quarter pace as a fair expectation; though, if inflation remains sticky, there is a risk of the November cut being delayed. The MPC also decided to slow the pace of quantitative tightening in their annual review; members now expect to reduce the balance sheet by GBP70bn a year from GBP100bn previously. Of the GBP70bn, around GBP21bn will be through active sales and the rest through bonds maturing. The decision follows volatility in Gilt markets and a similar decision by the Bank of Japan earlier this year.

A final point on China. This week’s August data round highlights that, while continuing to experience success with trade and despite burgeoning equity market momentum, consumer-related sub-sectors of China’s economy remain weak and susceptible to downside risks. Most notably, new home prices declined again, continuing a 27-month long trend, and property investment’s contraction accelerated, now down 12.9%ytd. The year-to-date gain for total fixed asset investment also deteriorated to just 0.5%, well down on 2024’s 3.3%. Note, this outcome is only partly due to the moribund state of housing construction; key high-tech manufacturing sectors have pulled back on current investment following rapid expansion over recent years, their focus now turning to the effective and profitable implementation of new capacity. At this stage in China’s economic development, continued rapid growth in new manufacturing capacity is unsustainable; equally, the contribution from trade must moderate. As such, it is important October’s Plenum deliver a consumer centric five-year plan for 2026-2031, with an immediate focus on ending property price and investment declines and means to fuel confidence over future income growth. Without such steps, GDP growth in the mid 4%’s from 2026 will likely prove unsustainable, as discussed in our September Market Outlook.

Gold and Silver are subject to immediate pressure as the US Dollar regains strength and reputation after yesterday's FOMC meeting.

The challenged independence of the Fed was a major driver behind the immense rally metals enjoyed from late August into early September, as Powell’s shift in tone from the Jackson Hole conference cast doubt on the Fed’s consistency amid still high inflation.

Yet the dovish stance advocated by Bowman and Waller, seen as President Trump's protege-appointees ahead of the Sep FOMC—was vindicated by subsequent NFP misses and the downward revisions in BLS data.

This is leading to the Federal Reserve regaining back some of its lost confidence throughout the past few months.

Dollar Index and Metals comparative Performance since beginning August, September 18, 2025 – Source: TradingView

Silver rallied 18.67% from its July 31st trough to its Tuesday peak, while Gold surged from $3,268 on July 30th to fresh all-time highs at $3,707.

Despite the ongoing pullback, prices remain near their highs.

Still, the balance is tilting towards a more neutral trend: With Powell delivering a less dovish message than markets had priced in, the renewed resilience of the US Dollar could set the stage for tighter price action ahead.

Let's dive into two timeframe charts for both Gold (XAU/USD) and Silver (XAG/USD) to see where the current trading takes us and where to look going forward.

Gold and Silver two-timeframe picture

Gold (XAUUSD) Daily Chart

Gold (XAUUSD) Daily Chart, September 18, 2025 – Source: TradingView

Gold responded remarkably to the technical-Fibonacci induced resistance mentioned in our most recent Gold analysis.

We precedently expressed how overbought levels don't imply tops, particularly amid strong performance and momentum.

However, Daily RSI is starting to shape downwards and may not help to sustain the current levels.

There is still an ongoing consolidation that is happening from the intermediate lows, which demands a closer look.

Gold (XAUUSD) 2H Chart and levels

Gold (XAUUSD) 2H Chart, September 18, 2025 – Source: TradingView

Selling momentum is currently stalling but the bigger timeframe outlook is showing signs of slowdown within the current trend, particularly when seeing the broken upward trendline that led to the new $3,707 All-time Highs.

Look for breakouts either above or below the Micro support and resistance zones, with their levels detailed just below.

Levels of interest for Gold trading:

Support:

• Micro support $3,620 to $3,630
• Previous ATH and now long-term Pivot around $3,500 (+/- $15)
• Previous Range Highs $3,400 to $3,450 (minor support)
• $3,300 Major Support
• $3,000 Main psychological level

Resistance and potential technical targets (due to all-time highs, can only use potential targets):

• Micro resistance $3,660 to $3,675
• FOMC and All-time highs Highs $3,707
• Fibonacci-Extension 1 from April Lows to April highs ($3,640 to $3,705) (Immediate resistance)
• Potential, Fibonacci-Extension 2 from 2018 to Oct 2024 induced target: $3,750 to $3,815 (Purple square on Weekly)

Silver (XAGUSD) Daily Chart

Silver (XAGUSD) Daily Chart, September 18, 2025 – Source: TradingView

Since our most recent Silver Analysis, prices did effectively break out of its daily upward channel but found technical resistance (to complement the fundamental resistance) at the higher bound of the Higher timeframe channel (in Blue).

