Weekly Forex Forecast: August 24–29, 2025
By: Adam Lemon (original source: DailyForex)
The forex market continues to grapple with diverging economic conditions across major economies, leading to increased volatility and directional shifts in several prominent currency pairs. For the week spanning August 24 to August 29, 2025, traders will be watching key economic releases, central bank commentary, and ongoing geopolitical developments for directional cues.
This comprehensive weekly outlook, based on technical and fundamental insights originally compiled by Adam Lemon from DailyForex, supplements the analysis using data and projections up to 2025 from publicly available economic calendars, central bank briefings, and recent trends. The forecasts aim to guide traders seeking to capitalize on volatility across the USD, EUR, GBP, JPY, AUD, and select emerging market currencies.
Overview of Key Market Drivers
1. US Dollar (USD) Trends
The US dollar remains supported by resilient economic data. July’s Non-Farm Payrolls exceeded expectations, while inflation remains sticky, keeping pressure on the Federal Reserve to maintain higher interest rates for longer.
Key points:
– Fed policymakers have reasserted that inflation risks persist.
– The latest Consumer Price Index (CPI) year-over-year figure stands at 3.1 percent, slightly above the Fed’s 2 percent target.
– Market pricing now anticipates the first rate cut no earlier than Q1 2026.
– The US Dollar Index (DXY) trades near a four-month-high around 104.80.
Expect upside potential in USD pairs as investors rotate into the greenback for yield and safety amid uncertain global macro risk.
2. Central Bank Divergence
A critical factor in forex trends continues to be the policy divergence among central banks:
– The Federal Reserve remains hawkish with rates steady at 5.50 percent.
– The European Central Bank (ECB) appears dovish, facing stagnating eurozone growth.
– The Bank of England (BoE) is cautious, troubled by inflation persistence and slowing wage growth.
– The Bank of Japan (BoJ) remains an outlier with ultra-loose policy and near-zero interest rates, although recent speculation suggests gradual tightening ahead.
Major Currency Pair Forecasts (August 24–29, 2025)
1. EUR/USD Outlook
EUR/USD extended its decline during the third week of August, with the pair hovering near 1.0720 as of Friday, August 23. Weakening eurozone economic indicators, such as lower German manufacturing PMI and dismal retail sales, continue to weigh on the currency.
Technical Analysis:
– Key Resistance Levels: 1.0800, 1.0875, 1.0940
– Support Levels: 1.0700, 1.0635, 1.0600
– Momentum: Bearish bias with declining volume confirmation on down days
– RSI on the daily chart is below 45, indicating sustained pressure
Fundamental Drivers:
– ECB’s hesitancy to hike again amid soft inflation
– Germany potentially entering recession with GDP contraction expected in Q3
– Growing U.S. exceptionalism in economic performance
Outlook: Bearish to neutral near term. Price action may test the 1.0635 support if risk-off sentiment persists. Watch for any shift in ECB commentary; otherwise, rallies to 1.0800 will likely be sold into.
2. GBP/USD Outlook
Sterling has struggled to maintain gains above 1.2700, weighed down by rising signs of economic slowdown in the UK. Despite high core inflation, the BoE’s recent statements suggest a pause in rate hikes is a real possibility.
Technical Analysis:
– Resistance: 1.2770, 1.2845
– Support: 1.2655, 1.2600, 1.2525
– The pair nearly breached its 100-day moving average (at 1.2670),
Read more on USD/CAD trading.