Stronger core inflation favours MUFG’s bearish Euro outlook, with the bank now expecting a September Fed hike and EUR/USD closing below 1.16.

The Euro to Dollar (EUR/USD) exchange rate closed Friday near 1.1599, down 0.10% on the day, as stronger US core inflation reinforced expectations of a Federal Reserve rate increase.

MUFG’s downside scenario points towards 1.14, approximately 1.7% below that close.

Before Friday’s inflation release, the bank outlined two possible paths: a Fed hold alongside further ECB tightening could lift EUR/USD towards 1.20, while a September Fed hike could push it towards the bottom of its 1.14-1.18 range.

“The performance of EUR/USD may increasingly hinge on the Fed’s policy response,” MUFG’s Lee Hardman said.

Core inflation strengthens the case for a hike

The August CPI release showed core prices rising 0.3% on the month, accelerating from July’s 0.2% increase and exceeding the 0.2% consensus.

Headline prices rose 0.4%, with gasoline accounting for more than a third of the increase.

Annual core inflation nevertheless eased to 2.4% from 2.5%, making this a setback in monthly momentum rather than an acceleration across every measure.

Market estimates put the probability of a September hike around 85-90% after the release.

MUFG subsequently changed its own Fed forecast:

“As a result, we now expect the Fed to hike rates by 25bps in September.”

View full size

ECB tightening still offers the Euro support

Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September, while projecting inflation above target through 2028.

That supported the argument for further European tightening explored in our earlier EUR/USD outlook.

We believe Friday’s CPI weakens the case for the Euro to benefit from an ECB tightening cycle while the Fed stands aside.

However, with a US hike already heavily anticipated, its delivery alone may offer limited additional Dollar support.

MUFG’s rates strategists acknowledge that markets have already priced in much of the expected tightening and may have gone too far.

A move towards 1.14 therefore remains conditional on how the Fed’s decision and guidance change expectations for subsequent meetings.

Our currency coverage draws on live market data, official economic releases and published bank research.

Stronger core inflation favours MUFG’s bearish Euro outlook, with the bank now expecting a September Fed hike and EUR/USD closing below 1.16.

The Euro to Dollar (EUR/USD) exchange rate closed Friday near 1.1599, down 0.10% on the day, as stronger US core inflation reinforced expectations of a Federal Reserve rate increase.

MUFG’s downside scenario points towards 1.14, approximately 1.7% below that close.

Before Friday’s inflation release, the bank outlined two possible paths: a Fed hold alongside further ECB tightening could lift EUR/USD towards 1.20, while a September Fed hike could push it towards the bottom of its 1.14-1.18 range.

“The performance of EUR/USD may increasingly hinge on the Fed’s policy response,” MUFG’s Lee Hardman said.

Core inflation strengthens the case for a hike

The August CPI release showed core prices rising 0.3% on the month, accelerating from July’s 0.2% increase and exceeding the 0.2% consensus.

Headline prices rose 0.4%, with gasoline accounting for more than a third of the increase.

Annual core inflation nevertheless eased to 2.4% from 2.5%, making this a setback in monthly momentum rather than an acceleration across every measure.

Market estimates put the probability of a September hike around 85-90% after the release.

MUFG subsequently changed its own Fed forecast:

“As a result, we now expect the Fed to hike rates by 25bps in September.”

View full size

ECB tightening still offers the Euro support

Thursday’s ECB decision announced a quarter-point increase in the deposit rate to 2.50%, effective from 16 September, while projecting inflation above target through 2028.

That supported the argument for further European tightening explored in our earlier EUR/USD outlook.

We believe Friday’s CPI weakens the case for the Euro to benefit from an ECB tightening cycle while the Fed stands aside.

However, with a US hike already heavily anticipated, its delivery alone may offer limited additional Dollar support.

MUFG’s rates strategists acknowledge that markets have already priced in much of the expected tightening and may have gone too far.

A move towards 1.14 therefore remains conditional on how the Fed’s decision and guidance change expectations for subsequent meetings.

Our currency coverage draws on live market data, official economic releases and published bank research.

The EUR/USD edged lower this morning, down for the second day, ahead of the release of US CPI. The pair has been consolidating in a tight range, and yesterday’s hawkish rate hike from the ECB failed to deliver the breakout many traders were hoping to get. With the US dollar finding renewed support in recent days, the risk to the near-term EUR/USD forecast is tilted to the downside.

