Track market-moving stories before they get noisy

Summary:

Stronger US Treasury yields and pre-NFP position adjustments boosted dollar demand, outweighing reduced safe-haven interest following Middle East diplomatic progress With no Bank of England meeting until September, sterling is trading reactively to US data, especially the closely watched July nonfarm payrolls report Market participants can capitalize on current range-bound conditions between key technical levels or await breakout opportunities following critical economic data The British pound (GBP) ended July strongly against the U.S. dollar, surpassing the 1.3500 mark after a three-day rally. However, August has presented a more volatile trading period for GBP/USD. In the first five trading days of August, the pair only managed two positive closes, returning to the 1.3440 level.

Traders were caught off guard by the dollar’s sudden dip. Global demand for safe havens relaxed, as talk of war in the Middle East quieted down thanks to diplomatic discussions about the Strait of Hormuz. So, why is the dollar still so strong despite this?

The Dollar’s Comeback Isn’t About Fear Anymore The dollar’s surprising strength right now is what’s really noteworthy, especially since a classic safe-haven driver, the risk of Middle East war, is actually fading. Iran and Oman have made good headway on a plan to reopen the Strait of Hormuz. In fact, reports this week even point to an agreed-upon shipping route.

This proposed deal would have ships moving through routes controlled by both Iran and Oman, which could undo months of disruption in a waterway that handles about a fifth of the world’s oil.

Normally, such de-escalation would reduce demand for the dollar as investors move away from safe-haven assets. However, the dollar’s resilience suggests other factors are at play. The primary reason for sterling’s weakness is a widening yield differential.

U.S. Treasury yields have remained stable due to consistent hawkish commentary from the Federal Reserve, while U.K. gilt yields have declined amid concerns about sluggish domestic economic growth.

Reports indicate Federal Reserve Chair Kevin Warsh is still considering a September rate hike if new inflation data stays stubborn. That’s pushed Treasury yields higher and backed the dollar. Markets are now paying more attention to the chance of tighter policy rather than just an extended pause.

Meanwhile, institutional investors reduced their short-dollar positions in anticipation of key U.S. economic data releases, including Non-Farm Payrolls (NFP) and ISM services figures.

On the UK side, the pound has its own headwinds. The Bank of England maintained its interest rate at 3.75% on July 30 and does not have another meeting scheduled until September 17. This leaves sterling largely influenced by U.S. economic data rather than having its own domestic drivers this month.

What to Expect In the Coming Weeks and Months for GBPUSD In the short term, GBPUSD will probably keep reacting to U.S. data and what the Fed says. The pair has been moving between 1.32 and 1.36. To break out of this range, either up or down, we’ll need clearer signals from American economic indicators.

If payrolls and upcoming inflation numbers are strong, the dollar might continue its slight comeback and push the pound towards the lower end of that 1.32–1.36 range. On the other hand, if the jobs report is significantly weaker, it would quickly bring back the idea that the Fed might be more patient, and the pound could test the 1.35 level again.

For now, it seems like the market is stuck in a range and reacting to specific events, rather than moving in a clear trend.

Why is the US dollar getting stronger against the sterling pound despite easing Middle East tensions?

Hawkish Fed signals under Chair Kevin Warsh, including rising odds of a September rate hike, are outweighing reduced safe-haven demand from cooling Iran-related risks.

How are interest rate differentials currently affecting the performance of the British pound against the U.S. dollar?

U.K. gilt yields softened faster than U.S. Treasury yields, reducing sterling’s relative yield advantage and encouraging capital flows back into dollars.

How does the pair’s near-term outlook look?

It remains likely to keep trading range-bound between roughly 1.32 and 1.36, with US labour and inflation data likely to dictate the next directional move.

British Pound remains weaker as UK-US yields narrow, US Dollar strengthensGBP/USD extends its losses for the second consecutive day, trading around 1.3450 during the Asian hours on Friday. The pair depreciates as the British Pound (GBP) softens even as United Kingdom (UK) political risk fades.

Analysts at Scotiabank observe that "fundamentals appear to be somewhat less supportive for the GBP, as we note the renewed softening in yield spreads," tempering the near-term backdrop for the currency. However, they also highlight that "sentiment continues to improve" as "market participants continue to fade politically-motivated concerns following the recent political transition and arrival of PM Burnham." In their view, "the new PM’s commitment to fiscal responsibility appears to be much stronger than expected," helping to offset the drag from softer yield differentials and underpinning a more constructive tone toward the Pound. Read more...

British Pound steadies despite strong US jobs data ahead of NFPThe Pound Sterling (GBP) holds firm against the US Dollar (USD) during the North American session on Thursday, after US jobs data reinforces the thesis that the labor market remains solid ahead of Friday’s Nonfarm Payrolls report. The GBP/USD pair trades at 1.3466, after bouncing off daily lows of 1.3404.

The US Department of Labor reported that Initial Jobless Claims for the week ending August 1 came in at 199K, exceeding the prior week’s print but below estimates of 202K. Earlier, the Challenger job cuts showed that planned layoffs tumbled 27% to 33.429K in July, its lowest level since July 2024. Read more...

Key Points:EUR/USD pulled back as traders focused on the disappointing Euro Area Retail Sales report.USD/CAD gained ground amid falling demand for commodity-related currencies. USD/JPY climbed towards the 158.50 level amid rising Treasury yields.

U.S. Dollar Gains Ground As Oil Prices Rally 4%

DXY 060826 4h Chart U.S. Dollar Index is moving higher as traders react to the Initial Jobless Claims report. The report indicated that 199,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 202,000.

Traders also react to the strong rally in the oil markets. Oil prices are up by +4% as Houthis attacked Saudi-backed forces in Yemen. Rising oil prices raised demand for safe-haven assets, which was bullish for the American currency.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 99.85 – 100.00. In case this attempt is successful, U.S. Dollar Index will move towards the 50 MA at 100.35. A move above the 50 MA will push U.S. Dollar Index towards the resistance at 100.50 – 100.65.

EUR/USD Retreats As Euro Area Retail Sales Miss Estimates EUR/USD 060826 4h Chart EUR/USD pulled back as traders focused on the disappointing Euro Area Retail Sales report. The report indicated that Euro Area Retail Sales decreased by -0.3% month-over-month in June, compared to analyst forecast of +0.1%.

