Goldman’s shift to one of the most bearish USD/JPY calls on the Street, alongside a market-implied probability of around 72% for 165 by next June, suggests positioning and forecaster consensus are increasingly aligned around further yen weakness rather than a reversal, even with the currency already trading well below what most models suggest is fair value. The bank’s view that any official intervention would likely prove short-lived implies traders may treat verbal or actual yen-buying operations as tactical rather than structural, limiting how much such moves can durably reverse the trend while US-Japan rate differentials and Japanese fiscal pressures persist. With hedge fund short positioning already at its highest since 2017 and Goldman explicitly favouring the yen as a carry trade funding currency, the setup points to continued one-way pressure unless there’s a meaningful shift in either Fed or BOJ policy expectations.

Goldman Sachs cut its one-year USD/JPY forecast to 165 from 155, also raising its 3-month call to 162 and 6-month to 163, citing widening rate differentials, fiscal pressure and slow BOJ tightening despite the yen’s undervaluation.

Summary:

• Goldman Sachs cut its one-year USD/JPY forecast to 165 from a prior 155, making it one of the most bearish institutions on the yen
• The bank raised its three-month forecast to 162 from 160 and its six-month forecast to 163 from 158
• Goldman cited widening US-Japan rate differentials, Japanese fiscal pressure, elevated US Treasury yields and slow Bank of Japan tightening as drivers of further yen weakness
• The bank said the yen appears deeply undervalued but that any official intervention would likely be short-lived, with underlying depreciation drivers remaining in place
• Hedge funds’ short positions on the yen hit their highest level since 2017 last month
• Market-implied probability of USD/JPY reaching 165 by June next year stands at about 72%, and Goldman favors using the yen as a funding currency for carry trades

Goldman Sachs has sharply cut its yen forecast, now projecting USD/JPY will reach 165 within a year, up from a prior forecast of 155 and placing the bank among the most bearish institutions on the currency.

Goldman also raised its nearer-term forecasts, lifting its three-month call to 162 from 160 and its six-month projection to 163 from 158. The bank’s strategists pointed to widening US-Japan rate differentials, Japanese fiscal pressure, elevated US Treasury yields and a slow pace of Bank of Japan tightening as the key drivers behind the revised outlook, even as they described the yen as appearing deeply undervalued on a fundamental basis.

Goldman said any official intervention aimed at supporting the currency would likely prove short-lived, since the underlying causes of the yen’s depreciation remain firmly in place regardless of near-term buying operations. The bank’s more bearish stance comes as hedge funds’ short positions on the yen hit their highest level since 2017 last month, while market pricing currently implies about a 72% probability that USD/JPY reaches 165 by June of next year, broadly consistent with Goldman’s own view. The bank also said it favors using the yen as a funding currency for carry trades, a stance that reflects continued conviction that the currency’s weakness has further to run.

Fundamental Analysis & Market Sentiment

I wrote on 28th June that the best trades for the week would be:

1. Long of the USD/JPY currency pair. This produced a loss of 0.23% over the week.

2. Short of the EUR/USD currency pair. This produced a loss of 0.44% over the week.

The total loss of 0.67% averages to 0.34% per asset.

A summary of last week’s most important data in the market:

1. US Average Hourly Earnings – exactly as expected.

2. US Non-Farm Employment Change – significantly lower than expected, which gave a dovish tilt to the market in terms of Fed expectations.

3. US Unemployment Rate – a tick lower than expected, which helped amplify the dovish tilt.

4. US ISM Manufacturing PMI – a little lower than expected, also more fuel for doves.

5. Canadian GDP – the month-on-month increase ticked a fraction higher and strengthened the Canadian Dollar a little.

The big story last week was the weaker than expected key US jobs data which suggests a cooling economy. This has led to slightly more dovish expectations of the Federal Reserve, which has helped the US Dollar to decline as its anticipated future yield decline. It also gave a small boost to risky assets such as stocks. However, the CME FedWatch tool still shows at least one rate hike of 0.25% is expected this year, in September.

This gave a boost to stock markets, but equities remain generally mixed, with most key indices off their highs, although in many cases, not by very much. Globally, the stock market had its best week in two months.

Another big story is the intervention by the Japanese Government last week to prop up the Yen, after a few rounds of making threats. The presumed intervention sent the Yen sharply higher towards the end of the week after the USD/JPY currency pair made a new 39-year high price. However, the Yen gave up some of its gains, and many players will see these temporarily successful interventions as nothing more than selling opportunities.

The Week Ahead: 6th – 10th July

Next week is relatively light. The coming week’s most important data points, in order of likely importance, are:

1. US ISM Services PMI

2. Reserve Bank of New Zealand policy meeting

3. Canadian Unemployment Rate & Employment Change

It is a public holiday in New Zealand on Thursday.

Monthly Forecast July 2026

Currency Price Changes and Interest Rates

For the month of July, I forecasted that the EUR/USD currency pair will decline in value, and the USD/JPY currency pair will rise in value. The performance so far is:

Weekly Forecast 28th June 2026

Last week, I made no weekly forecast.