Before discussing the upcoming CPI report, as well as other macro factors influencing the EUR/USD, let’s a have a quick look at the chart first.

Technical EUR/USD forecast and key levels to watch

From a technical analysis point of view, the EUR/USD forecast hangs in the balance as the pair continues to consolidate inside a triangle, but the balance of risks remain tilted to the downside because of the energy situation. Key support comes in between 1.1560ish to 1.1580ish. Break that region and then a revisit of 1.1500 could be on the cards next. Resistance meanwhile comes in around 1.1635/40 area. Here, the resistance trend of the triangle pattern meets the 200-day average and the highs of the last several days. Break that and 1.1700 could be the next stop.

A lot will now depend on the direction of oil prices and bond yields, which are starting to provide some support for the dollar.

Dollar finds renewed support ahead of CPI

The dollar is beginning to find its footing again as the relationship between the currency and long-dated Treasury yields starts to reassert itself. The shift has come against a backdrop of rising oil prices, firmer inflation expectations and renewed pressure in the bond market.

The US Treasury’s latest buyback programme offers an important clue. Although the headline announcement was for $6bn, only $5.19bn was ultimately conducted. That relatively modest intervention suggests Treasury Secretary Scott Bessent remains wary of trying to lean too heavily against the bond market. A more conventional relationship between higher long-end yields and a stronger currency is easier to sustain if investors do not expect Washington to suppress borrowing costs aggressively.

The next test comes with today’s CPI report. Markets expect headline inflation to rise 0.4% month on month in August, taking the annual rate to 3.4%, while core CPI is expected to ease slightly to 2.4%

After a stronger-than-expected PPI reading, the risks are no longer quite as symmetrical. A benign CPI report would give investors some relief, particularly in equities, but a meaningful upside surprise could have a much larger market impact. With oil back above $100 a barrel and Treasury yields rising, evidence that inflation is proving sticky would make the prospect of easier monetary policy considerably harder to defend.

That leaves the Federal Reserve in a difficult position. Chair Kevin Warsh has set a relatively high bar for incoming data to overturn the current hawkish tone, although Christopher Waller has suggested that continued improvement in inflation could remove the need for a September move. Much has changed since those comments, however, with oil prices surging in recent days.

A weaker CPI reading would therefore probably hurt the dollar, but it may not be enough to unwind the broader repricing of Fed policy.

The euro faces a different problem

The ECB has meanwhile become more comfortable acknowledging the inflation risks coming from energy. Its latest projections were revised higher, while Christine Lagarde’s comments reinforced the impression that another rate increase remains firmly on the table.

That has changed the near-term calculus for the euro. Markets are now carrying a much larger premium for European rates, reducing the likelihood of a large drop in the EUR/USD, but much of that hawkish tone was already priced in.

But Europe remains particularly exposed to higher energy costs, and an extended period of oil above $100 would squeeze consumers and companies while leaving the ECB with less room to respond to weakening growth.

The contrast with the US is becoming increasingly important. If higher oil prices feed into US inflation while Treasury yields continue to rise, the Fed may be forced to maintain a tighter stance just as growth risks increase. That would be a much more favourable combination for the dollar.

– Written by


James Fuller

STORY LINK Pound Sterling to Dollar Forecast: US CPI Keeps Fed on Hawkish Path

The Pound to Dollar exchange rate (GBP/USD) has battled to hold the 1.3500 level after much stronger-than-expected UK GDP data provided Sterling with fresh support.

July growth comfortably beat forecasts, but the Pound remains constrained by an increasingly hawkish Federal Reserve outlook, with markets now heavily pricing a US rate hike next week.

GBP/USD Forecasts: Battle around 1.35

The Pound to Dollar (GBP/USD) exchange rate attempted to stabilise around the 1.3500-1.3520 area on Friday as much stronger than expected UK growth data provided Sterling with support.

GBP/USD had come under pressure earlier in the week as a surge in global bond yields and rising energy prices strengthened the Dollar and undermined risk appetite.

The UK economy expanded by 0.4% in July compared with consensus forecasts for no growth, while annual growth accelerated to 1.6% from expectations of 1.2%.

Services output also increased by 0.4%, reinforcing evidence that the UK economy has retained more momentum than expected despite the energy shock.

The stronger figures helped Sterling recover some ground, although GBP/USD remained capped by rising US rate expectations.

