Created on October 09, 2025

• The British pound had rallied early during the trading session on Wednesday, but it looks like it is starting to discover the concept of gravity, after what has been in an explosive 5 days against the Japanese yen.
• The ¥205 level is a large, round, psychologically significant figure that will attract a lot of attention, and it’s probably worth noting that the candlestick for the session looks to be a bit of a shooting star.

Technical Analysis

The technical analysis is obviously bullish for this market after the Japanese election, and of course the massive gap higher that jumped over the ¥200 level is a significant area of importance, and I think that’s an area where a lot of people would be looking at as a massive support level. The shooting star for the trading session, assuming that’s exactly how we close, will end up being assigned that perhaps we are finally seeing some profit-taking, and quite frankly it makes quite a bit of sense considering that many traders out there might have a 400 pip gain in just the last couple of trading sessions.

Ultimately, if we were to break out above the top of the shooting star, then the ¥206 level could be a resistance barrier, but at this point in time I think this is essentially going to be a “buy on the dips” type of scenario, and over the next couple of days we may actually have a chance to do just that. However, extreme patience will be needed because a trade will need to be confirmed via a bounce, and of course chasing the market all the way up here is a great way to lose money. Unfortunately, there are probably traders who bought this at ¥205, and may find themselves in serious trouble. By being a little bit patient, you can take advantage of what is clearly a shift to the bullish side.

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

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

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Our forecast for the pound vs. dollar made two ten days ago was bang on the money.

The pound to dollar exchange rate has behaved exactly as we said it would in a short-term forecast set out ten days ago.

Our Week Ahead Forecast issued on Monday, September 29, looked for a slight GBP rebound, followed by a more concerted decline to a noted support area. Here is the chart overlay from that day:

Now, keeping that overlay and fast forwarding to today, here is where we are:

The call proved to be unusually accurate. Typically, the arrows are supposed to give an approximation of directionality, but this time, the target levels were also correct.

So, where to next? Clearly we are in a bullish setup for the dollar, even with the U.S. government shutdown underway.

Past shutdowns have tended to weigh on the dollar, but this time around, the currency is giving it a nonchalant shrug.

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The shutdown also brings a dearth of official data, and the Greenback looks to be treating this as a classic ‘no news is good news’ environment.

But, it’s also worth pointing out that ex-USD, there is a lot going on, and for some key currencies, the news is clearly not great:

The JPY is the big faller as new Prime Minister Sanae Takaichi is elected. She is a devout follower of the Abenomics faith: i.e. get the central bank to keep interest rates low and then buy up all the government debt you can issue. This kills expectations for further rate hikes and flattens the yen. As USD/JPY rises, all the other USD- crosses rise too.

The EUR rally has hit the buffers on the reality that France’s domestic political setup is an intractable mess. Sure, the government can muddle on, but in the big picture, it becomes more likely the ECB will have to step in to support French government bonds at some point.

This will effectively mean the ECB rescues a fiscally irresponsible country, and the rest of the Eurozone will ask why they have to behave and France gets away with whatever it likes. This isn’t good for Eurozone fiscal integration and points to the perennial weaknesses of the bloc.

Also, Germany’s economic data has really disappointed of late, indicating another poor quarter is underway.

The GBP is facing significant fiscal challenges too. Unlike France, the UK does not live in a big monetary union underpinned by Germany and where the ECB is poised to lend assistance. The bond market will come knocking on Number 11’s door before it does at the Bercy building in Paris. With Labour unwilling to cut spending, higher taxes are coming. Businesses are starting to struggle under the weight of the tax increases implemented this year, and anxiety is growing ahead of another big-tax budget in November.

So, with some big currencies under pressure, the USD has little choice but to rise.

Gains can continue into year-end, further pressuring GBP/USD, but come 2026, some fundamental weaknesses in the U.S. can come to the fore again, and the bigger USD selloff can resume.

GBP/EUR Investment Bank Consensus Forecasts Cut

The median and mean forecasts, that provide a consensus forecast for GBP/EUR, have fallen.

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Created on October 09, 2025

• The US dollar initially did rally a bit during the early hours here on Wednesday but gave back those gains to show signs of life again. Ultimately, this is a market that I think is going to continue to be very noisy in general.
• But I also recognize that we have a situation where we are basically hanging around between the 1.39 level on the bottom and the 1.40 level on the top. I do think that eventually the US dollar ends up outperforming the Canadian dollar and we do break above the 1.40 level. If and when we do that, I think we’ve got a situation where traders will really start to look towards the 1.4250 level.

On a Move Lower…

A breakdown below the 1.39 level opens up a potential move down to the 200 day EMA. But in general, I think you’ve got a situation where you’re still looking to buy dips. The interest rate differential still favors the uh US dollar over the Canadian dollar. And I think with this being the case, we look at any opportunity to buy on a dip as a gift. Now, keep in mind that Friday we have the Canadian employment numbers coming out. And that of course has a major influence on this pair and will continue to be important to keep in the back of our mind. With this, I like the idea of buying this pair. I do think eventually we will go much higher. But really at this point in time, we’re just looking for the next catalyst. And again, that catalyst could very well be the Friday session with that jobs number. Also, keep in mind that the US government is still shut down, and therefore we are without any significant US data at the moment, but this could change suddenly.

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

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

Created on October 09, 2025

• It looks like we are going to see yet another situation like we have seen over the last several days where the Euro gets sold off pretty early. But when the Americans show up, the United States dollar starts to shrink. And I think that is part of what’s going on here. American traders are just simply selling the US dollar.
• That being said, the 1.16 level continues to offer support. And if we were to break down below that level, I think you’ve got a situation where we could really start to break down at that point, the market could drop to the 1.14 level, which of course is right about where the 200 day EMA is currently hanging around.

US Dollar Was Supposed to Collapse.

Remember, we were told that the US dollar was going to lose its world’s reserve currency status and that it was going basically to zero. And just about any time you start hearing talk like that, you’ve hit the bottom. I don’t know if the US dollar has bottom yet, but it’s definitely in the process of making that argument. The circled candlestick is from the FOMC press conference and that clearly did not weaken the US dollar. We are seeing gold shoot straight up in the air and seeing people talk about de-dollarization because of gold, but both are strengthening. The 1980s had both strengthening, so it doesn’t necessarily mean anything at this point in time. If we were to rally from here, the 1.18 level will offer significant resistance, and that’s assuming that we can even get there, because we’ve tried multiple times over the last two weeks and just haven’t been able to do that. So, with that being said, I think you’ve got a situation where you’re fading rallies at the first signs of exhaustion still.

Ready to trade our daily Forex forecast? Here’s a list of some of the best regulated forex brokers to check out.

Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.