Weekly Forex Forecast: August 17th to 22nd, 2025
Original Analysis by DailyForex
The upcoming trading week, spanning from August 17th to August 22nd, 2025, presents key opportunities and risks for forex traders. With major currencies reacting to global macroeconomic news, central bank policy frameworks, and geopolitical tensions, traders must position themselves carefully across different currency pairs. This forecast offers a comprehensive overview of the potential movements expected across the forex board, with insights into how various currency pairs are setting up technically and fundamentally.
Overview of Key Market Drivers
Markets continue to be influenced by the evolving global monetary policy stances, particularly from the U.S. Federal Reserve, the European Central Bank, and the Bank of Japan. The general tone remains hawkish among several major central banks, even as inflation moderates. Additionally, rising geopolitical tensions in Eastern Europe and parts of Asia are adding uncertainties across global markets.
Key market drivers this week include:
– Global inflation data: Emerging data will show whether price-growth pressures are stabilizing
– Central bank commentary: Traders will watch closely for hints from Fed officials and other policymakers
– Economic indicators: U.S. retail sales, European inflation readings, and Japanese GDP data could provoke volatility
– Risk sentiment: Shifts in sentiment driven by geopolitical or economic developments will also affect currency flows
US Dollar (USD) Outlook
The U.S. Dollar Index (DXY) remains well-supported as the Federal Reserve continues to emphasize a data-driven stance toward rates. Despite slightly softer inflation prints in July, Fed speakers have remained unwavering in their view that inflation risks persist, especially in the services sector. Bond yields have stayed elevated, supporting the greenback.
Key expectations for the USD:
– Traders should anticipate continued strength in the USD, especially against lower-yielding currencies like the JPY and CHF
– Short-term resistance for the DXY stands near 106.20 while support levels are seen around 104.75
– U.S. retail sales and industrial production numbers will be closely watched
Technical Levels to Watch:
– DXY Resistance: 106.20
– DXY Immediate Support: 105.30
– Next support zone: 104.75
EUR/USD Forecast
The EUR/USD pair continues to exhibit weakness due to diverging monetary policy guidance and waning optimism over eurozone recovery. The European Central Bank has signaled the end of its hiking cycle, while the Fed maintains open language with a more hawkish bias. The pair is holding below the psychological 1.0900 level and has seen downward pressure from softening economic indicators out of Germany and France.
Technical Overview:
– Immediate resistance lies at 1.0890; a break above may invite bullish interest
– Primary support rests near 1.0770, with a further breakdown possibly targeting 1.0705
– A daily close below 1.0770 may initiate a bearish extension toward 1.0650
Key Fundamentals:
– Weak PMI numbers from the eurozone fuel concerns over economic stagnation
– ECB remains cautious, but no additional hikes seem likely, reducing euro attractiveness
– Germany’s industrial output and Ifo Business Climate Index due this week may influence sentiment
GBP/USD Forecast
The British Pound has been struggling to regain momentum against the dollar, with inflationary data from the UK painting a mixed picture. The Bank of England has adopted a more neutral tone recently, indicating that it may pause rate hikes if inflation continues to stabilize. GBP/USD has slipped back below the 1.2800 handle, with technical patterns suggesting further declines are possible.
Technical Analysis:
– Immediate resistance: 1.2835
– Short-term support: 1.2700, with key support below at 1.2625
– Daily closes below 1.2700 could trigger bearish continuation down to 1.2550
Fundamental Drivers:
– UK CPI and Retail Sales data will guide
Read more on EUR/USD trading.