Traders also had a chance to take a look at the Factory Orders report from Germany. The report showed that Factory Orders increased by +3.1%, compared to analyst consensus of +0.3%.

EUR/USD attempts to settle below the support level at 1.1510 – 1.1525. If EUR/USD manages to settle below the 1.1510 level, it will move towards the 50 MA at 1.1479. A move below the 50 MA will push EUR/USD towards the support level at 1.1420 – 1.1435.

GBP/USD Remains Stuck Near Resistance At 1.3465 – 1.3480 GBP/USD 060826 4h Chart GBP/USD continues its attempts to settle above the resistance level at 1.3465 – 1.3480 despite rising oil prices. In the UK, traders focused on the Construction PMI report. The report indicated that UK Construction PMI improved from 38.4 in June to 44.7 in July, compared to analyst forecast of 40.

A successful test of the resistance at 1.3465 – 1.3480 will open the way to the test of the next resistance level at 1.3550 – 1.3565. RSI is in the moderate territory, so there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

USD/CAD Attempts To Rebound

USD/CAD 060826 4h Chart USD/CAD gains some ground as traders focus on the pullback in precious metals markets. Other commodity-related currencies are losing ground in today’s trading session.

If USD/CAD settles above the 1.4025 level, it will head towards the 50 MA at 1.4055. In case USD/CAD climbs above the 50 MA, it will move towards the resistance level at 1.4125 – 1.4140.

USD/JPY Moves Higher As Treasury Yields Rise USD/JPY 060826 4h Chart USD/JPY gained ground as traders focused on rising Treasury yields. The yield of 2-year Treasuries settled near the 4.25% level, while the yield of 10-year Treasuries climbed above 4.67%. Rising Treasury yields are bullish for USD/JPY due to the ultra-dovish policy of the BoJ.

From the technical point of view, USD/JPY attempts to settle above the resistance level at 157.50 – 158.00. If USD/JPY settles above the 158.00 level, it will head towards the next resistance level at 159.50 – 160.00. It remains to be seen whether BoJ is ready to provide additional support to the Japanese yen in the near term.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Orbex Group Limited is the holding company of Orbex Global Limited, Orbex Limited is an affiliate with Orbex Global Limited. Orbex Global Limited is authorized and regulated by Mauritius Financial Services Commission “FSC” (View License). Orbex.com is owned by Orbex Group Limited and is operated by Orbex Global Limited with registered address: Ground Floor, The Catalyst, Silicon Avenue, 40 Cybercity, 72201 Ebène, Republic of Mauritius

Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Orbex Global does not offer its services to residents of certain jurisdictions such as Mauritius, USA, and North Korea.

Key Points:Friday's U.S. Nonfarm Payrolls report remains the week's biggest catalyst for FX markets.Traders are closely watching labor market data for clues on the Fed's September policy outlook.EUR/USD is testing long-term trendline resistance after recent gains.GBP/USD remains above key moving averages but needs a break above $1.3507 to extend higher.DXY is testing major trendline support below 100.00, with payrolls likely to determine the next move.

US Dollar News: Payrolls Countdown and Global Central Banks Shape FX Outlook The U.S. dollar’s value continues to fluctuate in anticipation of the U.S. Nonfarm Payrolls (NFP) report, the final significant market mover before all the markets take another look at the Federal Reserve’s overall policy outlook. Focused on NFP, is the most derived initial assessment of the potential impact on U.S. labor markets. A positive U.S. Nonfarm Payrolls report, coupled with positive detailed U.S. labor market employment data, will reinforce the viewpoint that the U.S. Federal Reserve will adopt a more accommodating monetary policy stance later this year. Based on the latest Reuters real-time reporting, markets are now primarily focused on U.S. labor market data after last week’s Federal Reserve meeting.

The U.S. dollar is stabilizing following Friday’s European Central Bank meeting in which it kept its main interest rate on overnight deposits at 2.25%, and repeated its data-dependent stance. Investors are now waiting on German industrial production and eurozone retail sales statistics, all of which will give insight into the potential for a recovery in domestic demand within eurozone countries, particularly in light of the first part of the year being subdued. In their recent meetings, various policymakers have continued to underline the fact that inflation is approaching the European Central Bank’s target of 2% and that further tightening of eurozone monetary policy appears to be warranted; although, at this juncture still may be upside risks to be concerned with.

Sterling is digesting last week’s Bank of England decision. Bank Rate was left at 3.75%. Investors are anxious to see what new data will show about the UK economy. In the lead up to this data, investors will be studying data related to labor market activity, consumer spending, and business activity, to get insight on whether easing inflation is sustainable without a sharper slowdown in growth. Alongside the collection of domestic indicators, early Friday’s U.S. payrolls report will remain the major driving force behind foreign exchange sentiment for the week ahead.

US Dollar Index (DXY) Technical Analysis: Dollar Index Tests Trendline Support Below 100.00 Dollar Index Price Chart – Source: Tradingview The US Dollar Index (DXY) continues dropping, currently trading at 99.76. It has been harshly rejected by 101.52, and has dropped below the psychological 100.00 zone and is currently challenging a key ascending trendline that can be found at 99.42. The index currently sits below the 50-day EMA ($100.38) while just holding above the 100-day EMA ($99.92), reflecting diminishing bullish sentiments. RSI has fallen to 36, moving into oversold territory, indicating that downside price momentum is losing speed.

A decisive break below 99.42 would expose 98.91 and 98.27, reinforcing a bearish outlook. However, if bears defend the trendline, the DXY could stage a recovery toward 100.36 and 100.82. For now, the larger bias remains cautiously bearish while the index trades below 100.00.

GBP/USD Technical Analysis: Sterling Consolidates After Strong Recovery Toward $1.3500 GBP/USD Price Chart – Source: Tradingview The GBP/USD is trading around $1.3459, holding within a consolidation range after rebounding sharply from $1.3274. The pair remains above both the 50-Day EMA ($1.3421) and the 100-Day EMA ($1.3400), suggesting the medium-term trend continues to favor buyers. Price is currently hovering near the 23.6% Fibonacci resistance at $1.3452, while RSI near 57 points to steady but moderating bullish momentum.

