The USD starts the North American session at a low point. We will focus on three major currency pairs: EUR/USD, USD/JPY, and GBP/USD.

Technical Analysis Overview

We will look at each pair to understand their trends, targets, and risks. This analysis helps to predict how these pairs might move in the market. With the US dollar struggling at the start of the week, we are searching for opportunities against it. The market is responding to last week’s US inflation data, which was reported at 2.8% for July. This figure fell short of expectations, suggesting that the Federal Reserve may consider rate cuts by early 2026. As a result, there’s a growing trend to sell dollars, so traders should think about buying put options on the dollar index or call options on other currencies. For the EUR/USD, we noticed a clear upward move past the 1.1500 level. This rise is supported by the European Central Bank’s recent hawkish stance, creating a difference in policy when compared to the Fed. Traders might consider buying call options with a strike price around 1.1600, aiming for higher movement in the coming weeks while managing their risks. The GBP/USD is also showing strong performance, nearing its yearly highs. UK wage growth data from earlier this month was robust at 4.5%, indicating that the Bank of England may delay rate cuts. This makes long GBP/USD futures an appealing option for traders betting on continued dollar weakness.

Market Trends and Strategies

Looking at USD/JPY, this pair is declining sharply as the dollar weakens and the yen strengthens. There are talks that the Bank of Japan might soon drop its negative interest rate policy after experiencing stable inflation in Tokyo last month. Buying put options on USD/JPY could be a smart move to prepare for a potential steep decline if the BoJ indicates a change in policy. This market reminds us of late 2023 when shifts in Fed expectations led to a prolonged decline in the dollar. That time saw strong trends develop, benefiting traders who held positions through futures or long-term options. Given this background, we should anticipate increased volatility compared to the summer lows. Create your live VT Markets account and start trading now.

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