The US dollar is gaining strength against major currencies, reaching new highs except against the AUD. The EURUSD pair has fallen below important moving averages, hitting a low of 1.16019. It now targets last week’s low and the prior low at 1.15816 and 1.15885.

USDJPY Trends

For USDJPY, it has regained its position above the 200- and 100-hour moving averages. It’s aiming for a swing area between 147.95 and 148.166, and further gains are possible if it breaks through this range. The GBPUSD has dipped below its 100-hour moving average. A key target on the downside is the 100-day moving average at 1.34214. If it falls below this level again, the bearish outlook will strengthen. In contrast, the USDCAD is recovering from support levels around 1.38127 and 1.38315, trading near 1.3860. It is targeting the August high at 1.38785, with additional resistance at 1.39229. A move towards sellers would need a break below 1.38127 and the rising 100-bar moving average on the 4-hour chart at 1.38018. The current dollar strength is mainly due to the Fed’s strong stance following last Friday’s comments. Markets are adjusting their interest rate expectations, and the CME FedWatch tool indicates that traders are no longer anticipating any rate cuts for the rest of 2025. The latest US jobs report from early August 2025 showed 215,000 jobs added, supporting the Fed’s wait-and-see approach.

Outlook for EURUSD and GBPUSD

For EURUSD, a decisive break below the 1.1640 level looks likely, especially with ongoing struggles in the Eurozone. Last week’s flash Eurozone manufacturing PMI came in at a disappointing 45.2, indicating continued contraction in the industrial sector. We should consider put options or short futures positions targeting the 1.1581 low from two weeks ago. The GBPUSD is also facing bearish pressure as it trades below the 1.3464 midpoint. The Bank of England has paused its tightening cycle, which contrasts sharply with the Fed’s stance. A sustained move below the 100-day moving average at 1.3421 could trigger a more significant sell-off. USDJPY shows strength as it regains key moving averages around 147.65. This upward movement is fueled by the widening policy gap, as the Bank of Japan has reaffirmed its commitment to an ultra-easy monetary policy. Call options could be a good strategy for a break of the 148.00-148.16 resistance zone. USDCAD buyers are effectively supporting the 1.3812 level, keeping the upward trend in place. A recent dip in WTI crude oil prices below $80 a barrel is also impacting the Canadian dollar. We should watch for a test of the August high near 1.3878. This market behavior resembles what we experienced in 2022 and 2023 when aggressive Fed tightening was the main influence. In this environment, strategies should favor dollar strength against currencies with more dovish central banks. We can expect this trend to continue until there’s a significant change in US economic data or Fed messaging. Create your live VT Markets account and start trading now.

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