A breakout above $1.3507 would reinforce the bullish structure and expose $1.3559. On the downside, immediate support rests at $1.3417, followed by $1.3391 and $1.3363. Holding above the moving averages keeps the recovery intact, although a decisive move above $1.3507 is needed to confirm the next leg higher.

EUR/USD Technical Analysis: EUR/USD Bulls Challenge Major Trendline Resistance EUR/USD Price Chart – Source: Tradingview The EUR/USD pair, on the other hand, has been trying to rebound from its July base, and has been able to move past the 61.8% Fibonacci retracement level at 1.1501. For the time being, the EUR/USD pair is trying to test a key descending trendline near 1.1559, while trading comfortably above the 50-day EMA ($1.1490) and holding marginally beneath the 100-day EMA ($1.1543). RSI has strengthened to 62, confirming improving bullish momentum.

It must be noted, however, that the EUR/USD pair is still trading below the 1.1500 level. A sustained break below this level would expose the crucial support zone at the 1.1470 level. The critical descending trendline comes into the picture at the 1.1450 level. As long as the EUR/USD pair remains comfortably above the critical descending trendline, around the 1.1450 level, the bias is expected to shift to a bullish bias for the pair.

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Editors’ Picks

The British Pound (GBP) trades marginally lower at around 1.3460 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair is expected to trade sideways as investors await the United States (US) Nonfarm Payrolls (NFP) data for July, which will be released on Friday.

US payrolls seen posting modest July gain as Deutsche Bank flags participation risksEconomists at Deutsche Bank expect Friday’s July payrolls report to show a further, if modest, improvement in hiring. They look for "employment growth of +65k, modestly above June’s +57k reading".

On the labor market’s slack, Deutsche Bank forecasts that "the unemployment rate is forecast to remain at 4.2%, although risks are skewed towards a rounding up to 4.3% if labor force participation rebounds after last month’s sharp decline." Wage and hours data are expected to be steady, with "average hourly earnings… expected to increase by +0.3% month-on-month, unchanged from June, while average hours worked are forecast to hold at 34.3 hours."

Investors will pay close attention to the US NFP data as it will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

Ahead of the US NFP data for July, the ADP Employment Change data remained weaker-than-projected. On Wednesday, the ADP reported that the private sector created 44K jobs in July, fewer than estimates of 70K and the prior release of 98K.

Technical Analysis

GBP/USD trades at around 1.3460, keeping a mildly bullish near-term bias as spot holds above the 20-day exponential moving average (EMA) at 1.3404, but struggles to achieve a decisive breakout of the downward-sloping border of the Volatility Contraction Pattern (VCP) at around 1.3471.

The Relative Strength Index (RSI) around 57 shows constructive but not overextended momentum, suggesting scope for further gains as long as price stays supported on dips above the EMA.

On the topside, immediate resistance is located at the former trend line break price at 1.3471, and a decisive move above this barrier would open the way for a continuation of the recent upside. Looking up, the July 15 high at 1.3558 is the key hurdle. On the downside, initial support is seen at the 20-day EMA at 1.3404, followed by the July 28 low at 1.3274.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Nonfarm Payrolls FAQs Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

The Pound Sterling (GBP) advances some 0.12% on Wednesday as the US Dollar (USD) registers back-to-back days of losses, after US jobs data was softer than expected, even though business activity in the services sector continues to expand solidly. The GBP/USD pair trades at 1.3467. Read More...

British Pound grinds higher above 1.3450 ahead of US ADP Employment releaseThe GBP/USD pair posts modest gains near 1.3455 during the early European session on Wednesday, bolstered by softer US economic data and cooling US-Iran tensions. Traders brace for the US ADP Employment and ISM Services Purchasing Manager Index (PMI) reports, which are due on Wednesday. Markets might turn cautious later this week ahead of the US July jobs data. Read More...

British Pound weakens as US Dollar gains despite easing safe-haven demandGBP/USD edges lower after registering modest gains in the previous day, trading around 1.3450 during the Asian hours on Wednesday. The currency pair came under selling pressure as the US Dollar (USD) gained momentum, bolstered by a rebound in the benchmark 10-year US Treasury yield, which had dipped toward 4.61% on Tuesday. That initial slide in yields was driven by falling energy prices, which helped cool inflation fears and tempered expectations of a hawkish response from the Federal Reserve (Fed). Read More...

The currency markets have no major announcements to focus on today, so ranges are likely to be watched by most.

EUR/USD Technical Analysis

EURUSD trades around 1.15462, extending its climb to fresh highs above both the 50-period and 200-period EMAs. Source: TradingView. The euro looks like it is testing the 1.1560 level, an area that had been important previously on a swing high, so we’ll have to see if we can break above there. It certainly looks like it’s struggling, but I also recognize that recently the 1.15 level had been support. Typically speaking, this is a pretty choppy pair, and when we zoom out on the longer-term charts, we start to see that we are approaching an area that historically has seen a lot of chop and noise. So a little bit of a pullback here would not be surprising to me at all. Certainly, we are seeing interest rates in America try to turn back around to the upside during the early part of the session, so something worth keeping an eye on.

USD/CHF Technical Analysis USDCHF trades around 0.80930, holding below the 0.81000 level and both its 50-period and 200-period EMAs. Source: TradingView. Currently, the US dollar and the Swiss franc seem to be very consolidated, and this is typical for this pair. But the interest rate differential most certainly favors the US dollar, and carry traders will be attracted to the wide spread here that they collect at any close of the day, especially with a lot of traders on Wednesday getting triple swap. Looks like the area right around 0.81 continues to be a magnet for price.

GBP/USD Technical Analysis

GBPUSD trades around 1.34708, pushing back toward its recent high above both the 50-period and 200-period EMAs. Source: TradingView. And finally, the British pound is stretching towards the 1.35 level. This is a lot like the euro in the sense that we had reached close to a swing high and failed a bit. Rates in the United States climbing a little bit early may provide a little bit of a headwind as well. 1.35 being broken would obviously be a strong headline because of the large round psychological number. It could bring in more buyers; we’d have to wait and see.

Currently, the 1.3435 level or so looks to be support. Could be range-bound. Today has no major economic announcements of any serious consequence. And with that, it would make sense if traders were a little bit range-bound and indecisive.