Look at the Daily RSI also showing some type of divergence – Overall, despite the action still hanging at the highs, it looks like some intermediate correction might come into play.

Let's have a closer look.

Silver (XAGUSD) 2H Chart and levels

Silver (XAGUSD) 2H Chart, September 18, 2025 – Source: TradingView

The selling from this yesterday to this morning's session has stalled a bit and short-term momentum is back to neutral.

Prices are now contained between an short-term resistance and support zone, in the ongoing $41.20 to $42 range.

Levels to watch for Silver (XAG) trading:

Resistance Levels:

• $42 psychological level and micro-resistance
• 50-Period MA 50 42.17
• $43 to $44 resistance (Most recent peak $42.97)
• August 2011 $44.25 top

Support Levels:

• Micro resistance around $41.20
• $39.50 to $40 key pivot zone
• $38.75 to $39 Key levels
• 2012 Highs Support around 37.50

Safe Trades!

USDCHF: ⬆️ Buy

• USDCHF reversed from support zone
• Likely to rise to resistance level 0.8000

USDCHF recently reversed up from the support zone located between the pivotal support level 0.7865 (which stopped the sharp downtrend in June), lower daily Bollinger Band and the support trendline of the daily down channel from July.

The upward reversal from this support zone will mostl likely form the daily Japanese candlesticks reversal pattern Morning Star – if the price closes today near the current levels.

Given the strength of the support level 0.7865 and the oversold daily Stochastic, USDCHF can be expected to rise to the next round resistance level 0,8000 (former support from August).

The Kiwi’s slide has been one that hasn't been seen in a while, with NZDUSD dropping 2% in just two sessions.

The pair had initially climbed ahead of the FOMC, driven by dovish concerns around the Fed and sudden Dollar-hedging that briefly pressured the DXY (sending the US Dollar down, hence the pair shooting upwards).

However, Powell’s balanced tone quickly flipped that narrative, erasing the priced-in dovishness observed in the SEP, dot plot, and FOMC statement.

“You can think of this, in a way, as a risk management cut,” Powell noted, striking a cautious stance around future cuts that steadied the USD.

There are still 25 bps of cuts priced at each of the two meetings left in 2025.

Strong US Jobless Claims (231k vs 240K exp) this morning reinforced that shift, further fueling a V-shaped reversal in the greenback.

Coupled with New Zealand’s atrocious GDP miss (-0.9% vs -0.3% q/q), the Kiwi was left in dismay, driving the pair sharply lower.

The current move is reflecting the repricing of more cuts for the RBNZ as the data has been very volatile for New Zealand throughout the year.

Expectations for a rate cut at the RBNZ upcoming meeting were at 82% last week and a 25 bps cut is now fully priced, with some extra premium in case of a larger 50 bps.

The NZ OCR is at 3% and the upcoming meeting will be happening on October 8th.

Let's have a look at NZDUSD through a multi-timeframe outlook to see where this takes the major pair.

A parenthesis on the DXY chart: Look at its V-Shape reversal since yesterday!

DXY 1H Chart, September 18, 2025 – Source: TradingView

NZDUSD 8H Chart

NZDUSD 8H Chart, September 18, 2025 – Source: TradingView

The downward shaping RSI right ahead of the FOMC was well located: Prices reached the 0.60 resistance before getting slammed lower as the Powell press-conference started.

RSI has shot down lower catching up with the ongoing move – The selling is showing no pity to the bulls, with prices consolidating slightly at the 0.59 Support which got swiftly broken.

Some immediate but small scale mean-reversion is stopping the descent, but the price action is brutal.

NZDUSD 2H Chart

NZDUSD 2H Chart, September 18, 2025 – Source: TradingView

At its extreme, the ongoing move downwards is of about 1350 pips or 2.25% in the pair from peak to trough.

Particularly after very slow FX trading, such data officially reinstores volatility for the end of this year.

Get ready to see more volatile data and price swings for NZDUSD and other pairs looking forward.

Levels to watch for in NZDUSD trading:

Resistance Levels

• Immediate Resistance 0.60
• 0.5950 Main Pivot now Resistance
• 200-period MA 0.59150

Support Levels

• 0.59 (+/- 150 pips) Support (broken)
• Current session lows 0.58725
• September lows 0.58330
• 0.58 Key Support

Watch for further volatile swings looking forward and stay in touch with the latest data as every central banks will be looking at the news for their decision-making.

The Dollar index is reaching an interesting level and NZDUSD is taking a breather, stay locked in for upcoming action.

Safe Trades!