UoB had commented; “Although GBP has been edging higher over the past few days, there has been no significant increase in upward momentum.”

The 1.3480-1.3500 region remains an important support area, while a sustained recovery above 1.3550 would ease the immediate downside pressure.

US Inflation Strengthens Fed Hike Case

US consumer prices increased 0.4% in August, matching expectations, while the annual inflation rate remained at 3.4%.

Core prices increased 0.3% on the month and 2.4% year-on-year.

Although the headline figures were broadly in line with forecasts, the data reinforced expectations that the Federal Reserve will raise interest rates at next week’s meeting.

Markets increased the implied probability of a 25-basis-point hike to around 85%, compared with roughly 70% before the CPI release.

US Treasury yields initially jumped following the figures, with the 10-year yield briefly touching 4.99%, its highest level in almost three years.

ING had commented; “We continue to see upside risks for the dollar. If front-end USD rates remain around current levels and global sentiment stays fragile, we cannot see a fundamental reason for persistent USD underperformance.”

The Dollar nevertheless struggled to secure a major advance as markets also responded to a partial recovery in equities and a retreat in oil prices.

Bond and Energy Risks Remain Elevated

Bond-market conditions remain an important threat to both Sterling and global risk appetite.

The US 10-year Treasury yield remains close to 5%, while the UK 10-year gilt yield has traded near its highest level since 2007.

Rabobank commented; “Rising yields are forcing difficult decisions everywhere, as governments face higher interest bills and deteriorating public finances. Choices can be politically expensive, but not making any choices will cost hard currency.”

Higher yields increase debt-servicing costs and add further pressure to already stretched fiscal positions.

Energy markets remain equally important.

Brent crude surged above $107 per barrel on Thursday before retreating towards $104 on Friday amid reports of possible talks aimed at stabilising shipping through the Strait of Hormuz.

Oil remains more than 8% higher on the week, however, leaving inflation risks elevated.

Danske Bank had commented; “Oil flows through the Strait of Hormuz remain far below pre-war levels and pressure on Red Sea routes is rising.”

For GBP/USD, the immediate battle remains around 1.3500.

Stronger UK growth provides Sterling with some protection, but a Fed hike next week is now heavily priced and US yields remain close to multi-year highs.

A decisive break below 1.3480 would expose the mid-1.34s, while a recovery above 1.3550 would improve the short-term outlook.

Like this piece? Please share with your friends and colleagues:

International Money Transfer? Ask our resident FX expert a money transfer question or try John’s new, free, no-obligation personal service! ,where he helps every step of the way,
ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts

2026.09.11 2026.09.11
USD/JPY: Elliott Wave Analysis and Forecast for 11.09.26–18.09.26

Alex Geutahttps://www.litefinance.org/blog/authors/alex-geuta/

Major Takeaways

• Main scenario: Once the correction has been completed, consider short positions below the level of 157.50 with a target of 151.76–148.92. A sell signal: the local correction ends and the price holds below 157.50. Stop Loss: above 158.10, Take Profit: 151.76–148.92.
• Alternative scenario: Breakout and consolidation above the level of 157.50 will allow the pair to continue rising to the levels of 160.48–163.90. A buy signal: the level of 157.50 is broken to the upside. Stop Loss: below 156.90, Take Profit: 160.48–163.90.

Main Scenario

Consider short positions below 157.50 with a target of 151.76–148.92 once the correction is completed.

Alternative Scenario

Breakout and consolidation above 157.50 will allow the pair to continue rising to the levels of 160.48–163.90.

Analysis

On the weekly time frame, an ascending third wave of larger degree 3 has formed, a downward correction has been completed as the fourth wave 4, and the fifth wave 5 is developing. Apparently, the first wave of smaller degree (1) of 5 has formed and a bearish correction (2) of 5 is developing on the daily chart. On the H4 time frame, wave A of (2) is developing. Within it, wave iii of A has been completed, and a local correction is forming as wave iv of A. If the presumption is correct, USD/JPY will continue to decline to 151.76–148.92 after the correction ends. The level of 157.50 is critical in this scenario as a breakout above it will enable the pair to continue rising to the levels of 160.48–163.90.

This forecast is based on the Elliott Wave Theory. When developing trading strategies, it is essential to consider fundamental factors, as the market situation can change at any time. 

