Monday mornings in the market often see low trading activity until more Asian markets open. This can lead to price fluctuations, so caution is advised. Here are the indicative rates for the start of the FX week: – EUR/USD: 1.1588 – USD/JPY: 147.28 – GBP/USD: 1.3280 – USD/CHF: 0.8050 – USD/CAD: 1.3775 – AUD/USD: 0.6478 – NZD/USD: 0.5925 Some weekend updates include: – Fed’s Williams is open to cutting interest rates. – OPEC plans to increase production by 548,000 barrels per day. – Revisions to non-farm payrolls are expected.

Weekend Highlights

Key topics from the weekend included: – Technical analysis of USD/JPY – OPEC’s production decisions – Discussions about Fed interest rates Other notable points include: – A cap on car finance payouts was recently announced. – Signs of a recession are appearing in the economy. – US tariffs generated $87 billion in the first half of 2025. Additionally, Canada-US trade talks are stalled with tariffs rising to 35%, and small-cap stocks are surging due to the AI boom. Be aware that trading in foreign exchange carries a significant risk and may not be suitable for everyone, given the potential for large losses. With low market liquidity today, we anticipate sharp price movements as trading volume increases. The economic outlook is uncertain; manufacturing is slowing while small-cap stocks benefit from the AI trend. This creates a mixed market environment where different sectors are telling various stories. The US Federal Reserve’s signals about a possible rate cut in September are expected to drive the market in the coming weeks. Recent reports from the US Bureau of Labor Statistics indicated a downward revision of over 300,000 jobs in the last quarter of 2024, increasing pressure for a rate cut. This trend suggests the US dollar may weaken, leading traders to consider buying put options on the dollar index.

Currency Forecasts

The USD/JPY pair at 147.28 appears particularly at risk of falling. If the Fed cuts rates while the Bank of Japan maintains its rate, the interest rate advantage that supports the dollar will diminish. We saw a similar scenario in 2019 when Fed easing caused the pair to drop significantly, and we might be on track for a repeat. For USD/CAD, we expect prices to rise from the current level of 1.3775. OPEC’s decision to boost oil production, along with stalled trade talks and new tariffs with the US, presents a double challenge for the Canadian dollar. Historically, falling oil prices and trade tensions, like those during the late 2010s, have weakened the loonie against the greenback. The British pound is also struggling, as the economy faces potential recession. The £18 billion cap on payouts related to the car finance scandal will negatively impact consumer confidence and bank profits. As a result, we are cautious about GBP/USD, even if the dollar weakens, which suggests that put spreads might be a good strategy for trading this sentiment. With all these conflicting signals, we expect overall market volatility to increase. The CBOE Volatility Index (VIX) is around 19, and has historically risen above 25 during times of Fed policy changes and economic uncertainty. This situation is ideal for options traders who can utilize strategies like straddles to profit from significant price swings, no matter which direction they go. Create your live VT Markets account and start trading now.

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