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Orbex Group Limited is the holding company of Orbex Global Limited, Orbex Limited is an affiliate with Orbex Global Limited. Orbex Global Limited is authorized and regulated by Mauritius Financial Services Commission “FSC” (View License). Orbex.com is owned by Orbex Group Limited and is operated by Orbex Global Limited with registered address: Ground Floor, The Catalyst, Silicon Avenue, 40 Cybercity, 72201 Ebène, Republic of Mauritius

Risk Warning: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange, you should carefully consider your investment objectives, level of experience, and risk appetite. There is a possibility that you may sustain a loss of some or all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Orbex Global does not offer its services to residents of certain jurisdictions such as Mauritius, USA, and North Korea.

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann analysts report GBP/USD traded quietly between 1.3423 and 1.3456 after a prior spike to 1.3506. They expect near‑term consolidation in a 1.3425–1.3470 band. Over 1–3 weeks, momentum has eased but a move toward 1.3555 is still possible as long as 1.3385 holds, while the broader 1–3 month view remains for range trading between 1.3210 and 1.3655.

Range trade with residual upside risk"24-HOUR VIEW: Two days ago, GBP rose to 1.3506 and then pulled back sharply. Yesterday, when GBP was at 1.3430, we highlighted that “the pullback has scope to extend but given that there has been no clear increase in downward momentum, any decline is likely part of a lower range of 1.3400/1.3475.” The subsequent price movements did not unfold as expected. GBP traded in a relatively quiet manner between 1.3423 and 1.3456. The price movements are likely part of a range-trading phase. Today, we expect GBP to trade between 1.3425 and 1.3470."

"1-3 WEEKS VIEW: Our most recent narrative was from Monday (03 Aug, spot at 1.3485), when we indicated that “while strong momentum suggests further upside, it remains to be seen whether GBP can break and hold above the significant resistance at 1.3555.” Upward momentum has since eased, but as long as 1.3385 (no change in ‘strong support’ level) is not breached, there is still a chance, albeit not a high one, for GBP to rise toward 1.3555."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

US Dollar Talking Points: The carry trade in USD/JPY has been building for more than five years now and the Japanese Yen weakness that’s seen the pair rise by more than 50% over that time is a large point of imbalance across global foreign exchange markets. The Bank of Japan has no dire need for near-term rate hikes, as Japanese inflation is currently at 1.6-1.7%. They also have an inflation target of 2% but unlike the US, inflation is currently subdued below that waypoint. Nonetheless, US Treasury Secretary Scott Bessent hinted that Japanese officials should look to tighter policy following the posture around interventions last week after the FOMC and BoJ rate decisions.

It’s truly a conundrum for the Bank of Japan. On one hand, they’d probably prefer it if the Japanese Yen didn’t weaken dramatically against global currencies, like the US Dollar. But on the other, there’s no pressing demand for a rate hike as their inflation levels remain below the bank’s 2% target.

Allowing the currency to fall rapidly runs the risk of bringing on unsavory levels of inflation, which would require rate hikes and, in-turn, a threat to Japanese growth. And for a country with an aging and declining population who spent decades struggling with deflation and disinflation, risking that growth is a pretty unsavory concept particularly when there’s not a massive current demand for such.

On the part of the United States, however, there’s a couple of reasons that they would want to see some form of action. The USD/JPY spot rate sits near recently-established 40-year highs. As the second largest component of the DXY basket, the significant JPY weakness of the past five years has kept the value of DXY elevated, which makes trade a more difficult venture for the United States as exported products are more expensive and imports are relatively cheaper.

But perhaps the biggest risk – is that if Japanese policymakers wanted to continue to try to have their cake and eat it too, by using interventions to run stops on market participants while trying to draw some artificial line in the sand, without hiking rates to address the fundamental divergence between the two economies rate policies – that would probably entail Japan selling US Treasuries. And that would mean even higher US Treasury yields, and we’ve already seen the 30-year bond push up to a fresh 19-year high.

So this is really a story wrapped in intrigue and it can have repercussions far and wide depending on how aggressively it spins out of control.

That global carry trade is, in essence, a form of leverage. We saw what happens when just some of that leverage gets taken out back in July of 2024, when the BoJ intervened on the morning of a US CPI print and despite markets finally getting the confirmation they needed that rate cuts were on the way, the Nasdaq 100 put in a bearish engulf and then sold off with aggression over the next few weeks.

The reason was some of that leverage brought upon by the carry trade was taken out as USD/JPY unwound, and that hit levered markets like high flying AI tech stocks until calm started to return on the morning of August 5th.

We’re not at that point yet, but if Scott Bessent has his way the situation could produce unwelcome and unexpected repercussions fairly soon.

Where this matters for the US Dollar – it’s been obvious for some time that the current administration would like a weaker USD. Trump has said as much, extolling the benefit of a weak currency for exporting goods while making domestic goods more competitive on a cost basis. Those efforts have largely fallen flat over the past year-and-change as the USD is roughly flat since last April, and a big reason why is the run in USD/JPY which extended after last year’s election of Sanae Takaichi, thereby putting both central banks in a precarious spot.

For now, it’s difficult to get too excited about USD/JPY above 160.00 as that’s the type of level that may evoke another intervention or a threat of such. Meanwhile, the fundamental bias remains tilted to the long side of the pair and thusly, for the US Dollar as a whole, there’s a lean towards trend strategies for short-term strength and breakout strategies for broader weakness.

US Dollar Four-Hour Chart Chart prepared by James Stanley; data derived from Tradingview USD/JPY

Last week was one of the largest red bars in USD/JPY since that July 2024 episode, and already for this week it looks like bulls are starting to make a return. It’s still too early to say that the dust has settled but it also highlights what I was talking about in the weekend video, where interventions at or around that 155.00 level seem to make little sense. Thus, we’ve seen buyers return to bid the dip but what remains to be seen is whether there is another swing of intervention above 158 or perhaps upon a test of the 160.00 handle.

USD/JPY Weekly Price Chart Chart prepared by James Stanley; data derived from Tradingview EUR/USD Despite the Euro being a 57.6% allocation of the DXY basket it really does feel like the larger currency pair is along for the ride.

This makes sense if we consider that USD/JPY is up more than 50% over the past five years – and given that the only thing that can actually push price in a real market is demand it highlights that there’s still an imbalance of longs v/s shorts. And when that comes into question, even just a little bit, that USD-selling could happen across currency pairs and not just against the Japanese Yen.

