• USD/JPY holds near 149 after ISM PMI improved from 48.0 to 48.7. Can NFP push the pair through 150 or trigger a pullback?
• USD/JPY extends higher after bouncing off the H4 Fair Value Gap (147.864–148.370) and is retesting the 149.00 resistance with 150.00 back in sight.
• BoJ’s cautious stance keeps the yield gap wide while U.S. data shows incremental improvement, sustaining dollar demand.
• A clean break above 149.00 unlocks a run toward 150.00–151.20; a firm rejection at 149.00 risks a dip back into 148.37–147.86 before NFP.

Why USD/JPY stays bid

Dollar-yen is trading heavy-on-the-upside: U.S. yields remain comparatively firm and the BoJ continues to signal patience on policy normalization, reinforcing the positive carry in favor of USD.

BoJ’s cautious stance: Policy divergence widens (concise)

The BoJ remains deliberately cautious, emphasizing the need for sustained wage-led inflation before meaningful tightening. With JGB 10-year yields near ~1% versus much higher U.S. Treasury yields, the carry incentive favors holding dollars over yen. That yield differential is a persistent structural tailwind for USD/JPY, keeping dips shallow and making pullbacks into demand zones (like your H4 FVG) buyable until the BoJ signals a firmer path to normalization.

ISM PMI: Missed forecast, but trend improved (why USD popped)

ISM Manufacturing PMI (Aug) printed 48.7, a touch below 49.0 forecast – but above the previous 48.0. Markets read that as stabilization rather than deterioration, and the USD caught a bid despite the “contractionary” label. This is a good reminder that direction of change often beats the absolute level.

Red-folder watch (this week)

• JOLTs Job Openings (Wed)
• ISM Services PMI (Thu)
• Nonfarm Payrolls + Unemployment Rate (Fri)

Technical outlook: H4 FVG bounce → 149 retest

USD/JPY has bounced off the H4 FVG (147.864–148.370) decisively and pressing back into 148.80–149.00, where supply capped prior attempts. That reaction confirms active demand inside the gap and keeps the bullish structure intact into Friday’s data.

Bullish scenario: FVG demand holds, breakout above 149 in play

On the chart, price reacted cleanly from the H4 Fair Value Gap (147.864–148.370), confirming it as a demand zone. That bounce carried USD/JPY back into the 148.80–149.00 resistance band, where sellers capped momentum previously. If bulls can force a breakout above this zone, the path toward the psychological 150.00 handle opens up.

• A sustained close above 149.00 signals continuation.
• Next liquidity rests at 149.50 before the round 150.00.
• Break of 150 unlocks extension targets at 150.70–151.20.
• FVG remains the defense line; pullbacks into 148.37–148.20 can act as continuation setups.

Bearish scenario: Rejection at 149, back into the gap

The same chart also highlights the risk: 149.00 is still acting as firm resistance. If price fails to clear this zone and prints rejection wicks or bearish engulfing patterns, sellers may regain control. That would likely send USD/JPY back into the H4 FVG (147.864–148.370) to test demand again.

• Failure at 149.00 brings downside back to the FVG mid-point (~148.20).
• Break below 147.864 signals demand exhaustion.
• If that occurs, price risks a deeper move to 147.20 → 146.80–146.20.
• Such a shift would frame the August rebound as distribution at premium pricing.

NFP game plan: Jobs data as the decider

Friday’s Nonfarm Payrolls (NFP) and Unemployment Rate will likely act as the catalyst that decides whether USD/JPY breaks cleanly above 149.00 or falls back into the H4 Fair Value Gap (147.864–148.370).

Bullish NFP outcome (supports breakout above 149)

If headline NFP beats expectations (>75K) and unemployment holds steady or drops:

• Markets will interpret it as labor resilience.
• Yields stay firm, reinforcing the dollar’s edge over the yen.
• USD/JPY would likely break above 149.00 quickly, targeting 149.50 → 150.00 into early next week.
• Strong upside surprise could even accelerate toward 150.70–151.20 liquidity zones.

Bearish NFP outcome (triggers rejection at 149)

If NFP misses (<75K) and unemployment ticks up (>4.3%):

• Dollar sentiment weakens, and yields soften.
• USD/JPY would likely reject 149.00, slipping back into the FVG for retests.
• Break below 147.864 exposes 147.20 → 146.80–146.20 downside liquidity.
• Weak data could reframe the recent rally as distribution at premium levels.

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RBC Capital Markets expects the pound to remain resilient in the short term, with forecasts showing GBP/USD and GBP/EUR holding firm before edging higher into year-end.

“Sterling is not without challenges, but near-term resilience is underpinned by relative rate support,” RBC wrote in its August currency report.

The Pound entered 2025 as the second-best performing G10 currency in the two previous years, and analysts had expected further outperformance over this year.

