The euro’s recovery against the dollar has strengthened, but Bank of America still sees scope for a near-term pullback.

The Euro to US Dollar exchange rate (EUR/USD) slipped to around 1.1504 on Monday after opening near 1.1548, leaving the pair at the bottom of its intraday range.

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EUR/USD ended July around 1.1530, having recovered from a monthly low near 1.1354.

The pair remains 1.7% lower for 2026, with this year’s trading range extending from 1.1325 to 1.2075.

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Bank of America says the July Fed press conference “injected uncertainty around the Fed’s inflation-fighting commitment and reaction function”.

The bank described the meeting as “doved and confused”, with Chair Kevin Warsh suggesting that financial markets had already delivered some of the tightening that might otherwise have required higher rates.

BofA said this was “not reassuring”, adding that the Dollar should respond differently to “a central bank credibly doing the tightening” than one which “outsources the tightening to the market”.

That credibility concern has shifted the near-term risk balance against the Dollar. However, BofA still sees support from resilient US economic conditions, artificial-intelligence investment and geopolitical uncertainty.

The bank also believes the Fed may ultimately need to respond more forcefully.

“Ironically, we think the need to re-establish credibility increases the probability that the Fed will hike in September,” BofA said.

Its economists continue to forecast three 25-basis-point increases over the remaining meetings of 2026.

BofA forecasts EUR/USD at 1.12 in September, 1.15 at year-end and 1.20 by the end of 2027.

The Euro’s technical recovery has improved after the late-July surge, but 1.1500 remains the immediate test.

A sustained hold above it would keep 1.1555 and 1.1600 in view, while a renewed break lower would expose 1.1450 and the 1.1370 area.

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

Why the Dollar Is Falling Against the Yen?

Can the Yen Continue to Appreciate?

USD TO YEN Technical Analysis

The pound sterling has started to show relevant strength against the U.S. dollar. At the moment, GBP/USD has gained slightly more than 1.3% in the short term, reflecting an important buying bias.

Buying pressure began to gain relevance after the Federal Reserve decision during yesterday’s session and strengthened even further after the Bank of England decision today. For now, the central bank dynamic could continue to be key for demand in the pound sterling and maintain possible buying pressure on GBP/USD over the next few trading sessions.

Fed and BoE signals shape the outlook

During today’s session, the Bank of England published its interest rate decision and kept the reference rate at 3.75%, in line with expectations. However, the vote delivered an important signal: 6 members voted to keep rates unchanged, while 3 members voted for a 0.25% hike.

Although the rate did not change, this division was interpreted as a slightly more aggressive signal, as it shows that an important part of the committee is starting to consider the need for further increases over the coming months.

In the statement after the decision, the central bank highlighted that energy prices remain volatile and that this factor could continue to pressure inflation. For this reason, although additional hikes were not confirmed, the BoE does not appear ready to ease its stance either. If annual inflation fails to move closer to the 2.00% target, the central bank could continue to consider a more restrictive monetary policy.

The dynamic in the United States was slightly different. Although the Federal Reserve also kept rates unchanged in the 3.50% – 3.75% range, Kevin Warsh’s comments after the decision did not offer a clear signal of a possible hike in September.

This difference is important because the market expected a more aggressive stance from the Fed, but the event did not confirm that expectation. According to the CME Group probability table, for the September 16 decision, there is still a probability near 61% of a rate hike in the United States. However, a probability of almost 40% that rates remain unchanged has also started to emerge, something that had not been observed with the same strength in previous weeks.

Source: CMEGROUP

As a result, the market is facing an interesting dynamic. In the United States, expectations of a more aggressive Fed have lost strength, while in the United Kingdom, the BoE showed internal division that keeps open the possibility of a more restrictive stance if inflation remains a problem.

This contrast has started to be reflected in the U.S. dollar. The DXY index, which measures the dollar’s strength against its main peers, has shown a relevant decline since the Federal Reserve announcement and is now below the 100-point area. This suggests that demand for the dollar has started to weaken significantly after the U.S. central bank decision.

Source: TradingEconomics

With this in mind, and considering that both the United States and the United Kingdom maintain rates near 3.75%, the main difference lies in each central bank’s message. While the market is starting to price in a Bank of England that appears more willing to act if necessary, the Federal Reserve has reduced signals of early rate increases.

This dynamic could continue to weigh on the dollar and open room for the pound sterling to recover more consistently. If this scenario remains in place, GBP/USD could continue to show buying pressure over the next few trading sessions.

Technical forecast for GBP/USD

Source: StoneX, Tradingview

• The broad sideways range continues to dominate: Despite GBP/USD’s recovery attempts, the chart continues to show a broad sideways channel that has acted as the main technical structure for several months. This range remains between an upper area near 1.37492 and support around 1.32079. If price fails to break consistently out of these levels, the sideways structure will remain the most relevant pattern and could continue to reflect indecision over the coming trading weeks.
   