I talked about this in last week’s webinar and I reiterated it this week. At this point it’s the 1.1500 level in EUR/USD that’s held the lows now for two consecutive days and there’s bullish structure in place down to the Friday swing low of 1.1455.

EUR/USD Daily Chart Chart prepared by James Stanley; data derived from Tradingview GBP/USD Cable built in a similar falling wedge into the Fed last week, and the response there was perhaps even more emphatic as buyers pounced on the bullish reversal. The challenge now for the pair is that 1.3500 level but there’s higher-low support potential around 1.3390 for bullish continuation scenarios.

GBP/USD Four-Hour Chart Chart prepared by James Stanley; data derived from Tradingview USD/CAD USD/CAD looks somewhat calm on a relative basis, following last week’s test and hold a the 1.4000 level. Following that test on Thursday, we’ve had higher lows, illustrating an element of bullish anticipation as buyers have stepped in with a bit more aggression over the past couple of days. This keeps the door open for short-term strength and for those looking for USD-strength, this may be a less chaotic backdrop than what showed in USD/JPY and perhaps a bit cleaner than EUR/USD or perhaps even GBP/USD which are vying for possible bullish trend scenarios.

USD/CAD Daily Chart Chart prepared by James Stanley; data derived from Tradingview --- written by James Stanley, Senior Market Analyst, Global Macro

The Pound Sterling (GBP) recovers some ground against the US Dollar (USD) on Tuesday, up 0.14%, as US jobs data was softer than expected but confirmed the strength of the labor market, with layoffs being little changed. The GBP/USD pair trades at 1.3451 after rebounding from 1.3419. Read More...

British Pound finds footing at 1.3420 with markets awaiting US Job Openings dataThe British Pound (GBP) edges higher against the US Dollar (USD) on Tuesday, reaching session highs above 1.3440 after finding support at the 1.3420 area earlier on the day. A mild risk appetite amid market hopes of a negotiated breakthrough in Iran and investors’ cautiousness ahead of key US labour market releases are keeping US Dollar bulls subdued on Tuesday. Read More...

British Pound weakens below 1.3450 as US-Iran uncertainty boosts safe-haven US DollarThe GBP/USD pair loses ground to near 1.3425 during the early Asian session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar (USD) against the British Pound (GBP). All eyes will be on the US July jobs data, which is due later on Friday. Read More...

GBP/USD held steady at 1.3426 on Tuesday, with the pound lagging behind other currencies despite a broader decline in the dollar.

Market sentiment improved following a drop in oil prices, as investors grew hopeful that the US and Iran may reach an agreement to restore shipping through the Strait of Hormuz. Such a development would reduce inflation risks and the likelihood of further rate hikes.

Additional pressure on oil prices came from Donald Trump’s statement on Monday regarding the resumption of negotiations with Tehran, which eased fears of a fresh wave of conflict.

The outcome of last week’s Bank of England meeting reinforced the view that the regulator is in no rush to tighten policy. As a result, markets have scaled back expectations of a rate hike in 2026, which continues to weigh on sterling.

Technical Analysis

On the H4 GBP/USD chart, the market is forming a move lower towards 1.3380. A broad consolidation range around the 1.3440 level is taking shape. An upside breakout would open the way for a move towards 1.3500, while a downside breakout would suggest a move towards 1.3300, with scope for the trend to extend to 1.3190. The MACD indicator supports this scenario, with its signal line above zero and pointing downwards.

On the H1 chart, the market has formed a compact consolidation range around the 1.3420 level, currently extending down to 1.3418. A move higher towards 1.3442 is expected, followed by a decline to 1.3380. The Stochastic oscillator confirms this scenario, with its signal line below 50 and pointing downwards towards 20, indicating increasing short-term downside pressure.

Conclusion GBP/USD is struggling to gain traction, with sterling underperforming compared to other currencies despite a broadly weaker dollar. The pound has failed to benefit from improving risk sentiment, driven by hopes of a US–Iran deal that could ease oil prices and inflation concerns. However, the Bank of England’s cautious stance, reinforced by last week’s policy meeting, continues to weigh on the currency, with markets scaling back expectations for 2026 rate hikes. Technically, the pair appears to be consolidating near 1.3420, with potential for a pullback towards 1.3380–1.3300. The pound’s relative weakness may persist until clearer signals emerge on the BoE’s policy trajectory or geopolitical tensions ease further.

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Dollar Index Price Chart – Source: Tradingview The US Dollar Index (DXY) is trading at 100.05. After last week’s steep drop, this confirms efforts to reestablish a trading range. From the daily chart, the DXY has found support from a long-term ascending trendline that has guided price action since February. DXY buyers have defended the 99.48 horizontal support and prevented price action from weakening even further.

Current price action balances the 100 day EMA at 99.93 with the 50 day EMA at 100.44. A sustained upside break from the current trading range at 100.45 supports a bullish trend and targets 101.61, subsequently 102.66. Outside of the 50 day EMA, price action has not confirmed the trend resurgence. The support of the trendline would guide price action to defend 99.48 and subsequently 98.53.

Momentum indicators have yet to confirm the strength of the bullish trend. The RSI has recovered from oversold levels, but remains below the neutral 50 level confirming the bullish reversal has not yet been confirmed. The strength of the bullish trend will be confirmed with a daily close above 100.45. Until then major resistance levels reside around 100.45 to support 101.61, 102.66, and 99.48 to 98.53.

Current bias remains neutral, but is leaning bullish as long as price action holds above 99.48. Confirmation of the bullish trend will be confirmed with a move above.

Key Highlights

GBP/USD started a fresh increase above 1.3400. It traded above a key bearish trend line with resistance at 1.3305 on the 4-hour chart. Bitcoin seems to be facing hurdles near $64,500 and $65,650. EUR/USD rallied above 1.1500 before it started a consolidation phase. GBP/USD Technical Analysis The British Pound started a decent increase above 1.3380 against the US Dollar. GBP/USD even surpassed 1.3400 to enter a positive zone.

Looking at the 4-hour chart, the pair settled above 1.3400, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). There was a move above the 61.8% Fib retracement level of the downward move from the 1.3555 swing high to the 1.3273 low.