However, that strength failed to materialise and the consensus forecast for the third and fourth quarters of the year has been lowered.

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A run of disappointing economic data that includes rising unemployment and inflation are key culprits behind the GBP’s failure to live up to earlier expectations.

 But, by RBC’s reckoning, disappointing economic growth is now well understood by the market and incorporated into the price of Pound Sterling.

“Markets are prepared for weaker UK activity, which limits the scope for a significant repricing lower in GBP,” the report added.

The report argues that resilience seen through August reflects the Bank of England’s more cautious approach to policy easing compared with peers, with money markets now showing investors no longer see another interest rate cut at the Bank of England on the menu for the remainder of the year.

RBC adds that positioning is favourable, with a neutral market position (sell and buy contracts in the options market roughly similar) leaves room for fresh Sterling inflows if global sentiment steadies.

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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RBC expects the pound to outperform higher beta G10 currencies like AUD and NZD if global growth weakens in line with forecasts.

The bank now forecasts the Pound to Dollar exchange rate at 1.37 by the fourth quarter of 2025, compared with 1.36 currently, reflecting relative monetary policy support.

Against the euro, RBC expects EUR/GBP to ease to 0.85 by the fourth quarter, consistent with sterling retaining relative strength over the coming months.

This translates into a Pound to Euro exchange rate of 1.1765, up from the level of 1.16 at the time of writing. (You can book your target rate with an automatic order).

“We think GBP has relative defensive value within G10, which should allow it to outperform the more cyclical FX bloc,” the report said.

Above: After two years of gains, GBP/EUR has entered a period of softer trade.

Longer term, however, the bank remains cautious on sterling’s prospects, citing structural economic weaknesses.

“Near-term resilience does not change our longer-term view that structural imbalances will weigh on GBP,” RBC concluded.

The bank also warns that higher energy prices or looser fiscal policy could revive downside risks for the currency.

“Energy costs remain a structural vulnerability for the UK economy and could cap sterling upside if they flare again,” RBC wrote.

As of Wednesday, GBP/USD was trading at 1.3602 (+0.05%), EUR/GBP at 0.8574 (-0.02%), and GBP/JPY at 198.95 (+0.08%).

GBP/USD Price Slumps as UK Gilt Yields Hit Multi-Decade Highs

The British pound collapsed against the U.S. dollar, with GBP/USD falling as much as 1.2% intraday and erasing all the gains it posted after Jerome Powell’s dovish Jackson Hole speech on August 22. At the core of the decline sits the violent repricing of UK sovereign debt, where the 30-year gilt yield spiked to 5.69%, a level not seen since March 1998. That surge reflects growing concern over Chancellor Rachel Reeves’ heavy borrowing plans, ballooning deficits, and the heightened risk premium demanded by investors. The market drawdown draws strong parallels with the 2022 gilt crisis triggered by Liz Truss’s “mini-budget,” where unsustainable fiscal policy shattered confidence and sparked a sterling free-fall.

GBP/USD Technical Breakdown Accelerates Below Key Supports

On the technical front, GBP/USD slipped under its key moving averages, with the pair now trading below both the 20-day and 50-day levels. The 4-hour RSI sits deep in oversold territory, below 30, yet momentum remains bearish. Bears are targeting the medium-term pivotal zone between 1.3315 and 1.3280, defined by the 61.8% Fibonacci retracement of the early August rally and the ascending trendline from the January 13 low. Immediate resistance rests at 1.3460, and only a break above that level would neutralize the near-term bearish tone. If the pair pierces 1.3315 decisively, the path opens toward 1.3200 and potentially 1.3130, completing a deeper A-B-C-D bearish structure that has been unfolding since July.

Macro Headwinds from UK Fiscal Fragility

The market’s message is blunt: sterling’s weakness is driven by fiscal credibility fears. With borrowing costs surging, Reeves’ need to raise funds has unsettled gilt buyers who demand higher yields for long-dated paper. In April, revenues collapsed by more than 20% compared to last year, and the UK budget deficit continues to widen. Investors now view the Autumn Budget as a flashpoint for renewed volatility, with questions over whether Reeves can stabilize debt trajectories without aggressive tax hikes or spending cuts. As of September 2, sterling remains the weakest among major currencies on a rolling one-day basis, with the dollar posting a 1.1% gain versus GBP.

U.S. Data and Dollar Dynamics Drive Additional Pressure

Sterling’s slide is compounded by U.S. momentum. The Dollar Index (DXY) bounced back to 98.19, recovering from 97.54, bolstered by geopolitical safe-haven demand and anticipation of fresh PMI data. August’s ISM Manufacturing PMI is projected at 49.0, up from 48.0, with the Prices Paid component at 65.1 versus 64.8 prior. Friday’s nonfarm payrolls report looms even larger, with forecasts calling for a 75,000 job gain and unemployment at 4.3%. Traders assign an 89% probability of a September Fed rate cut, but strong employment could delay deeper easing. For now, the Fed’s trajectory and Trump’s attacks on the central bank’s independence add to dollar volatility, yet GBP/USD remains skewed to the downside as long as the UK’s fiscal credibility is under attack.

