The EURJPY pair ended the bearish correctional rebound by providing a new positive close above the support at 170.45, which allows it to surpass the negative factors and begin forming bullish waves by its rally above 172.00, forming an intraday obstacle against the positive attempts.
The main stability within the bullish channel’s levels support the chances for resuming the bullish attack, gathering positive momentum makes us expect reaching 173.20, then attempts to press on the barrier at 173.55 to find an exit for resuming the bullish attempts.
The expected trading range for today is between 172.00 and 173.55
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Quick overview
The pound is trading around $1.3540 as investors await key meetings involving US and Ukrainian leaders.
Market sentiment may be influenced by the outcome of the Trump-Zelenskyy talks, with potential implications for risk assets.
UK inflation data is also in focus, with expectations of a 3.7% YoY core CPI, which could impact the Bank of England’s policy stance.
Technically, GBP/USD is consolidating within a rising channel, with key resistance at $1.3594 and support at $1.3485.
The pound is trading in a tight range near $1.3540 during the European session as investors wait for several market moving events. The focus is on Washington where US President Donald Trump, Ukrainian President Volodymyr Zelenskyy and NATO leaders will meet.
Last week Trump’s talks with Russia’s Vladimir Putin sparked speculation over possible peace terms including a freeze of current front lines. Zelenskyy rejected concessions and now the focus is on the White House talks. For markets even a neutral outcome could support risk appetite and S&P 500 futures are edging higher at 6,460 (+0.13%).
Signs of a truce could lift risk assets further and indirectly help the pound which has been supported by resilient market sentiment.
UK Inflation Data in Focus
Traders are also looking at July’s UK Consumer Price Index (CPI) which is expected to show core inflation at 3.7% YoY. Persistent price pressures may reinforce the Bank of England’s cautious stance after last week’s 25-basis-point rate cut to 4.25%.
Gilt yields are rising and the pound has limited exposure to global trade tensions. A stronger than expected CPI reading could support GBP/USD while softer inflation would strengthen the case for further BoE easing.
The pound is consolidating near $1.3539 inside a rising channel that started in late July. Price is supported above the 50-period SMA at $1.3545 and the channel base at $1.3485.
GBP/USD Price Chart – Source: Tradingview
Candlesticks show hesitation with a cluster of small-bodied candles near resistance at $1.3594 indicating market indecision. Momentum is fading: the RSI at 46 is below 50 and the MACD is tightening and could be about to cross bearishly.
Bullish case: Above $1.3594 could extend to $1.3647–$1.3696.
Bearish case: Below $1.3485 targets $1.3442 and $1.3398.
Trade: Wait for confirmation. Above $1.3594 long, below $1.3485 short.
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The USD/JPY outlook points to a stronger dollar as traders await the outcome of a meeting between Trump and Zelensky.
Traders are preparing for the Jackson Hole symposium.
Powell might not give a clear rate cut signal.
The USD/JPY outlook points to a stronger dollar as traders await the outcome of a meeting between Trump and Zelensky. At the same time, market participants were gearing up for the Jackson Hole symposium.
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Market participants are anticipating a crucial meeting between Trump and Zelensky that could mean progress towards peace in Ukraine. The US president met Russian President Putin on Friday to talk about the war. Putin is ready for a peace deal if Ukraine will agree to the terms. Therefore, Trump will try to get Zelensky to agree to the terms and quickly end the war.
Meanwhile, Powell will speak at the Jackson Hole Symposium and might drop clues about future policy moves. However, experts believe he might not give a clear signal of the next rate cut.
“The US central bank might cut rates in September, but it’s unlikely that the Fed chair will give a clear signal towards that later this week,” said Lee Hardman, senior currency analyst at MUFG Bank.
“It’s probably too early for them (the Fed) to have complete confidence that they can cut rates again,” he said.
USD/JPY key events today
Market participants do not expect any key releases from the US or Japan. All focus will remain on the meeting between Trump and Zelensky.
USD/JPY technical outlook: Bulls face the 30-SMA resistance
USD/JPY daily chart
On the technical side, the USD/JPY price is challenging the 30-SMA resistance line. Meanwhile, the RSI has broken above 50, showing stronger bullish momentum. However, there is no clear direction, as the price has maintained a sideways move since its impulsive bearish leg.
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In this time, the price has chopped through the 30-SMA with no clear pattern for the highs and the lows. Therefore, it is a corrective move that might soon lead to an impulsive one.
At the moment, the nearest resistance is at the 148.00 level. Meanwhile, the nearest support is at the 146.00 level. If bulls regain momentum, the price will likely break above the SMA and the nearest resistance. This would allow USD/JPY to retest the 150.01 level. On the other hand, if bears win, the price will challenge and break below the 146.00 level.
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The EUR/USD forecast indicates a pullback in the euro at the start of the week.
Trump met Russia’s Putin on Friday and said the leader is more willing to work on a peace deal.
The dollar recovered as Fed rate cut bets eased.
The EUR/USD forecast indicates a pullback in the euro as market participants anticipate the meeting between Trump and Ukraine’s Zelensky. At the same time, the dollar recovered slightly as Fed rate cut bets eased after more data last week.
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Trump met Russia’s Putin on Friday and said the leader is more willing to work on a peace deal rather than a ceasefire deal. However, Ukraine has to agree to Russia’s terms. Trump will meet Zelensky on Monday to try and convince him to agree to Russia’s terms and work to end the war. A peace deal would boost the euro. However, the opposite might weaken the currency.
Meanwhile, the dollar recovered as Fed rate cut bets eased. Data last week revealed a surge in wholesale inflation and solid sales, erasing bets of a massive cut in September.
“While the data don’t all point in the same direction, the US economy looks to be in okay shape in the third quarter,” said Bill Adams, chief economist at Comerica Bank.
“The Fed is likely to cut interest rates by year-end, either in September, when markets now price in a cut, or a few months later, when Comerica forecasts a cut.”
EUR/USD key events today
Market participants do not expect key releases from the US or the Eurozone. Therefore, they will focus on geopolitical developments.
EUR/USD technical forecast: Weak momentum in bullish channel
EUR/USD 4-hour chart
On the technical side, the EUR/USD price trades above the 30-SMA, with the RSI above 50, suggesting a bullish bias. At the same time, the price trades within a bullish channel, respecting clear support and resistance lines. Bulls have made higher highs and lows within the channel.
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However, since bulls broke above the SMA, they have failed to respect it as support. This means the price has punctured the line several times, showing bears are strong. At the same time, while the price has made higher highs, the RSI has made lower ones, indicating a bearish divergence. This shows that bulls have lost the enthusiasm to reach new highs.
Therefore, bears might try to breach the SMA again. Additionally, if momentum surges, the price might break out of the channel to retest the 1.1550 support level.
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The GBPJPY pair failed to resume the bearish correctional attack, affected by forming an obstacle at 66.8%Fibonacci correction level at 198.80, forcing it to provide mixed trading by its stability near 199.90.
Note that regaining bullish bias will be by breaching the resistance at 200.65, while holding below it and stochastic attempt to exit the overbought level confirms the dominance of the sideways bias in the current period, to expect the trading confinement between the mentioned main levels, to keep monitoring the price behavior to confirm the trend by surpassing these levels.
The expected trading range for today is between 198.85 and 200.60
The GBPJPY pair failed to resume the bearish correctional attack, affected by forming an obstacle at 66.8%Fibonacci correction level at 198.80, forcing it to provide mixed trading by its stability near 199.90.
Note that regaining bullish bias will be by breaching the resistance at 200.65, while holding below it and stochastic attempt to exit the overbought level confirms the dominance of the sideways bias in the current period, to expect the trading confinement between the mentioned main levels, to keep monitoring the price behavior to confirm the trend by surpassing these levels.
The expected trading range for today is between 198.85 and 200.60
The Euro to Dollar exchange rate (EUR/USD) posted net gains on Friday, reversing the bulk of Thursday’s losses as the dollar was subjected to fresh selling.
Despite higher-than-expected inflation data on Thursday, markets remain confident that the Fed will cut rates next month, while pressure on the Fed continues.
The Trump-Putin talks will be monitored closely with some hopes for progress on the Ukraine situation helping to underpin the Euro.
UoB was not expecting a retreat below 1.1645, although there was only a brief excursion below this level.
It added; “The breach of the ‘strong support’ indicates that upward momentum has faded. The current price movements are likely part of a consolidation phase between 1.1585 and 1.1705.”
Scotiabank remains generally positive on the pair; “The EUR’s broader August rebound remains intact, with the market carving out a succession of higher highs and higher lows following the brief August 1 dip under 1.14. Support intraday is 1.1640, ahead of 1.1590/00. A push through this week’s high at 1.1730 should pave the way for a retest of the upper 1.17s.”
The dollar was helped in part by stronger-than-expected wholesale price inflation data on Thursday.
Headline prices increased 3.3% in the year to July from 2.4% previously and well above consensus forecasts of 2.5 while core inflation increased sharply to 3.7% from 2.6%.
Scotiabank commented; “Yesterday’s unexpectedly large US PPI gains indicated that business margins are increasing, which is perhaps not what would be expected if tariffs were being absorbed. That may mean that higher retail prices become more apparent shortly.”
MUFG added; “Overall, the report has provided support for the US dollar by dampening expectations for more aggressive Fed easing but is unlikely on its own to reverse the current weakening trend for the US dollar in the near-term.”
Markets are still extremely confident that the Fed will cut rates at the September meeting with traders still pricing in over a 90% chance of a cut, although talk of a larger 50 basis-point cut has faded dramatically.
The Fed still faces a tough underlying decision.
According to Joseph Carpuso, head of international economics at the Commonwealth Bank of Australia; “The combination of elevated inflation and weak growth in jobs is a conundrum for the Fed.”
Scotiabank added; “If the Fed does opt to ease amid intense political pressure for lower rates and stubborn inflation, investors may become more concerned that the Fed’s inflation anchor is slipping which can only weaken the appeal of the USD.”
Friday’s data recorded a 0.5% increase in retail sales for July, marginally below consensus forecasts of a 0.6% gain for the month while core sales met expectations with a 0.3% increase.
The New York Empire manufacturing survey improved to 11.9 for August from 5.5 previously and compared with expectations of a -1.
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The Pound to Dollar exchange rate (GBP/USD) found support above 1.35 on Thursday and advanced to 1.3565 after Friday’s New York open as the dollar failed to hold Thursday’s gains.
There was a limited retreat for the FTSE 100 index, although overall risk appetite held firm while volatility levels remain contained.
The Pound will tend to perform well if risk appetite holds firm.
UBS commented; “For the time being, we think the GBP can outperform against peers on a total return basis thanks to its attractive carry proposition.
UoB expects narrow ranges will prevail; “Outlook for GBP remains positive, and it may rise to 1.3620; the chances of it reaching 1.3660 this time around are more limited.”
According to Scotiabank; “Sterling is firmer on the session but yesterday’s peak and minor reversal from the 1.3595 area warrants attention as the pound topped out at a similar point in late July.
It added; “Cable has put together a solid run of gains since basing in early August but spot needs to push on through to a 1.36 handle to extend gains.”
Scotiabank added; “The pound is lagging some of its G10 peers somewhat this morning but has had a solid week overall, rising against the USD and EUR, as markets rethink the outlook for UK monetary policy after last week’s BoE decision.”
The latest UK inflation data will be released next week and will be significant for near-term Bank of England policy expectations.
Berenberg now has a more positive outlook on the UK economy and does not expect further Bank of England rate cuts, potentially underpinning the Pound.
According to the bank; “Forward looking measures of real interest rates are below pre-financial crisis. Assuming that the neutral real interest rate has rebounded from its 2010s nadir, monetary policy may not be overly restrictive now. Indeed, rising company and household inflation expectations were one reason why the BoE became more hawkish last week. We expect the central bank to pause its cutting cycle with bank rate at 4.00% until 2026.”
Federal Reserve policy will remain a key market influence. Markets remain convinced that the Fed will cut rates in September, but expectations of a 50 basis-point cut have dipped sharply following recent firm data.
Thursday’s US producer prices data was stronger than expected and indicated that there would be more serious upward pressure on consumer prices over the next few months.
US retail sales increased 0.5% for July, marginally below consensus forecasts of a 0.6% advance with a 0.3% increase in core sales.
The New York Empire manufacturing index improved further to 11.9 for August from 5.5 the previous month and well above market expectations of -1.0.
There were weaker readings for employment while inflation pressures increased slightly.
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The euro rallied a bit during the trading session here on Friday, as we have seen quite a bit of US dollar weakness around the world. That being said, we’re still just chopping back and forth. There’s no real directionality in the short term, but over the long term, obviously, the euro had been quite a bit more bullish than the US dollar. Recently, we had formed a double top at the 1.18 level, so that is worth paying attention to, and we are below there. So, we’ll see. I think this is a market that’s still trying to make a few decisions.
USD/JPY Technical Analysis
The dollar has dropped against the Japanese yen to test the 50-day EMA, but it is starting to show signs of support. If we can turn around and break above that 148 yen level, then I’d be much more comfortable with my long position, but you do get paid to hang on to it, and I have been in this for a while, so that does help. A break above the 148 yen level, I believe, opens up a move to about 150.50 yen. If we break down below here, then the 146 yen level is support, right along with the 145 yen level.
The Euro at least attempted to go a little bit higher in the early part of the trading session here on Thursday, but has since fallen pretty significantly as we continue to see a lot of volatility in markets.
With the PPI numbers coming out much hotter than anticipated in the United States, traders are starting to worry that perhaps the Federal Reserve won’t be able to cut rates as quickly as they once thought.
What I find interesting here is the Euro has formed a bit of a double top at 1.18 and we’ve had a nice bounce, but now it looks like we’re trying to roll over again.
If we break down below the 50 day EMA, then that could send the Euro even lower, perhaps back down, and to the 1.14 level and anything below there, think could call the top.
Questions for the Fed
I think there are a lot of questions out there as to what the federal reserve can do going forward. And one of the federal reserve governors came out today and even suggested that the idea of a half point or a half percent rate cut was validated, was completely wrong by the data that the U S economy is currently producing. If that is the case, things could get rather ugly pretty quickly for the Euro because money will come right back towards the U S because the U S dollar has been so oversold.
Ultimately, this is what I’m waiting to see. I don’t want to buy the Euro. And if I did short the U S dollar, it won’t be against the Euro. At this point, we’re in a little bit of a holding pattern. We are consolidating in an area that I think we may need to make a decision from, but this chart just got quite a bit more interesting.
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.