However, the bears are active near the 1.3520 zone. If there is a downside correction, the pair might find support near 1.3290 or the 100 simple moving average (red, 4-hour).

The first key support is near the 1.3350 level and the 200 simple moving average (green, 4-hour). A downside break and close below 1.3350 might send the pair toward 1.3320. Any more losses could open the doors for a test of 1.3250.

On the upside, the pair could face resistance near 1.3500. The next major resistance might be 1.3520. A close above 1.3520 could start another steady increase. In the stated case, the bulls could aim for a move to 1.3555. Any more gains might open the doors for a test of 1.3620.

Looking at Bitcoin, the bears seem to be in control, and they could aim for a fresh push toward the $60,000 level.

Upcoming Key Economic Events:

US Factory Orders for June 2026 (MoM) – Forecast +0.2%, versus -1.3% previous. US Goods and Services Trade Balance for June 2026 – Forecast $-73.0B, versus $-77.6B previous.

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Key Points:EUR/USD pulled back as Germany's Retail Sales missed analyst estimates. USD/CAD gained ground amid falling demand for commodity-related currencies. USD/JPY moved away from session lows as traders reacted to recent interventions.

U.S. Dollar Moves Higher As Traders React To ISM Manufacturing PMI Report

DXY 030826 4h Chart U.S. Dollar Index gains ground as traders focus on the better-than-expected ISM Manufacturing PMI report. The report indicated that ISM Manufacturing PMI increased from 53.3 in June to 55.6 in July, compared to analyst forecast of 54. ISM Manufacturing Employment grew from 49.7 to 52.8, compared to analyst consensus of 49.8. Numbers above 50 show expansion.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 99.85 – 100.00. In case this attempt is successful, U.S. Dollar Index will move towards the next resistance level, which is located in the 100.50 – 100.65 range. RSI is in the moderate territory, so there is plenty of room to gain momentum in case the right catalysts emerge.

EUR/USD Pulls Back As Germany’s Retail Sales Miss Estimates

EUR/USD 030826 4h Chart EUR/USD is losing ground as traders react to the disappointing Retail Sales report from Germany. The report showed that Retail Sales decreased by -1.1% month-over-month in June, compared to analyst forecast of -0.5%.

From the technical point of view, EUR/USD made an attempt to settle above the resistance level at 1.1510 – 1.1525 but failed to develop sufficient upside momentum and pulled back towards the 1.1500 level. In case EUR/USD manages to settle below 1.1500, it will head towards the next support, which is located in the 1.1420 – 1.1435 range.

GBP/USD Moves Lower Amid Profit-Taking GBP/USD 030826 4h Chart GBP/USD pulls back as traders take some profits off the table after the strong rally and react to ISM Manufacturing PMI report from the U.S.

A move below the 1.3400 level will open the way to the test of the support level at 1.3335 – 1.3350. On the upside, GBP/USD needs to settle above the resistance level at 1.3465 – 1.3480 to have a chance to gain upside momentum in the near term. If GBP/USD climbs above 1.3480, it will head towards the resistance level at 1.3550 – 1.3565.

USD/CAD 030826 4h Chart USD/CAD is moving higher as traders focus on the pullback in precious metals markets. Other commodity-related currencies are also losing ground in today’s trading session.

USD/CAD climbed above the support level at 1.4010 – 1.4025 and is trying to settle above the 1.4050 level. In case this attempt is successful, USD/CAD will move towards the 50 MA at 1.4070. If USD/CAD manages to settle above the 50 MA, it will head towards the resistance level at 1.4125 – 1.4140.

USD/JPY Moves Away From Session Lows

USD/JPY 030826 4h Chart USD/JPY attempts to rebound after interventions from Japan and U.S. It is not clear how mcuh U.S. spent to provide support to the yen, but Treasury Secretary Scott Bessent said that the country would not hesitate to get back into the market.

U.S. officials decided to intervene as Japan could be forced to sell U.S. Treasuries to raise money for currency interventions. The yield of 30-year Treasuries is at multi-decade highs, and additional pressure from Japan’s sales could trigger a major sell-off in U.S. bond markets.

If USD/JPY climbs above the 157.00 level, it will move towards the resistance level at 157.50 – 158.00. A successful test of this level will open the way to the test of the next resistance at 159.50 – 160.00.

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Vladimir is an independent trader, with over 18 years of experience in the financial markets. His expertise spans a wide range of instruments like stocks, futures, forex, indices, and commodities, forecasting both long-term and short-term market movements.

Editors’ Picks

Dollar Index Price Chart – Source: Tradingview Currently, the U.S. Dollar Index sits around 99.79, approaching significant support due to the long-term ascending trendline intersecting with the 100-day EMA (99.92). After buying pressure was absorbed around 101.61, the Index was pressed to the psychological 100.00, but the broader uptrend is still in effect.

Now the 100-day EMA at 100.45 is the first point of resistance, and the RSI indicates a bearish trend may be losing momentum due to the recent fall to 34. A daily close at 99.47 or lower would negate the uptrend, with a target at 98.53, then 97.63. If prices hold above the trendline, expect a move to 100.45, with the 101.61 target remaining in effect.

While the trend remains bullish, and prices are above the trendline, the next few daily candles will dictate whether the trend remains bullish, or a deeper correction is in effect.

GBP/USD Technical Analysis: GBP Approaches Important Resistance Level at 1.3500

Pound-Dollar could extend its recovery if US labour market data weakens further, although stronger ISM surveys may help steady the Greenback. The Pound to US Dollar (GBP/USD) exchange rate climbed to a 15-day high last week as investors scaled back Federal Reserve rate hike expectations following softer US economic data and the latest central bank decisions.

At the time of writing, GBP/USD was trading around $1.3483, up approximately 1% over the week.

Latest — Exchange Rates:

Pound to Dollar (GBP/USD): 1.347555 (-0.05%)

Euro to Dollar (EUR/USD): 1.153631 (+0.06%)

Dollar to Yen (USD/JPY): 156.42647 (-0.65%)

Image: GBP/USD monthly returns WEEKLY RECAP:

The US Dollar (USD) opened the week on a firm footing as a cautious market mood boosted demand for the safe-haven currency.

