**Weekly Forex Forecast: 17th to 22nd August 2025**
*Based on original analysis by DailyForex.com, edited for length and clarity*
As we enter the third week of August 2025, the forex market is at a critical juncture. Global economic dynamics, mounting central bank policies, and geopolitical uncertainties continue to shape currency flows. This week is particularly vital, with major economic data releases and central bank rhetoric expected to add increased volatility in the markets. Here is an in-depth technical and fundamental forecast for the most-traded forex pairs, as informed by the excellent analysis from DailyForex.com.
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## Market Overview: Key Economic Drivers
Before delving into individual currency pairs, it’s essential to consider the broader market environment:
– **US Dollar Index (DXY):** The US dollar recently saw renewed strength, touching multi-month highs, fueled by hawkish commentary from Federal Reserve officials and resilient US macroeconomic data.
– **Central Banks:** The Federal Reserve, ECB, Bank of Japan, and Bank of England are all facing tough policy decisions. Rate divergence remains a key market driver.
– **Geopolitics:** Tensions in major global hotspots continue to impact risk sentiment, especially in safe-haven flows.
Significant data releases this week include:
– US retail sales, industrial production, and FOMC meeting minutes
– Eurozone inflation data and ECB meeting minutes
– UK retail sales and employment data
– Japan GDP and inflation readings
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## EUR/USD: Bearish Bias With Room for Downside
The euro-dollar pair continues to grapple with alternating momentum, but the overall trend remains bearish.
– **Technical Outlook:**
– The pair is trading below both the 50-day and 200-day moving averages.
– Key support is located at 1.0700, followed by 1.0640.
– Immediate resistance at 1.0830, then 1.0900.
– The Relative Strength Index (RSI) on the daily chart remains under 45, reflecting sustained selling pressure.
– **Fundamental Factors:**
– The European Central Bank remains cautious, struggling with lackluster growth in Germany and persistent inflation risks.
– US economic data continues to outperform, making the dollar the preferred choice among investors.
**Trading Strategy:**
– Short positions below 1.0830, targeting 1.0700 and 1.0640.
– A sustained move above 1.0930 would negate the short-term bearish outlook.
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## GBP/USD: Upside Capped Amid Mixed Data
The pound has been consolidating within a modest range but faces headwinds from a slowing UK economy and sticky inflation.
– **Technical Outlook:**
– GBP/USD is flatlining below the 1.2700 handle.
– Support is evident at 1.2600, and significant resistance is at 1.2750.
– The pair hovers near the lower boundary of a short-term ascending channel.
– Momentum indicators are neutral, showing a lack of clear direction.
– **Fundamental Factors:**
– The Bank of England faces the dilemma of stalling growth versus above-target inflation.
– Uncertainty around UK public finances and trade remains.
**Trading Strategy:**
– Sell rallies towards 1.2750, with stop-losses above 1.2800.
– Look for short-term buying opportunities if there’s a bounce from 1.2600.
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## USD/JPY: Testing Historic Levels
The Japanese yen is under continued pressure, marking multi-decade lows as the Bank of Japan sticks to ultra-loose policy.
– **Technical Outlook:**
– USD/JPY is approaching the psychological 160.00 resistance level.
– Daily RSI is above 70, signaling an overbought market.
– Support is at 158.00, then 157.20.
Read more on GBP/USD trading.