This week, I again make no forecast, as there were no exceptional price movements last week.

Volatility decreased last week, with only 11% of the notable currency pairs and crosses moving by more than 1% in value. Next week’s volatility is likely to remain at a similar level, although it might be higher in New Zealand Dollar pairs and crosses.

You can trade these forecasts in a real or demo Forex brokerage account.

Technical Analysis

Key Support/Resistance Levels for Popular Pairs

Key Support and Resistance Levels

US Dollar Index

The US Dollar printed a bearish candlestick last week, which engulfed the real body of the previous week’s candlestick which both made a new 13-month high and failed to break above the key long-term resistance level at 101.39.

A valid long-term bullish trend has clearly been established, but its failure to break above resistance calls it into doubt. Fundamental data released last week also was not supportive of the US Dollar.

The long-term bullish trend might well survive, but there are signs that the Dollar is not going to be breaking to new highs soon and may have further to fall. However, it is also possible that last week’s low will start to act as support it if is touched again.

I am neutral on the US Dollar over the coming week.

US Dollar Index Weekly Price Chart

USD/JPY

The USD/JPY currency pair rose firmly to reach a new 39-year high price, drawing several warnings of intervention to prop up the Yen from the Japanese financial establishment, and that threat was finally delivered upon at the end of the week, with central bank buying of Yen sending the price down below ¥161. However, the price clawed back some of its gains, and the retracement was not deep enough to shake out most institutional trend followers.

I think these interventions are just trying to hold back the incoming tide, so if anything, I see these dips as buying opportunities.

Technically, the weekly candlestick was a spinning top doji, which can often signify indecision.

There are fundamental reasons why the US Dollar is quite likely to remain strong, but the currency that many analysts see as having a long way to weaken further over the coming years is the Japanese Yen, due to the massive levels of national debt there.

I am very comfortable being long of this currency pair – as a longer-term trend trade, this pair still looks good. Look at that supportive ascending trend line shown in the price chart below which stretches all the way back to April 2025.

USD/JPY Weekly Price Chart

EUR/USD

The EUR/USD currency pair was looking likely to make a serious bearish breakdown and did briefly reach new long-term low prices, drawing in many trend traders like me on the short side. However, it made quite a natural recovery last week, generating a relatively fat bullish candlestick. The Euro is certainly naturally less bearish than the Japanese Yen is.

I remain short here, but I am not very hopeful about this trade. However, there is a valid long-term bearish trend and this pair does like to pullback so I will stick with it. It is easy to be put off by the usual deep retracements in this currency pair. The Euro is not a particularly strong currency, so I still see it as likely to be weaker than the US Dollar over the next few weeks.

EUR/USD Weekly Price Chart

NASDAQ 100 Index

The NASDAQ 100 Index made a bearish pin bar (hammer) last week, although I’m showing the daily chart below so you cannot see that. What you can see, is that since making a record high over one month ago, the price has entered a narrowing triangle consolidation. The price will have to break out of this in a few days.

We have a strong bull market, but there is an increasing feeling that it is overbought, especially in tech indices such as this one.

Looking at this chart pattern, I feel like a strong fall is going to happen, perhaps to 26,400 as a natural floor.

If the price instead rises to close one day above 30,571 then I will take a bullish bias instead.

NASDAQ 100 Index Daily Price Chart

Gold

Gold had a fairly strong bullish candlestick last which, which almost fully engulfed the previous week’s candlestick, which was a bullish sign. The descending trend line is suppressing the price, but there are initial signs that things might be about to change.

If you are thinking of buying, it will likely be wiser once the trend line I mentioned is decisively broken. Next week, this trend line will be sitting at about $4,260.

It could be that Gold and Silver have finally found bottoms that are going to hold, at least for a few weeks. However, it will be best to wait for a decisive break of that trend line before entering a new long position in Gold.

Gold Weekly Price Chart

Brent Crude Oil Futures

Brent Crude Oil again made its lowest close at the end of last week since the war between the USA and Iran broke out last February. This is not surprising as the belligerents have recently signed an MoU and practically the only thing the Americans get out of it is the reopening of the Strait of Hormuz. Progress towards this, and the news of the MoU signing, have driven down the price of crude oil and removed a recessionary and inflationary input into the global economy. The path lower has been helped by the Iranians stopping violent activities in the Strait of Hormuz, and the are busy this week with the funeral of former “Supreme Leader” Khamenei.

Looking to the downside, the price has arrived within its pre-war area of comfort, albeit maybe at the higher edge of that. So, it might fall by a few more Dollars, but I think it does not have a lot more room to descend technically. I also said this at the end of last week, and I think I was shown to be correct as last week’s candlestick, while bearish, was small.

Brent Crude Oil Futures Weekly Price Chart

Bottom Line

I see the best trades this week as:

1. Long of the USD/JPY currency pair.

2. Short of the EUR/USD currency pair.

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