Trading remained subdued until Wednesday evening, when the Federal Reserve left interest rates unchanged by a 9-3 vote and adopted a broadly neutral tone.

Following the decision, markets pared back expectations for further Fed interest rate hikes this year, triggering broad-based US Dollar weakness.

Image: GBP/USD 1-month chart performance Share article

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Selling pressure intensified on Thursday after second-quarter US GDP growth slowed to 1.5%, missing expectations and decelerating from 2.1% in the first quarter.

At the same time, the latest core PCE price index suggested inflation cooled modestly in June, adding to expectations that the Fed may be in no hurry to tighten policy further.

An improving market mood also kept the safe-haven US Dollar under pressure into the end of the week.

Meanwhile, the Pound (GBP) traded without clear direction during the first half of the week ahead of the Bank of England's policy decision.

The BoE announcement provided modest support for Sterling, although gains were uneven as investors assessed the voting split and Governor Andrew Bailey's comments.

Policymaker Catherine Mann joined two colleagues in voting for an interest rate increase after previously supporting unchanged policy, while Bailey reiterated there was little evidence that inflation was becoming entrenched in the UK economy.

After a soft start on Friday, Sterling recovered after Chancellor John Healey confirmed the date of the Autumn Budget and reiterated the government's commitment to maintaining its fiscal rules, helping reassure investors.

Image: Pound-to-Dollar exchange rate forecast consensus range as of August 2026 Share article

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Near-Term GBP/USD Forecast: Non-Farm Payrolls Report in Focus Looking ahead, the US ISM manufacturing and services PMIs on Monday and Wednesday are expected to provide the first major clues on the health of the US economy.

If both surveys point to improving business activity, the US Dollar could regain some support.

However, the week's key release will be Friday's US non-farm payrolls report.

A stronger-than-expected increase in employment could revive support for the Greenback, although any further rise in the unemployment rate may offset the positive impact.

Meanwhile, the UK's final services PMI on Wednesday is the main domestic release for Sterling. Confirmation that the UK's dominant services sector returned to growth in July could provide additional support for the Pound.

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

MUFG says the Bank of England’s hawkish hold should keep Sterling supported, but Governor Bailey’s pushback against imminent rate increases limits the scope for a sustained GBP/USD rally. The Pound to Dollar exchange rate (GBP/USD) ended July around 1.3482 after gaining 1.75% over the month and rebounding strongly from lows below 1.33.

GBP/USD rose around 0.85% over the final 48 hours of July, reaching a high near 1.3495 and finishing close to the top of that range.

Image: Pound to Dollar (GBP?USD) exchange rate chart - final 48hr pre-close Over the past three months, the pair has traded between approximately 1.3142 and 1.3658, leaving the latest rate near the middle of its broader spring and summer range.

MUFG believes the Bank of England’s latest communication remains supportive for Sterling, although policymakers stopped short of signalling an imminent rate increase.

The Monetary Policy Committee left rates unchanged, with MUFG’s textual analysis describing the written contributions as consistent with a hawkish hold. Policymakers continued to emphasise inflation persistence, second-round effects and the risks posed by energy prices and geopolitical uncertainty.

The committee remains divided. MUFG’s framework placed Catherine Mann firmly in hawkish territory, followed by Huw Pill and Megan Greene, while Swati Dhingra and Alan Taylor remained on the dovish wing.

Mann’s shift was particularly notable, with her comments placing greater weight on inflation risks arising from Middle East tensions and volatile energy prices.

The press conference delivered a more balanced signal than the written statement, however.

MUFG scored the MPC contributions at 23.3 on its hawk-dove scale, compared with a softer 17.0 for Governor Andrew Bailey’s press conference.

Bailey explicitly warned markets not to leave the meeting believing that the MPC was “edging towards a hike”.

That distinction is important for Pound Sterling.

The BoE remains concerned enough about inflation to resist a dovish shift, supporting UK yields and the Pound, but it is not yet preparing investors for another tightening move.

According to MUFG, “the communication remains supportive, but the deliberate pushback against rate hike expectations limits the scope for upside.”

Image: GBP/USD 3-month history The Pound-Dollar exchange rate charts reinforce that mixed picture.

GBP/USD has recovered above both its short-term moving averages, but remains below the May high near 1.3658.

A clean move through 1.3500 would improve the immediate technical tone, while the 1.3550-1.3660 area is likely to offer stronger resistance.

Pound Sterling’s rebound can therefore extend while the Dollar remains under pressure, but MUFG’s assessment suggests the BoE alone is unlikely to drive GBP/USD decisively beyond its recent highs.

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

The Pound Sterling retreats some 0.02% on Friday as the Greenback stages a recovery following Thursday’s intervention day, which weakened the US Dollar Index (DXY) to a 30-day low. At the time of writing, the GBP/USD trades at 1.3458, virtually unchanged. Read More...

British Pound underperforms as traders reconsider BoE interest rate hike betsThe British Pound (GBP) is down against its major currency peers, trading marginally lower at around 1.3444 against the US Dollar (USD) during the European trading session on Friday. The British currency faces selling pressure as financial markets reconsider Bank of England (BoE) interest rate expectations for the September policy meeting after the monetary policy announcement on Thursday. Read More...

British Pound falls as US Dollar receives from internal FOMC policy splitGBP/USD loses ground after three days of gains, trading around 1.3450 during the Asian hours on Friday. The pair depreciates as the US Dollar (USD) gains support from a hawkish pause by the Federal Reserve (Fed) and an internal FOMC policy split. Read More...

UK economists expect the GBP/USD exchange rate to retreat in the near-term outlook as steady BoE rates and doubts over the durability of hawkish policy guidance weigh on Pound Sterling. The Pound to Dollar exchange rate (GBP/USD) traded around 1.3443 on Friday morning after gaining more than 1.3% over the previous two sessions.

GBP/USD closed Thursday at 1.3461, leaving the pair 1.6% higher for July but still below the month’s 1.3558 peak.

Rabobank expects that recovery to fade, forecasting Cable in a 1.32–1.33 range over the next one to three months.

The bank’s argument is that markets have already tightened UK monetary conditions on the Bank of England’s behalf by pricing further rate increases and pushing borrowing costs higher.

“In RaboResearch’s view, the heavy lifting done by the market may help the Bank avoid an actual hike in policy rates,” Rabobank said.

