The US Dollar to Yen exchange rate is trading around 162.66, close to July’s high of 162.84 and its strongest levels in decades.

The pair has gained from around 159.36 at the start of June, although it remains narrowly lower for July after briefly falling to 160.65 earlier this month.

ING believes USD/JPY could break above the 162.75-162.85 resistance area over the coming sessions as higher energy prices support the Dollar and increase pressure on Japan’s trade position.

Deteriorating news from the Gulf has pushed oil, natural gas and refined-product prices higher, reinforcing inflation concerns and reducing investors’ willingness to sell existing Dollar positions.

ING said it was “slightly surprising not to see the dollar a little stronger”, particularly as higher energy prices mean the Federal Reserve must remain alert to renewed inflation pressure.

Japan is particularly exposed to rising energy costs because it relies heavily on imported oil and gas. That backdrop can weaken the Yen while supporting currencies of energy exporters, including the US Dollar.

The bank also noted that Japanese authorities did not intervene during Monday’s Marine Day holiday, leaving traders free to test the upper end of the recent USD/JPY range.

According to ING, “it would not be a surprise to see USD/JPY briefly break above 162.75/85 over coming sessions” if the Bank of Japan remains absent from the market.

ING expects the broader Dollar index to find support near 100.50 and potentially recover towards 101.30, with persistent Gulf tensions and elevated energy prices limiting the scope for near-term Dollar weakness.

Foreign exchange analysts at Bank of America forecast the Euro to weaken against the US Dollar over the coming months, projecting EUR/USD will fall to 1.12 in the third quarter before recovering to 1.15 by the end of 2026.

The Euro to Dollar exchange rate (EUR/USD) traded around 1.15 on Monday after recovering from recent lows near 1.12, but remains below this year’s highs close to 1.20 as investors continue to favour the higher-yielding US Dollar.

The recent recovery in EUR/USD has come as the Dollar paused after a strong first half of the year. However, Bank of America believes the broader trend still favours the US currency, arguing that resilient US growth, relatively high Treasury yields and continued demand for Dollar-denominated assets should underpin the greenback.

The bank expects the Federal Reserve to remain more restrictive than many of its peers, preserving the Dollar’s yield advantage even if interest rates gradually move lower.

“We expect EUR/USD to finish 2026 at 1.15.”

BofA believes the path to that year-end forecast will not be smooth, with further Dollar strength likely over the coming months.

“Our forecasts are for EUR/USD at 1.12 by the end of the third quarter before recovering to 1.15 by year-end.”

The bank also points to the Eurozone’s weaker growth outlook and greater exposure to higher energy costs as factors that could continue to weigh on the single currency. Although investor positioning has become less negative on the Euro, BofA argues much of the earlier short-covering has already taken place, reducing scope for another sharp rally.

Looking further ahead, the outlook becomes more constructive for the Euro as the Dollar’s exceptional performance gradually fades.

“We forecast EUR/USD at 1.20 by end-2027 and 1.22 by end-2028.”

BofA believes that longer-term recovery will be driven by a gradual narrowing in growth and interest-rate differentials rather than by a sharp deterioration in the US economy.

Near-Term EUR/USD Forecast: BofA Sees Dollar Yield Advantage Limiting Euro Gains

Despite expecting EUR/USD to recover from its projected third-quarter lows, Bank of America believes the Dollar should remain well supported over the remainder of 2026.

“The Dollar’s yield advantage should continue to underpin the currency.”

For now, the bank expects rallies in EUR/USD to remain limited while US yields stay elevated and capital continues to flow into US assets. It argues that only a more pronounced slowdown in the US economy or a materially faster Federal Reserve easing cycle would be likely to push the pair sustainably above the mid-1.15 area.

The British Pound has been sideways in general against the yen on Monday, as we continue to see risk appetite cause some issues for a lot of assets. The pound continues to pay you at the end of every day to hold it here.

GBP/JPY

The British Pound has gone back and forth during the early part of the trading session here on Monday as we continue to see a lot of volatile trading in general. Keep in mind this is a pair that is highly sensitive to risk appetite, and therefore you have to be very realistic about what’s going on around the world. While we had recently seen the British Pound really take off against the Japanese Yen, recently we’ve seen a little bit of hesitation.

Interest Rate Differential Favors the Pound

The 216 Yen level looks to be support from what I can see, with the 220 Yen level above being resistance. Overall, I believe this is a market that will do everything it can to try to get to the upside as the interest rate differential continues to favor the British Pound. And of course, the Bank of Japan itself has a lot of issues when it comes to debt and the inflationary situation perhaps cooling off just a bit in the Japanese economy.

So, with that, I like the idea of finding dips every time we get them, taking advantage of them, and I have no interest in shorting. In fact, I’m quite comfortable adding to an already long position in little bits and pieces because you get paid at the end of every day. If we can break above the 220 Yen level, I think at that point we can really start to take off. But as things stand right now, I think more of a grind is probably to be expected.

Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire

Currency analysts at MUFG predict the Euro to recover ground against the Pound Sterling over the coming months, forecasting the Euro-Pound rate will strengthen to 0.8700 as Sterling’s recent rally fades and UK political optimism proves difficult to sustain.