Price chart of USDJPY in real time mode

2026.09.11 2026.09.11
EUR/USD: Elliott Wave Analysis and Forecast for 11.09.26–18.09.26

Alex Geutahttps://www.litefinance.org/blog/authors/alex-geuta/

Major Takeaways

• Main scenario: Once the correction has been completed, consider long positions above 1.1470 with a target of 1.1790–1.2088. A buy signal: the local correction ends and the price settles above 1.1470. Stop Loss: below 1.1425, Take Profit: 1.1790–1.2088.
• Alternative scenario: Breakout and consolidation below 1.1470 will allow the pair to continue declining to the levels of 1.1350–1.1230. A sell signal: the level of 1.1470 is broken to the downside. Stop Loss: above 1.1515, Take Profit: 1.1350–1.1230.

Main Scenario

Consider long positions above the level of 1.1470 with a target of 1.1790–1.2088 once the correction ends.

Alternative Scenario

Breakout and consolidation below 1.1470 will allow the pair to continue declining to the levels of 1.1350–1.1230.

Analysis

On the weekly time frame, an ascending wave of larger degree B is developing, with wave (A) of B forming as its part. On the daily time frame, the third wave 3 of (A) is apparently unfolding. Within it, wave i of 3 has formed, a bearish corrective wave ii of 3 has been completed, and wave iii of 3 has started developing. On the H4 time frame, the first wave of smaller degree (i) of iii has formed, and a local correction is developing as the second wave (ii) of iii. If the presumption is correct, EUR/USD will continue to rise to the levels of 1.1790–1.2088 after the correction ends. The level of 1.1470 is critical in this scenario. A breakout below it will allow the pair to continue falling to the levels of 1.1350–1.1230.

This forecast is based on the Elliott Wave Theory. When developing trading strategies, it is essential to consider fundamental factors, as the market situation can change at any time. 

Price chart of EURUSD in real time mode

The EURJPY pair kept its stability below the initial barrier that is represented by 209.45 level; however, the weakness of the last trading is caused by its neediness to the negative momentum due to stochastic exit from the oversold level as appears in the above image.

The price might keep providing sideways trading until gathering extra negative momentum, to reinforce the chances of attacking 177.80 level, and surpassing it will make it reach the extra negative stations near 177.35 and 176.70, while the risk of changing the trend and begin building bullish trend depends on breaching 180.80 level and holding with a daily close above it.

The expected trading range for today is between 178.10 and 179.40

Trend forecast: Bearish

Currently, DXY is trading at 99.07, having recovered from the 98.72 support zone. What I am seeing is price has recovered above the short-term moving averages, but the recovery is running into the 99.16 resistance zone where sellers are stepping in. This keeps the recovery constructive, but not strong enough for me to consider it a reversal.

The first resistance zone I am looking at is 99.16. If price clears this, then 99.28 and 99.39 come into play. If price continues to fall, then 98.99 will until 98.88 and 98.72 become significant.

The RSI is above the midline, which is supportive of the recovery. Even with that said, I remain slightly bullish until DXY trades below 98.99. However, I prefer to remain on the sidelines until the hourly candle closed above 99.16, at which point I would be bullish again. I would become neutral again if DXY trades below 98.88.

USD/JPY and EUR/JPY are flashing daily oversold momentum signals not seen since 2024, raising the risk of a near-term reversal ahead of the U.S. CPI report and Federal Reserve policy decision.

Both currency pairs are approaching key technical levels:

• USD/JPY is nearing the lower boundary of a respected uptrend channel that has been in place since 2023. Daily momentum is also approaching oversold levels last seen in 2024.
• EUR/JPY is testing the 27.2% retracement level of the 2025–2026 advance, while daily momentum has reached oversold levels last seen in 2024.

These developments come amid expectations and risks surrounding a potential Bank of Japan rate hike, ahead of Friday’s U.S. CPI report, and as Brent crude prices move back above $100 per barrel.

According to the Food and Agriculture Organization of the United Nations, the global food price index rose in August to its highest level since late 2022.

With oil prices elevated, geopolitical tensions unresolved, inflation concerns increasing and daily momentum reaching oversold levels not seen since 2024, a reversal in the direction of USD/JPY and EUR/JPY may be developing.

USD/JPY Forecast: Weekly and Daily Time Frames — Log Scale

Source: TradingView

Following the breakdown below the April 2025–July 2026 uptrend, USD/JPY has been respecting the Fibonacci retracement levels of that advance.

Price action recently dropped below the 38.2% retracement at 154.80 and is now only a few points away from the 50% retracement and the next projected support zone near 152.