GBP/USD Short-Term Trading Signals and Market Positioning

Trading signals reflect that the bearish camp has regained firm control. Short positions are favored between 1.3520 and 1.3550, with stops just above 1.3570. Profit-taking zones stretch toward 1.3400, 1.3315, and 1.3280, with the latter forming the fulcrum of the medium-term outlook. A counter-trend long trade would only become attractive if GBP/USD breaks and holds above 1.3560, a threshold that would re-target the 1.3590–1.3639 zone. Market internals, however, suggest that such a bullish reversal is unlikely given the bond market rout. Liquidity grab patterns and repeated failures to hold above August’s breakout levels underscore the dominance of sellers.

Sterling Outlook and Risk Context

Sterling’s volatility is not isolated. Broader markets show gold rallying past $3,500 per ounce, the euro firming against the dollar, and U.S. yields bouncing on tariff headlines. In this global environment, GBP/USD lacks domestic support, with manufacturing PMI contracting at 47.0 for August compared with July’s 48.0. Meanwhile, dollar resilience is reinforced by global safe-haven flows as Eastern Europe tensions escalate. Unless UK policymakers restore credibility, the market will continue to test sterling’s lower bounds. The two-week high at 1.3540 posted earlier in the week has already been rejected, and key resistance at 1.3590 remains intact. With the fiscal story dominant, the near-term outlook remains bearish, pointing to continued downside pressure until gilt yields stabilize.

That’s TradingNEWS

EUR/USD Technical Analysis

The euro has fallen pretty significantly during the early hours here on Tuesday, as we have seen a continuation of the sideways action. With that being said, this is a market that I think continues to be somewhat noisy and somewhat rudderless, if you will. But we do have a range that we seem to be following. We have the 1.16 level offering support right along with the 50-day EMA now. But we have significant resistance near the 1.1750 level, followed by the 1.18 level. While I don’t necessarily expect a big move, I do expect to see continued stubbornness out of the US dollar through the week, really, due to the jobs number coming out on Friday.

USD/JPY Technical Analysis

The US dollar has rallied quite nicely against the Japanese yen, slamming right back into that 148.50 level. The question is, can we take off from here? If we can, it opens up a move to the 151 yen region, perhaps even higher than that. This is a strong candle, and it is a good sign, but the question is, can we follow through on the momentum? That might be a bit more difficult than imagined, but it is worth noting that after we fell apart there, we went sideways. We just sat still. And sometimes markets are about where they won’t go. In this case, they don’t seem to want to go down.

• The GBP/USD price analysis indicates escalating concerns about the UK’s fiscal health.

• The UK 30-year yield rose to its highest point since May 1998.

• The US will release its non-farm payrolls report on Friday, providing an update on the state of the labor market.

The GBP/USD price analysis indicates escalating concerns about the UK’s fiscal health, which is weighing on bonds and the pound. Meanwhile, traders are gearing up for the crucial US monthly employment report, which will shape the outlook for Fed rate cuts.

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The UK 30-year yield rose to its highest point since May 1998 amid worries about UK finances. As a result, the pound collapsed. The government has to balance heavy borrowing, a weak economy, and high inflation. However, investors have lost some confidence. Therefore, sterling could face a lot of downward pressure ahead of the next budget reading.

“While a repricing of Bank of England expectations had helped sterling last month, the UK is going to be vulnerable to fiscal risks as the autumn budget approaches, which is likely to remain a headwind for sterling,” said Rabobank’s head of FX strategy, Jane Foley.

Elsewhere, the US will release its nonfarm payrolls report on Friday, showing the state of the labor market. Further weakness could revive bets for a 50-bps cut. On the other hand, if the sector is resilient, rate cut expectations will ease.

GBP/USD key events today

GBP/USD technical price analysis: Bears challenge the 1.3401 support

On the technical side, the GBP/USD price has collapsed and is on the verge of breaking below the 1.3401 key support level. It trades well below the 30-SMA, showing bears are in the lead. At the same time, the RSI has dipped into the oversold region, indicating solid bearish momentum. Bears took over after bulls failed to continue the previous rally. 

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Although price action showed solid bullish momentum, the price remained in a corrective move, chopping through the 30-SMA. Bulls struggled to detach from the SMA and retest the 1.3575 key resistance level. As a result, bears returned and made an impulsive move below the SMA. 

A break below the 1.3401 support would solidify the bearish bias. Moreover, it would allow GBP/USD to retest the 1.3200 support level. On the other hand, if the support holds firm, bulls will return to target the 1.3575 resistance level.

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