Thursday’s BoE decision reinforced that possibility. Bank Rate remained at 3.75%, despite three policymakers voting for an immediate increase.

The vote looked hawkish, but the majority still preferred to wait for clearer evidence that higher energy costs were feeding into wages and domestic prices.

Rabobank believes markets will initially continue “taking the BoE’s hawkish rhetoric at face value and maintain its expectations of rate hikes”.

The risk is that investors eventually demand action.

The bank questioned whether another unchanged decision could cause markets to doubt whether the Monetary Policy Committee is “truly focused on its inflation mandate”, particularly if policymakers continue talking tough without raising rates.

Image: GBP/USD median bank forecast path showing a near-term fall towards 1.33 before a longer-term recovery The latest Exchange Rates UK forecast survey poll, see chart above, broadly supports Rabobank’s near-term caution. The median bank projection falls to around 1.33 by the end of the third quarter before recovering gradually through 2027 and moving above 1.40 in late 2028.

Rabobank is less convinced about the Pound’s medium-term prospects.

“Further out we see risk that UK fiscal concerns will combine with steady BoE rates to weigh on the pound,” the bank said.

The UK labour market remains central to that view. Before the energy shock, weaker employment conditions had supported expectations that the BoE would cut rates this year.

Recent signs of stabilisation have complicated the picture and may increase the risk of “second order price effects” as oil prices rise again.

Rabobank said stronger labour data or “another ramp higher in UK CPI inflation data” could increase pressure on the Bank “to put its money where its mouth is”.

Near-Term GBP/USD Forecast: Rabobank Targets 1.32–1.33 as BoE Credibility Faces a Test Rabobank’s range implies that Thursday’s move above 1.34 will not be sustained.

A decline to 1.33 would reverse much of the latest rally, while 1.32 would return Cable towards the lower part of its recent trading range.

The Dollar side is also important. Sterling benefited when short-term US yields and the greenback fell after the Federal Reserve held rates steady, but Rabobank does not view that as enough to secure a lasting Pound advance.

Its central judgement is that the BoE may continue using hawkish language while avoiding an actual increase.

That strategy can support Sterling only while markets believe a hike remains credible. Rabobank’s 1.32–1.33 forecast suggests that confidence will become harder to maintain.

The GBP/USD pair trades in negative territory around 1.3445 during the early European trading hours on Friday. Heightened Middle East tensions and rising global oil prices provide some support to a safe-haven currency such as the US Dollar (USD) against the British Pound (GBP). The Michigan Consumer Sentiment Index will be published later on Friday. 

Iranian Parliament Speaker Mohammad Bagher Ghalibaf on Thursday denounced the US attack on civilian homes on Qeshm Island, describing it as a continuation of American crimes in the southern Iranian cities of Minab and Lamerd. Earlier on Thursday, the US launched missile strikes across southern Iran, including Qeshm Island as well as parts of Bushehr, Fars and Khuzestan provinces.

Financial markets have priced in a more than 90% chance of the Bank of England (BoE) keeping borrowing costs on hold, with the outside chance of a hike. Traders expect a rise in borrowing costs to 4.0% before the end of the year.

BoE seen on hold as softer UK inflation eases pressureAnalysts at Brown Brothers Harriman note that the Bank of England is “widely expected to keep the policy rate at 3.75% for a fifth straight meeting,” arguing that a “less worrisome UK inflation backdrop gives the BoE room to stand pat.” In their view, the recent moderation in price pressures allows policymakers to maintain the current stance without rushing to adjust rates, reinforcing expectations for an extended pause in the tightening cycle.

Technical Analysis:In the daily chart, GBP/USD holds a modest bullish bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger middle band around, suggesting underlying dip-buying interest after recent consolidation. The Relative Strength Index (RSI) at about 57 stays in positive but not overbought territory, hinting that upside momentum is constructive yet still measured.

On the downside, immediate support is seen around the 100-day SMA at 1.3400, reinforced by the nearby Bollinger middle band at roughly 1.3390, while a deeper cushion emerges at the lower Bollinger band near 1.3265 should sellers regain control. On the topside, initial resistance aligns with the upper Bollinger band around 1.3515; a sustained break above this cap would open the door for the July 15 high of 1.3558. 

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Pound Sterling FAQs The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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

•    The US dollar has fallen on fears that the Fed will not raise interest rates.

•    Positive policy outlook, including the BoE’s hawkish rhetoric, will support the pound.

The US dollar suffered its sharpest fall in the last two weeks following Kevin Warsh’s intention to shift the Fed’s responsibility for bringing inflation back to the 2% target onto the financial markets. The new Fed Chair emphasised that the rally in Treasury yields is tightening financial conditions and holding back price growth. Inflation expectations remain at acceptable levels.

Investors interpreted this rhetoric as an intention to extend the pause and avoid tightening monetary policy for as long as possible. The probability of a federal funds rate hike in September has fallen from 75% to 65%, and the likelihood of two hikes in 2026 has dropped from 51% to 44%. This led to a weakening of the US dollar against major peers, despite falling stock indices, a rally in Treasury bond yields and rising oil prices against the backdrop of the escalating conflict in the Middle East.

However, Commerzbank believes that the rally in Brent crude will not necessarily weigh on the EURUSD and GBPUSD. It is leading to a rise in inflation expectations in Europe and to an increased likelihood of policy tightening by the ECB and the Bank of England. At the same time, inflation expectations in the US are not rising, nor is the likelihood of Fed monetary tightening. According to DBS Group, Kevin Warsh’s withdrawal of his forward guidance is leaving US markets and the dollar stumbling in the dark. By contrast, the euro and the pound may benefit from central banks maintaining their guidance on the future path of interest rates.

In this regard, the BoE meeting could provide sterling support. Investors do not expect a rise in the repo rate but anticipate hawkish rhetoric amid the escalating conflict in the Middle East and rising energy prices. Oil and gas prices are higher than they were at the time of the Committee’s previous meeting.

Despite the Bank of England holding rates for a fifth consecutive meeting, the futures market is pricing in a 65% chance of a hike in September and nearly two increases by the end of this year. Bloomberg experts forecast that only two of the nine MPC members will vote for a rate hike. If the number is higher, GBPUSD could rise.

The FxPro Analyst Team

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