Will we finally get some follow through from the US dollar, and how might it affect the EURUSD, GBPUSD, and USDJPY?

Get the latest in today’s Weekly Forex Forecast.

US Dollar Index (DXY) Forecast

The DXY broke down last week after retesting the September trend line near 109.50 on February 3.

Some follow-through is a welcome sight, even if it wasn’t the move I expected.

Thursday’s session closed below a key trend line from the November 22 high, which is now resistance near 107.20.

Next week, I’ll be watching the 106.00 support area closely, given its significance on the quarterly time frame since January 2023.

This area could extend to 105.70, with the October 2023 trend line support just below at 105.00.

Despite last week’s breakdown, I expect market conditions to stay relatively tight, given the current level of uncertainty.

EURUSD Forecast

EURUSD staged a comeback last week after gapping down on Monday.

It started with a daily close above 1.0350 and gained momentum with Thursday’s break above 1.0457.

The pair faces resistance next week at 1.0533, with a break there opening the door to 1.0615.

One thing to note about the recent EURUSD downtrend is that we never saw a backtest of the 1.0660 region following the November breakdown.

There are several key levels in that area, along with a fair value gap at 1.0687 that could come into play later this month.

Key support next week is between 1.0440 and 1.0457.

GBPUSD Forecast

GBPUSD tested key resistance at 1.2617 on Friday, a pivot from the December 2 low.

This followed Thursday’s breakout above the 1.2500 resistance level.

While we could see some consolidation early next week, a sustained break above 1.2617 would expose the 1.2800 highs.

Like EURUSD, there’s an untested area on the GBPUSD chart at 1.2850.

That level marked a significant breakdown in November and could act as a magnet later this month.

Key support next week is 1.2500.

USDJPY Forecast

USDJPY had a volatile week, nearly round-tripping its rally from 151.36 to 154.80.

Despite the pullback between Thursday and Friday, the pair could find a local bottom early next week if it carves out a higher low.

An ascending channel has developed, with support at 151.20 next week.

Additionally, the Japanese yen looks subdued following last week’s breakout, so a USDJPY bottom may depend on whether the US dollar finds support next week.

This isn’t a trade I want to rush into, but I’ll be watching for a potential higher low around 152.00.

Created on February 17, 2025

• According to recent trades, the British Pound has ignored US President Donald Trump’s threats to impose tariffs on countries that impose value-added taxes and appears set to achieve another weekly gain against the dollar and euro.
• At the end of last week, Trump outlined his plans to impose “reciprocal” tariffs on goods from countries that impose tariffs on the United States starting in April.
• Consequently, the bullish rebound of the GBP/USD pair extended to the resistance level of 1.2630, the pair’s highest level in two months, before settling around 1.2590 at the beginning of this week.

The Fate of US Tariffs

Recently, the US president surprised observers by saying he would impose tariffs on countries that impose sales taxes such as value-added tax, which includes Britain. He argued that the idea of VAT is ridiculous and confirms an agenda of punishing everyone, whether allies or enemies, to increase revenue for the United States. The random approach creates a great deal of uncertainty in the financial markets as it becomes difficult to predict where tariffs will fall and to what extent. This makes it difficult for other countries to respond.

Overall, it has become clear that forex markets are losing interest fast: the US dollar fell 1 percent last week and is heading for its fourth weekly decline in 2025. According to market experts, the law of diminishing returns appears to be at play as headlines about tariffs seem less provocative to the forex market. Overall, the pound is facing the threat of an expanded US tariff regime aimed at addressing stifling corporate rules that affect US companies. We reported that Howard Lutnick, the incoming US Commerce Secretary, will seek to impose tariffs on countries with onerous environmental, social and governance rules, which he says penalize US companies.

Now, Trump believes that VAT also punishes American companies. He told reporters at the White House, “We’re going to call it a tariff.”

Britain has imposed VAT since 1973 when it joined what would later become the European Union. For its part, the United States has pledged to deal with “each country individually. In almost all cases, they charge us much higher tariffs than we charge them but those days are over.” For its part, the American Taxpayer Foundation, a right-wing think tank, said last Thursday that VAT is “not a tariff” and is “commercially neutral.” “Historical evidence and recent studies show that tariffs are taxes that raise prices and reduce the quantities of goods and services available to American businesses and consumers, leading to lower incomes, reduced employment, and lower economic output.”

Trading Tips:

We still recommend selling the GBP/USD from any upward level but without risking the trading account from any sudden price reversals by activating take-profit and stop-loss orders.

Trump’s Goal of Tariffs

Trump says his reciprocal tariffs are aimed at restoring balance to global trade dynamics in favour of the United States. Analysts point out that Britain already has a balanced trade in goods with the United States, which would technically make Britain a low-priority target for Trump. But targeting VAT, he says, is not about global trade but about exercising American economic power and increasing revenue. On this basis, Britain will not escape by virtue of its favourable trade balance.

