The week has not been particularly favorable for the euro. Over the last three trading sessions, EUR/USD has declined by nearly 0.5%, once again highlighting a meaningful bearish bias in the short term. For now, this selling pressure has been supported by factors such as the recovery in the U.S. bond market and the resurgence of geopolitical tensions, developments that have allowed the dollar to regain part of the ground lost in previous weeks. As long as these catalysts remain relevant, selling pressure around EUR/USD could continue to play an important role during the coming trading sessions.

Is Inflation Risk Returning to the Markets?

Today’s session has been particularly relevant due to new developments coming out of the Middle East. The United States resumed attacks against certain targets in Iran after nearly a month without significant exchanges between the two sides. In addition, attacks against two tankers in the Strait of Hormuz were reported at the start of the week, a development that has once again raised concerns about potential disruptions to one of the most important routes for global energy trade and reduced expectations of a quick diplomatic resolution to the conflict.

The market’s reaction to these events has been an increase in the geopolitical risk premium and a rise in uncertainty surrounding the outlook for global markets. This effect is already beginning to appear in the behavior of WTI crude oil, which has once again moved closer to the $90 per barrel area. In broader terms, this dynamic is reviving concerns over rising energy costs and could continue to fuel expectations of higher inflationary pressures in the months ahead.

This environment also comes at a time when markets continue to reassess the outlook for the Federal Reserve. Since Jackson Hole, investors have increasingly priced in a more hawkish stance after Kevin Warsh emphasized that inflation remains a meaningful risk to the U.S. economy. These comments have helped reinforce expectations that interest rates could remain elevated for longer or even leave room for additional hikes should inflation continue to prove persistent.

This situation is already being reflected in the U.S. bond market. 10-year Treasury yields continue to move toward the 4.8% area, reaching new highs for 2026. While European bond yields have also shown a gradual recovery, benchmark yields remain near 3.7%, still well below equivalent levels in the United States. This yield differential continues to support the relative attractiveness of dollar-denominated assets over their European counterparts.

Source: TradingEconomics

Taking all of this into account, the current environment remains supportive of the U.S. dollar. On one hand, rising geopolitical tensions could once again encourage demand for safe-haven assets. On the other, the strength of the U.S. bond market continues to support interest in dollar-denominated investments. Together, these factors help explain why the euro is struggling to regain ground in a consistent manner.

This reaction can already be seen in the behavior of the DXY Index, which measures the dollar’s performance against its major rivals. The index continues to maintain a relatively steady upward slope and is once again approaching the 100-point area, reflecting a gradual improvement in confidence toward the greenback during recent sessions.

Source: TradingEconomics

As a result, recent developments appear to be providing fresh support for the U.S. dollar. As long as the market continues to perceive that the dollar is benefiting from both geopolitical concerns and expectations of higher interest rates, the euro may continue facing difficulties in establishing a sustained recovery. Under this scenario, bearish pressure around EUR/USD could remain relevant during the upcoming trading sessions.

EUR/USD Technical Outlook

Source: StoneX, Tradingview

• Potential Bullish Trendline Enters a Risk Zone: Since late July, a bullish trendline had been developing as a result of the euro’s recovery over recent weeks. However, the latest downside price action has started to place this structure under pressure and could signal an important shift in the broader chart outlook. Unless buying pressure begins to stabilize more convincingly, it is possible that the market enters a more neutral phase during the coming sessions.
   

• RSI: The RSI is now fluctuating around the neutral 50 level. This reading suggests that the balance between bullish and bearish momentum has become increasingly even and may reinforce the importance of a broader period of indecision in the short term.
   

• MACD: A similar picture can be seen in the MACD histogram, which continues to fluctuate near the neutral 0 line. This reflects balance in the average strength of short-term moving averages and supports the possibility that the market remains in a consolidation phase over the next several sessions.
   

Key Levels to Watch:

• 1.17127 – Key Resistance: A high not seen since May of this year and the most important upside barrier within the current structure. Price action that manages to approach or break above this area could restore the relevance of the bullish trend observed in previous weeks and support a more meaningful recovery.
   

• 1.16300 – Nearby Barrier: An important equilibrium zone that coincides with previous retracement levels and the 200-period Simple Moving Average. As long as the price continues to trade around this area, a lack of clear direction could remain dominant and even support the development of a broader trading range in the short term.
   

• 1.15168 – Critical Support: A level that coincides with one of the most important lows recorded in recent weeks as well as the 50-period Simple Moving Average. A move below this area could strengthen a more dominant bearish bias within short-term price action.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

– Written by


David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Recovers as Weak US Data Hits the Dollar

The Pound US Dollar (GBP/USD) exchange rate recovered some ground through the latter part of Tuesday’s session as weaker-than-expected US data undermined demand for the ‘Greenback’.

At the time of writing, GBP/USD was trading at around $1.3546, little changed from Tuesday’s opening levels.

The US Dollar (USD) initially found support on Tuesday, with renewed tensions between the US and Iran prompting a bout of safe-haven demand.