This level also aligns with the lower boundary of the parallel April 2025–July 2026 channel. At the same time, the daily RSI is showing a bullish divergence from oversold levels last seen in 2024.

This setup hints at a potential final leg lower before a possible reversal during the month.

Bearish scenario: A breakdown below 152 would signal further weakness in the dollar and additional strength in the yen. This could target the lower boundary of the larger channel that has been in place since 2023, near 149.

The 149 area could create another major reversal risk, particularly if momentum sinks deeper into oversold territory across multiple time frames.

Bullish scenario: Reclaiming 154.80 would strengthen the short-term bullish case and open the way toward the 158.40–161 zone.

This area represents a defining barrier between long-term bullish continuation toward the yearly highs and potentially 170, and the risk of another corrective move.

Overall, the bias leans toward a short-term bearish correction while the longer-term bullish structure remains in place.

EUR/JPY Forecast: Weekly and Daily Time Frames — Log Scale

Source: TradingView

From a weekly perspective, EUR/JPY is holding above the 27.2% retracement level of the February 2025–April 2026 uptrend, near the 178 mark.

At the same time, the daily RSI is falling into oversold territory last seen in 2024, increasing the risk of a bullish reversal in correlation with the USD/JPY chart.

If price drops below 178, the next target would be the 38.2% retracement near 175. This level also aligns with the July 2024 high and could create a high-probability dip-buying setup if momentum indicators move deeper into oversold territory across multiple time frames.

On the upside, a breakout above 181.40 would redirect price action toward the yearly highs and the 8-month resistance zone near 185.60–187.

A sustained move above this zone could open the way toward new multi-year highs.

Overall, the short-term bearish bias and longer-term bullish risks remain in focus.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves

Nordea expects further ECB increases in December and March, while Scotiabank sees scope towards 1.1700 if EUR/USD clears resistance.

The Euro to Dollar (EUR/USD) exchange rate recovered from a sharp fall below 1.1600 on Thursday as investors assessed US producer-price inflation and the European Central Bank’s latest rate increase.

At the time of writing, EUR/USD was trading around 1.1624, down 0.09% against the previous close, having rebounded from an intraday low near 1.1595.

View full size

Economists at Nordea believe the ECB has further tightening ahead, despite policymakers declining to commit to their next move.

“We maintain our baseline of two further 25bp rate hikes at quarterly intervals, with the next one in December and the second in March 2027.”

That path would take the deposit rate from 2.50% to 3.00%, providing potential support for the Euro through higher returns on euro-denominated assets.

Nordea sees more tightening behind cautious ECB language

The ECB raised its three key interest rates by 25 basis points, matching the increase Scotiabank had described as fully priced before the announcement.

Its monetary policy statement projected inflation at 3.0% this year and 2.5% in 2027, with the latter revised higher.

“We are not pre-committing to a particular rate path,” the ECB said.

Scotiabank had expected a forceful endorsement of further near-term tightening as recovering oil prices threatened broader price pressures.

Nordea reads the inflation projections as evidence that September’s increase will be followed by others.

“A very extended period of inflation above target strongly supports the case for more rate hikes.”

However, Nordea also notes that markets have moved to price a faster tightening path than its own forecast, leaving scope for those expectations to reverse if December remains the likeliest next move.

We believe that limits how much support the Euro exchange rates can draw from further hikes alone: their timing, and whether expectations move beyond what is already priced, will matter.

US inflation keeps the Dollar side of the trade unsettled

The US producer-price figures showed core prices, excluding food and energy, rose 0.2% in August, easing from July’s 0.3% increase, with annual inflation at 4.6%.

Headline prices increased 0.4% on the month and 5.4% annually as energy prices jumped 4.2%.

The slower monthly core reading offers encouragement, but persistent price pressure leaves the FED’s response an important constraint on Euro gains.

The recovery keeps Scotiabank’s case for a EUR/USD move towards 1.1700 in focus.

Its pre-release technical assessment nevertheless identified an obstacle just above current levels.

“The 200 day MA (1.1634) continues to offer resistance on a closing basis, and we continue to highlight the absence of any major resistance ahead of the local high around 1.17.”

A close above 1.1634 would strengthen the case for another attempt at 1.1700, while a renewed fall through the session’s 1.1595 low would undermine the recovery.

Our currency coverage draws on live market data, official economic releases and published bank research.