**Source: Mitrade News Live (Original author: kimmy@mitrade.com) – Published August 19, 2025**
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# Forex Market Weekly Outlook: Key Themes and Major Currency Pairs to Watch
By kimmy@mitrade.com
The upcoming week in global Forex markets is set against a backdrop of simmering volatility, as traders weigh central bank policy signals, growth data, and geopolitical risks. With evolving monetary policy expectations and resilient macro headwinds continuing to dominate, the U.S. dollar maintains a firm grip on market sentiment as the world’s reserve currency. The euro, yen, and pound remain susceptible to data flow, policy divergence, and risk appetite in the days ahead.
Below, a comprehensive breakdown of market driving factors, price levels, and emerging trade opportunities for the most popular currency pairs is detailed. Pay close attention to potential catalysts in economic releases and monetary policy guidance, as well as geopolitical catalysts shaping the near-term direction for each currency.
## 1. U.S. Dollar Dominance: Macro and Fed Guidance
– The dollar index (DXY) closed the prior week above 103.60, extending its upward momentum after the Federal Reserve’s balanced but hawkish-leaning comments at the Jackson Hole Symposium.
– Chair Powell’s rhetoric suggested the central bank is “prepared to raise rates further if appropriate,” though a downturn in inflation and economic resilience keep market participants speculating about the exact timing of a policy pivot.
– Strong U.S. economic data, including persistently tight labor markets and firm consumer activity, has widened the divergence versus G10 peers. The greenback continues to benefit from safe-haven flows, especially amid global risk-off episodes.
Key data to watch this week:
– Tuesday: U.S. Retail Sales, July (MoM)
– Wednesday: FOMC Minutes, August meeting
– Friday: Michigan Consumer Sentiment Index
**Analyst’s view:** The dollar’s uptrend remains intact unless incoming U.S. inflation or jobs data shows significant downside surprises. The FOMC’s policy minutes and any further hawkish commentary could prompt renewed buying interest in the dollar, especially against lower-yielding currencies like the yen and euro.
## 2. EUR/USD: Stuck in Range, Eyes on ECB Inflation Jitters
– The euro has remained under pressure, failing to regain the 1.0900 handle amid a slowing economic backdrop and growing stagflation concerns in the Eurozone.
– Recent Eurostat data continues to highlight anemic GDP prints and weak consumer spending across the bloc, dampening growth forecasts for the second half of the year.
– Despite policy tightening, the European Central Bank faces a complex challenge balancing below-target GDP with stubbornly high inflation in the services sector.
Key euro-area catalysts:
– Eurozone GDP (2nd estimate, Q2)
– Eurozone Harmonized Index of Consumer Prices (Final, July)
– ECB Meeting Account (Thursday)
Technical outlook:
– Immediate support is found at 1.0850, with more significant downside risk toward 1.0770 if bears maintain control.
– On the upside, bulls would need to reclaim 1.0950 to lessen downside threats.
**Analyst’s view:** Unless data surprises to the upside or the ECB strikes an assertively hawkish note regarding future rate hikes, EUR/USD risks another leg lower amid diverging growth signals and U.S. dollar strength.
## 3. USD/JPY: Fresh Highs as Policy Divergence Widens
– The Japanese yen traded to multi-decade lows, with USD/JPY reaching above 146.60, as the Bank of Japan reaffirmed its ultra-loose monetary stance at its recent meeting.
– BoJ Governor Ueda reiterated that wage growth and inflation remain insufficient to justify a shift away from negative interest rates or the current yield curve control framework.
– Expectations for further Federal Reserve tightening and upward pressure on U.S. yields continue to attract carry trades against
Read more on GBP/USD trading.