• RSI: Now, the RSI remains above the neutral 50 level, suggesting that bullish impulses have started to gain relevance in the short term. If this dynamic continues, the indicator could keep supporting the formation of a more important buying bias over the next few sessions.
   
• MACD: The MACD shows a histogram near the neutral 0 area, suggesting balance in the strength of short-term moving averages. This reading indicates that, although the pound has gained strength, the indecision bias has not completely disappeared from the GBP/USD chart.
   

Key levels:

• 1.36255 – Relevant resistance: This relevant high is positioned as the main bullish barrier in the short term. Price movements toward this area could reinforce the current buying pressure and open room for a more consistent bullish bias over the next few sessions. In addition, a clear break above this level could start to put at risk the broad sideways range that has remained in place for several months.
   
• 1.34079 – Near-term barrier: This recent neutral area coincides with the 50- and 200-period simple moving averages. If price moves back toward this level consistently, it could once again highlight a phase of indecision and keep the sideways range as the dominant technical structure.
   
• 1.32079 – Crucial support: This low coincides with the lower barrier of the broad sideways range. Sustained moves below this point could reflect a dominant selling bias and open room for the formation of a short-term bearish trend line over the coming trading weeks.
   

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25

2026.08.03 2026.08.03
US, Japan, and South Korea Join Forces to Support Yen. Forecast as of 03.08.2026

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

Over the past few weeks, the USD/JPY pair has been trading amid concerns about potential currency interventions. Eventually, the Forex market saw them happen. The coordinated intervention was meant to further temper speculators. Let’s discuss this topic and develop a trading plan.

Major Takeaways

• The yen was supported by a coordinated intervention.
• The Bank of Japan’s sluggish response is helping the USD/JPY.
• The US does not want to allow Treasury yields to rise.
• Long positions can be considered as long as the USD/JPY remains above 156.

Weekly Fundamental Forecast for Yen

The first coordinated currency intervention since 1998 aimed at supporting the yen has raised many questions. Is Japan truly so vulnerable that it cannot counter USD/JPY bulls on its own? Why would the US support such an effort? Which other countries, if any, were involved? Finally, why did the euro become a target for selling pressure rather than the US dollar alone?

According to Bloomberg, around $53 billion was deployed on the first day of intervention. Since September 2022, Japan has spent approximately $255 billion on currency interventions. With foreign exchange reserves exceeding $1 trillion, Tokyo theoretically had sufficient resources to act independently. However, a significant portion of those reserves is invested in US Treasury securities. Selling these assets aggressively would push Treasury yields higher—an outcome that does not align with US policy objectives.

US and Japanese Bond Yields

Source: Bloomberg.

According to Mizuho Bank, it was precisely the Ministry of Finance—led by Scott Bessent—that did not want volatility in Japan’s debt market to continue negatively affecting the US debt market, and this was the main reason for US participation in the coordinated intervention.

Why was the euro chosen as the target? The answer may be simpler than attempts to link it to the concept of a strong dollar. According to JPMorgan, the US Treasury’s Exchange Stabilization Fund held assets of approximately $13 billion and €25 billion. While this amount alone would clearly be insufficient for a large-scale intervention, the combined resources of Japan and a potential third participant could have provided a more substantial firepower. Against this backdrop, the FX market speculates that South Korea may also have taken part in the coordinated currency intervention.

Speculative Positions on Japanese Yen

Source: Bloomberg.

Notably, the timing was perfect. Speculators had pushed net short positions in the yen to their highest levels since 2024, while hedge funds’ short positions had soared to their highest level since 2007. Confusion over whether Kevin Warsh wants to raise rates or will wait until the last minute caused investors to flee the US dollar.

The key question is whether the current USD/JPY exchange rate is fundamentally justified. Based on the yield spread between US and Japanese government bonds, the pair appears to have moved closer to levels supported by market fundamentals. However, currency markets are also pricing in expectations for future Fed and Bank of Japan interest-rate policies. This is where Tokyo’s cautious approach could become a vulnerability—potentially leading to the pattern seen after the interventions in April and May. In that scenario, the dollar could resume its advance.

Market Expectations for Fed and BOJ Interest Rates

Source: Bloomberg.

Weekly USDJPY Trading Plan

The joint intervention managed to scare speculators but hardly discouraged traders from attempting to recover their losses. In currency markets, every victory comes with the possibility of a setback. The strategy of selling USD/JPY from 163.35 proved highly effective. However, the Bank of Japan’s slow response and the renewed activity of carry traders create conditions for taking profits and considering long positions—at least while the pair remains above ¥156.

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