**Weekly Forex Forecast: 17th to 22nd August 2025**
*Based on the analysis by Dr. Michael Duane Archer, as originally published on DailyForex.com*
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The week of August 17th to 22nd, 2025, approaches amid heightened volatility across major currency pairs, as global markets grapple with central bank policy shifts, evolving geopolitical tensions, and mixed economic data. This in-depth weekly forecast synthesizes technical analysis, fundamental outlooks, and key events likely to drive forex market sentiment, providing comprehensive guidance for traders at all levels.
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## Overview of Major Market Drivers
### 1. Central Bank Policy Divergence
– The US Federal Reserve remains at the forefront of hawkish policy with persistent hints of another interest rate hike if inflation proves sticky.
– The European Central Bank is taking a more cautious stance as Eurozone data softens.
– The Bank of England and Bank of Japan face their own dilemmas, with growth challenges hampering further tightening in the former and persistent ultra-loose policy in the latter.
### 2. Economic Data Points
– US: The market awaits US retail sales and inflation figures, which could solidify the Fed’s next steps.
– Eurozone: Preliminary GDP and PMI readings are expected to provide clues about the recovery trajectory.
– UK: CPI and labor market data will be closely followed for direction.
– Japan: GDP growth and industrial production will be key in shaping JPY sentiment.
### 3. Geopolitical Backdrop
– Ongoing trade disputes, the unsettled situation in Eastern Europe, and energy market supply uncertainties continue to contribute to overall risk sentiment.
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## Technical Analysis: Major Forex Pairs
### 1. **EUR/USD: Testing the Lows Amid Diverging Policies**
– **Current Position:** EUR/USD started last week testing resistance around 1.0850 but was rejected, drifting back towards the 1.0700 handle.
– **Support Levels:** Key support lies at 1.0660, followed by the year’s low near 1.0610.
– **Resistance Levels:** Initial resistance appears at 1.0800, then the round number at 1.0850.
– **Momentum Indicators:** RSI remains below 50, signaling bearish momentum, while the MACD line is trending downward.
– **Key Factors:** The divergence in Fed and ECB policy, combined with Eurozone economic woes, keeps pressure on the Euro.
– **Forecast:** A sustained breach below 1.0700 opens the door to deeper declines; only a weekly close above 1.0850 would neutralize the current bearish setup.
### 2. **GBP/USD: Struggling with Mixed UK Data**
– **Current Position:** GBP/USD attempted a recovery after briefly dipping below 1.2500, but upside remains limited.
– **Support Levels:** 1.2460 is crucial, with 1.2375 next if selling intensifies.
– **Resistance Levels:** 1.2590 and 1.2650 cap any rallies.
– **Momentum:** Both stochastic and RSI indicators suggest lingering downside pressure.
– **Key Factors:** Uncertainty over future Bank of England hikes and mixed UK economic signals fuel volatility.
– **Forecast:** Expect limited upside; a decisive break below 1.2460 could trigger a quick move toward 1.2375.
### 3. **USD/JPY: Bulls Remain in Control**
– **Current Position:** Continued divergence in Fed and BoJ policies supports dollar strength against the yen.
– **Support Levels:** Initial support at 154.80, stronger at 153.60.
– **Resistance Levels:** Immediate resistance is 155.60, then 156.50.
– **Momentum:** MACD and RSI remain bullish, though deeply overbought conditions suggest potential for short-term pullbacks.
– **Key Factors:** Interest rate differentials dominate, and any hawkish surprise from
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