Technical Analysis for the GBP/USD pair today:

Keep in mind that the GBP/USD pair may remain relatively around its recent gains until the financial markets and investors react to the US and UK economic releases led by the announcement of the minutes of the last US Federal Reserve meeting. The success of the bulls in moving towards the resistance levels of 1.2670 and 1.2800 strengthens the ascending channel forming on the daily chart above, which may eventually lead to a move towards the psychological resistance of 1.3000. Conversely, and in the same time frame, the bears broke the support level of 1.2380, threatening the current upward rebound and a return to the broader bearish path.

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Created on February 17, 2025

• A bearish start to the trading week for the USD/JPY pair with losses to the support level of 151.47 before settling around the 151.85 level at the time of writing.
• Furthermore, the Japanese yen’s gains increased as investors responded to strong economic growth data.
• According to economic indicators, Japan’s economy grew by 0.7% on a quarterly basis in the fourth quarter, accelerating from a growth of 0.4% in the previous quarter and exceeding expectations of 0.3%.
• On an annual basis, Japan’s GDP grew by 2.8% in the fourth quarter, in line with expectations and up from growth of 1.7% in the third quarter.

Overall, the positive numbers reinforced the hawkish expectations for the Bank of Japan’s monetary policy. While uncertainty remains about whether the Bank of Japan will raise interest rates again in March, a rate hike later in the year is widely expected. The Japanese Yen has also gained strength from the recent weakness of the US dollar, driven by weak US economic data and easing fears of a global trade war.

Trading Tips:

We still recommend buying the US Dollar against the Japanese Yen but without risking the trading account from any sudden price reversals by activating take-profit and stop-loss orders.

Tariffs and US Stock Performance

Since President Donald Trump took office, Wall Street stock markets have been guessing “whether or not he will do it” regarding tariffs, since he promised to impose comprehensive duties on both geopolitical allies and competitors alike. While the initial reaction in the stock market was cautious, the mood is changing as the administration’s policies become increasingly confused with delays and exemptions mixed with aggressive rhetoric.

For stock investors, they have ignored the concerns and bought stocks. While the risk of a global trade war remains dangerously real after Trump announced a 25% tariff on steel and aluminium imports that will take effect in March and reciprocal tariffs on many trading partners expected to be imposed in April, US stock indices continue to rise, with the S&P 500 ending last week just points away from its all-time high. The question now is whether the buyers driving these gains are adequately assessing what Trump will do – or are recklessly throwing caution to the wind.

USD/JPY Technical Analysis and Expectations Today:

According to the daily chart, the bears are trying to move the USD/JPY currency pair with stronger downward levels, and now the psychological support level of 150.00 is the most important for further control, and at the same time, technical indicators will move towards strong oversold levels, led by the direction of the Relative Strength Index and the Stochastic Oscillator. I still recommend buying the USD/JPY from any downward level. Conversely, on the same timeframe, the bulls will successfully break the downward trend if the pair rebounds above the resistance of 155.50 again. The reaction to the content of the minutes of the latest meeting of the US Federal Reserve and any new developments regarding US trade wars, as well as signals from central bank officials, will affect the performance of the dollar against the Japanese Yen.

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• EUR/USD trades below 1.0500 in the European session.
• Financial markets in the US will remain closed on Monday.
• The technical outlook remains bullish, with a potential for a technical correction in the near term.

EUR/USD trades in a relatively tight channel below 1.0500 to begin the new week. Financial markets in the US will remain closed in observance of the Presidents’ Day holiday on Monday, limiting the volatility in the second half of the day.

The persistent selling pressure surrounding the US Dollar (USD) helped EUR/USD post strong gains in the previous week. Easing fears over an aggressive trade policy by US President Donald Trump helped the market mood improve and weighed on the USD. Ahead of the weekend, the data from the US showed that Retail Sales in the US declined by 0.9% on a monthly basis in January, not allowing the USD to stage a rebound.

The economic calendar will not feature any high-tier data releases in the first half of the week. On Wednesday, the Federal Reserve (Fed) will publish the minutes of its January policy meeting.

In the meantime, market participants will pay close attention to developments surrounding the Trump administration’s trade policy with the EU. 

European Trade Commissioner Maros Sefcovic will travel to Washington on Monday to meet with US counterparts to discuss US tariffs.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart declines from the 80 mark it touched on Friday but holds above 60, suggesting that EUR/USD remains bullish after correcting from overbought levels.

On the downside, 1.0440 (Fibonacci 61.8% retracement of the latest downtrend) aligns as first support before 1.0400 (100-period Simple Moving Average (SMA), Fibonacci 50% retracement) and 1.0360 (200-period SMA).

Looking north, first resistance could be spotted at 1.0500-1.0510 (round level, Fibonacci 78.6% retracement) ahead of 1.0550 (static level) and 1.0600 (static level, beginning point of the downtrend).

Copper price failed to resume the bullish attack after facing 4.8100$ barrier, to activate the correctional track by crawling towards 4.6200$ now.

The frequent stability below the mentioned barrier and stochastic attempt to provide the negative momentum support the domination of the correctional bias, to expect crawling towards 4.5600$ and 4.5200$ levels soon, while breaching the barrier will open the way to record new gains that might start at 4.8900$.

The expected trading range for today is between 4.5600$ and 4.7400$

Trend forecast: Bearish