The Euro to Pound exchange rate (EUR/GBP) traded close to 0.85 on Monday after falling to its lowest levels of 2026, leaving the Pound at its strongest against the Euro this year, but MUFG believes the move has gone too far.

The Pound has outperformed most major currencies this month after political developments in the UK boosted investor confidence. Reports that incoming Prime Minister Andy Burnham is likely to appoint a fiscally conservative Chancellor have also helped reduce concerns over the government’s economic direction.

MUFG believes those political tailwinds have been an important driver of Sterling’s gains, but questions whether they can continue.

“The pound has continued to trade at stronger levels after strengthening sharply in response to media reports surrounding the new government.”

The bank argues that markets have already priced in much of the near-term political optimism.

“We are cautious about chasing Sterling strength from current levels.”

MUFG also notes that the Euro has been weighed down by higher energy prices and concerns over the regional growth outlook following tensions in the Middle East. However, it expects those headwinds to fade gradually as markets refocus on relative valuations.

“The recent move in EUR/GBP looks overextended.”

While MUFG acknowledges that the Bank of England is likely to keep policy relatively restrictive in the near term, it believes expectations for UK growth and fiscal policy have become increasingly optimistic.

“Current market pricing leaves room for EUR/GBP to recover.”

Near-Term EUR/GBP Forecast: MUFG Sees Recovery Towards 0.8700

MUFG continues to forecast EUR/GBP rising to 0.8700, implying the Pound will surrender part of its recent gains against the Euro.

“We forecast EUR/GBP at 0.8700.”

The bank believes the combination of fading political optimism in the UK, stretched Sterling positioning and a stabilisation in the Eurozone outlook should allow the Euro to recover over the coming months. While the Pound could remain supported in the very near term, MUFG expects gains beyond current levels to prove increasingly difficult to sustain.

– Written by


David Woodsmith

STORY LINK Pound Sterling Forecast: UK Employment Report Set to Drive Next GBP/USD Move

The Pound US Dollar (GBP/USD) exchange rate was little changed on Monday as Andy Burnham delivered his first speech since taking office as UK Prime Minister.

At the time of writing, GBP/USD was holding steady at $1.3449, having traded broadly unchanged throughout the day.

The Pound (GBP) traded without much direction on Monday, as markets responded cautiously to Andy Burnham’s first speech since becoming Prime Minister.

While Burnham set out his broader vision for the government, he stopped short of providing detailed policy announcements, instead saying that plans to tackle the cost of living, along with details on how they would be funded, would be unveiled on Tuesday.

With few concrete measures to assess, Sterling saw only limited movement throughout the session.

A quiet UK economic calendar also left the Pound without any meaningful domestic data to influence trading.

The US Dollar (USD) moved within a fairly tight range on Monday, slipping at the start of the session before recovering those losses as trading progressed.

Renewed tensions in the Middle East helped the ‘Greenback’ regain some support after its early decline, although financial markets continued to show notable resilience.

Despite the conflict escalating, with the US and Iran continuing to exchange attacks, hopes remain that diplomatic efforts could still prevent a further deterioration in relations.

On Monday, a spokesperson for Iran’s foreign ministry said diplomatic contact between Tehran and Washington was continuing.

Near-Term GBP/USD Forecast: UK Labour Market Data Takes Centre Stage

Attention turns to the UK’s latest employment figures on Tuesday. Economists expect unemployment to have edged up from 4.9% to 5% in the three months to May, although a projected increase in employment could help offset some of the negative impact.

Sterling traders will also be watching the latest wage growth figures. If earnings remain strong, the Pound may prove more resilient.

For the US Dollar, broader market sentiment is likely to remain the key driver. If concerns over the worsening Middle East conflict continue to dampen risk appetite, the safe-haven ‘Greenback’ could attract further demand.

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The US dollar initially fell against the Japanese yen on Friday, but we continue to see buyers take advantage of “cheap US dollars.”

USD/JPY

The US dollar initially fell against the Japanese yen during the trading session on Friday, but turned around to show signs of life again. Ultimately, this is a market that I think continues to see a lot of questions asked of it as we are watching the US yields drop, but at the same time, those yields are so much higher than Japanese yields, it’s very difficult to imagine things changing.

The 163 yen level above is a level that a lot of people will be paying close attention to. If we can clear that, then it allows the US dollar to go much higher, perhaps breaking out to the 165 yen level. Short-term pullbacks I think, continue to get bought into, as you can see, we are in the midst of forming an ascending triangle, and that ascending triangle, of course, is a bullish sign.

Technical Analysis and Key Levels

The 161 yen level underneath the current trading level is support, with the 50-day EMA also sitting there as well. Ultimately, the market remains one that rewards traders who jump in and start buying every time the US dollar gets a little cheaper. This is the way I look at this pair for the longer-term move as well. I have no interest in trying to fight the momentum.

I’ve got no interest in shorting over the longer term, and really, it’s not until we break down below the 200-day EMA that you even begin to have those thoughts. I have been long of this market for quite some time, and every time it dips, I add a minute amount to that position to simply build up a longer-term buy and hold position.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire