The pair took advantage of its repeated stability above the 55-period moving average, forming new bullish waves and currently settling near the first additional target at 184.80, which may in turn form a temporary obstacle to the bullish advance.

The price may currently be forced into some sideways trading. However, with the main indicators continuing to provide positive momentum and overall stability above the support level at 183.15, these factors encourage us to maintain the bullish bias, which may soon target 185.45. A breakout above this obstacle would extend the trading toward 185.95.

The expected trading range for today is between 184.25 and 185.45

Trend forecast: Bullish

In comparison to the U.S. dollar, the euro has a stronger monetary policy backdrop. According to a Reuters survey, 57 of 69 economists expected the ECB to raise its deposit rate of 2.50 percent in September, while inflation continues to be above the ECB’s target of 2 percent. Policy divergence in favor of the euro continues to increase as the expectations surrounding the Fed’s policy continue to decline.

Sterling is also benefiting from policy divergence. UK growth for the second quarter was at 0.4 percent, and the Bank of England’s Chief Economist, Huw Pill, indicated that the recent growth that was also in excess of expectations, is a good reason for policy to be tightened. Currently markets are calling for at least one additional hike by the BoE in 2026. New data on the labor market and inflation in the U.K. will be released this week that will be useful in evaluating this position.

The main issue for all three currencies is the Middle East. Renewed U.S.-Iran tensions and ongoing disruptions through the Strait of Hormuz pose risks for another energy-related inflation shock, which could once again bring expectations of tighter policy if price pressures begin to accelerate.

U.S. Dollar Index Technical Analysis: DXY Defends $99.38 Support but Remains Below Key EMAs

2026.08.17 2026.08.17
Weaker Dollar Gives Yen Room to Recover. Forecast as of 17.08.2026

Dmitri Demidenkohttps://www.litefinance.org/blog/authors/dmitri-demidenko/

While the markets speculate that, without proactive measures from the Bank of Japan, the yen will be unable to sustain the gains it has made through currency interventions, speculators are reducing their net short positions. Let’s discuss this topic and develop a trading plan for the USD/JPY pair.

Major Takeaways

• The US and Japanese economies are slowing down.
• The BoJ’s overnight rate could rise to 2.25–2.5%.
• Hedge funds have halved their net short positions in the yen.
• Long positions on the USD/JPY can be opened if the pair breaks through 159.5.

Weekly Fundamental Forecast for Yen

There is nothing better than having someone else do your work—even if it initially required participating in currency interventions. Japan is finally on the verge of breaking the uptrend in the USD/JPY. Notably, this is happening not because of coordinated Forex intervention with the US, but because the US dollar is weakening.

A strong economy typically supports a strong currency. For a long time, the US economy appeared remarkably resilient, bolstered by massive AI investments, fiscal stimulus, productivity gains, and the wealth effect. Now, however, cracks are beginning to emerge. Employment and retail sales are weakening, pointing to softer domestic demand. The downward trend in inflation and the first decline in the consumer sentiment index in several months further suggest the US economy is losing momentum.

Japan’s GDP Growth

Source: Bloomberg.

Japan’s GDP disappointed in the second quarter, which, in theory, should make the BoJ more cautious about tightening monetary policy. The bigger issue is the challenge to American exceptionalism, while the Japanese economy has continued to grow for a third consecutive quarter. At the same time, speculation that Sanae Takaichi’s government will not stand in the central bank’s way of raising rates has pushed the odds of monetary tightening by September to 80%. Derivatives markets have already priced in an overnight rate increase to 1.25% by October.

In fact, the Bank of Japan could afford to tighten monetary policy much more aggressively, potentially raising borrowing costs to 2.25–2.5% while inflation remains around 2%. Real interest rates are still negative, unlike in most other developed economies. This is putting considerable pressure on the yen and contributing to massive yen selling in carry-trade operations, where the currency serves as a funding source. For arbitrage traders, the situation is particularly attractive: currency interventions have created an opportunity to sell the yen at a higher price.

Speculative Positions on Japanese Yen

Source: Bloomberg.

Speculators are a different story. Sensing trouble ahead, they have halved their net short positions in the yen since the coordinated intervention in the Forex market. Now, with the US dollar weakening, hedge funds are thinking twice about buying the USD/JPY.

In fact, Washington has an interest in seeing the pair decline on its own. The US does not want Japan to sell Treasuries to finance currency interventions. A BoJ rate hike is not an ideal solution either. Higher Japanese rates would make local bonds more attractive, potentially encouraging capital to flow from North America to Asia. In this case, how would the US finance its colossal debt?

Weekly USDJPY Trading Plan

The USD/JPY pair’s trajectory will largely depend on how long the US dollar’s weakness persists. A sustained break above the 159.5 resistance level would offer a buy signal.

This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.

Price chart of USDJPY in real time mode

The pair’s price formed a new bullish surge during Friday’s trading, moving away from the initial support level at 183.15 and confirming its adherence to the bullish scenario. The price has begun recording some gains, reaching the 184.45 level.

The Stochastic indicator’s current position within the overbought zone will increase the chances of the price accumulating additional positive momentum. Therefore, we maintain our bullish outlook, which may soon target 184.85, followed by the next target at 185.45.

The expected trading range for today is between 183.90 and 184.80

Trend forecast: Bullish

– Written by


David Woodsmith

STORY LINK Pound-to-Dollar Weekly Forecast: USD Retreat Pushes GBP to Three-Month Best

The Pound to Dollar exchange rate (GBP/USD) has climbed to three-month highs above 1.3550 as resilient UK growth, attractive yields and fading expectations of an imminent Federal Reserve rate hike combine to support Sterling.

With US inflation continuing to moderate and retail sales weakening, markets are increasingly questioning whether the Fed will tighten at all in September.

GBP/USD Forecasts: Fed rethink?

SocGen sees scope for the Pound to Dollar (GBP/USD) exchange rate to strengthen to the 1.38 area.

MUFG has a 12-month GBP/USD target of 1.36 with the Pound and dollar both struggling over the medium term.

GBP/USD strengthened to 3-month highs just above 1.3550 during the week. The Pound was underpinned by high yields while the dollar was hampered by reduced speculation of a near-term Federal Reserve rate hike.

There is near-term resistance close to 1.3550. SocGen commented; If the rebound extends, the May high near 1.3660 could act as an interim hurdle.

High yields and low volatility underpinned the Pound during the week.

MUFG commented; “The pound is continuing to perform well this year. It has been the best performing major currency so far in August with cable rising back above the 1.3500. The pound has been supported by further evidence yesterday that the UK economy is proving more resilient than expected to the negative energy price shock triggered by the US-Iran conflict.”

The near-term focus will be on labour-market and inflation data releases due this week.

MUFG commented; “The soft labour market and recent downside inflation surprises have eased pressure on the BoE to hike rates in response to the energy price shock even as the UK economy has held up better than expected.”

Scotiabank is positive on the Pound outlook; “Fundamental releases have been limited, however BoE communication has remained hawkish with comments from Chief Economist Pill that have reaffirmed a call for higher rates. Risk reversals are extending their recovery and fading the premium for protection against GBP weakness, reflecting a sustained improvement in the market’s perception of (moderating) political risk.”

Fiscal policy will continue to be watched closely given underlying pressures on the spending and revenue sides of the equation.

Rabobank commented; “Burnham’s plans to ease the cost of living for the electorate still must be paid for. Speculation as to which taxes may go higher is already emerging and so too has speculation that this could have a contractionary impact on growth.”

The dollar retreated after a relatively benign inflation report with the headline rate at 3.4% and core rate at 2.5%. Retail sales also declined for July and markets were less confident that the Federal Reserve would hike rates at the September policy meeting.

CIBC commented; “With core inflation in line with consensus, and inflation continue to decelerate on an annual basis, this should bring some comfort to some members of FOMC and we continue to expect the Fed to hold rates in the September FOMC meeting.”

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