The latest exchange of strikes marked the first direct hostilities between the two sides in several weeks, helping to drive another sharp increase in oil prices and adding to market uncertainty.

The ‘Greenback’ subsequently surrendered these gains, however, after a pair of disappointing US economic releases raised fresh concerns over the health of the world’s largest economy.

The latest ISM manufacturing PMI and July’s JOLTs job openings both fell short of expectations. The weakness in the jobs data was particularly significant for USD investors, as evidence of a cooling labour market could make the Federal Reserve more reluctant to raise interest rates in the months ahead.

The Pound (GBP) was largely rangebound against its major counterparts on Tuesday as UK markets reopened following the bank holiday against a backdrop of sharply higher borrowing costs.

The benchmark 10-year gilt yield climbed to around 5.24%, its highest level since 2008, as rising oil prices and renewed inflation concerns prompted investors to reassess the outlook for UK monetary policy.

Higher energy costs could force the Bank of England (BoE) to keep interest rates elevated for longer, although the prospect of tighter policy offered little immediate support to Sterling.

An upward revision to the UK’s August manufacturing PMI also failed to generate much interest, with the latest improvement largely overlooked by currency markets.

Near-Term GBP/USD Forecast: ADP Figures to Set the Tone for USD?

Looking ahead to Wednesday, the Pound to US Dollar (GBP/USD) exchange rate may be influenced by the release of the latest US ADP employment report.

Economists expect August’s figures to show that private-sector hiring remained subdued. A weak reading could weigh on the US Dollar by reinforcing expectations that Friday’s non-farm payrolls report may also disappoint.

With the UK economic calendar offering little of significance, Sterling is likely to take its direction from broader market sentiment and developments elsewhere in the currency market.

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Created on September 02, 2026

The British pound has fallen again, as we continue to see a lot of questions about the Japanese yen and the Bank of Japan itself. With this, it is imperative that traders watch for Japanese headlines.

GBP/JPY

The British pound has broken back and forth during the course of the trading session on Tuesday as we are just killing time here. We are trying to figure out where we are going to go next. We are dancing around sideways just above the 50-day EMA, but it’s worth noting that the British pound is being propelled higher in general against many currencies due to the interest rate differential.

Bank of Japan Intervention and Position Sizing

That being said, though, this is a little bit different in the sense that the market is facing a lot of questions about whether or not the Bank of Japan is going to intervene again. After all, intervention by the Bank of Japan has been rather brutal recently, and with that being the case, you need to be very cautious at this point. Ultimately, this is a market that continues to see a lot of upward pressure, but I also recognize that the market still sees a lot of support at the 215 yen level. The 215 yen level is an area that previously had been resistant.

The 219 yen level above has been a massive resistance barrier, and I do think that eventually we try to grind to the upside, but it is worth noting that there is that fear of the Bank of Japan intervening.

Because of this, I keep my position size reasonable in the yen-denominated pairs, with the exception of dollar/yen; I’ve been in that for several months. This one I like as well, but it’s a smaller position for me. Ultimately, this is a market that I’m still bullish on, with that one exception that could cause a bit of a wiggle here and there.

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

The pair’s price has no choice but to activate its bearish corrective move, given its repeated stability below the 186.05 barrier. The price has currently started forming some bearish waves, reaching around 185.30.

The price now needs fresh bearish momentum to renew pressure on the 184.85 level. A break below this obstacle could extend the corrective trading move in the near term toward 184.40 and 184.00, respectively.

The expected trading range for today is between 184.40 and 185.70

Trend forecast: Bearish

The yen’s latest decline comes despite several developments that would normally support the currency.

Japan and the United States recently coordinated efforts to stabilise the yen, producing a sharp but temporary rally. USD/JPY subsequently moved from near 164 toward approximately 155.

However, the recovery did not last.

By September 1–2, USD/JPY had returned to around 160. There are several reasons.

1. The US-Japan Interest Rate Gap Remains Large

Interest-rate differentials remain one of the biggest structural drivers of USD/JPY.

The US still offers substantially higher interest rates than Japan, encouraging investors to hold US-dollar assets or use the yen as a funding currency.

Even though the BoJ is gradually tightening monetary policy, markets continue to view the normalisation process as relatively slow compared with the level of US rates.

This means that yen carry trades remain attractive, particularly when investors expect the US dollar to remain strong.

2. The BoJ Has Not Yet Delivered the Rate-Hike Cycle Markets Want

The BoJ has raised rates during its normalisation process, but policymakers remain cautious because Japan has a very large government debt burden and economic growth remains relatively fragile.

Japanese 10-year government bond yields recently approached 3%, their highest level in decades, highlighting how quickly financial markets are repricing Japanese monetary policy.

The problem for the yen is that expectations alone may not be enough.

Markets increasingly want evidence that the BoJ is prepared to raise rates more frequently.

Reuters reported in August that the BoJ was considering a September rate hike and potentially a faster pace of tightening thereafter.