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Technical analysis indicates that USDCHF is fluctuating within a narrow range while sellers remain in control.
The USDCHF is testing key resistance levels, particularly the 0.8047 point, while 0.8017 serves as support to help forecast market trends. After Powell’s speech last Friday, the currency pair dropped significantly, falling below the 100- and 200-hour moving averages and slipping through the 0.8040–0.8047 range.
Despite extending below the 0.8017 low of an important swing area, sellers couldn’t maintain their downward momentum. Currently, the price is back within the swing area but is having difficulty breaking through the 0.8040–0.8047 resistance zone, which aligns with earlier swing points and the 50% midpoint from July’s rally.
The US dollar strengthens while UK holiday restrictions limit activity and key economic reports are expected
The US dollar is gaining strength as a new trading week starts. This follows a bounce-back from a cautious stance after the Jackson Hole event. Currently, there’s about an 85% chance of an interest rate cut in September, a drop from levels seen last Friday. US yields are rising too, with the two-year yield up by 3 basis points and the 10-year yield up by 1.5 basis points.
Today, we are focusing on technical analysis of major currency pairs such as EURUSD, USDJPY, and GBPUSD, especially since UK markets are closed for a holiday. The Ifo Business Climate report came in better than expected at 89.0, and outlooks for Q3 look positive. Although current conditions are not meeting expectations, the EUR sentiment is getting mild support from the report’s stability.
Upcoming Nvidia Earnings
Nvidia will release its earnings report on Wednesday, expecting to show $1.00 in earnings per share (EPS) and revenues of $45.94 billion, marking an increase from the previous year. This week is also packed with important speeches and data releases from Canada, Australia, and the US. Today, current home sales data will be revealed, with a slight increase expected from last month. In premarket trading, US stock indices are falling, with declines in the Dow, S&P, and NASDAQ. At the same time, US debt market yields are rising, particularly in the two-year and ten-year sectors. After the Jackson Hole meeting, the US dollar appears strong as the market lowers its expectations for an immediate rate cut. With US two-year yields climbing, the dollar’s short-term outlook seems positive, though this may be temporary. The upcoming Core PCE inflation report on Friday will likely shape the Federal Reserve’s next steps and could lead to significant market shifts.Impact of German Economic Data
All attention this week is on Nvidia’s earnings report on Wednesday, where revenues are projected to rise over 50% year-on-year. Given how stocks reacted to their earnings in 2023 and 2024, this event will greatly impact the NASDAQ and overall market mood. Options traders expect more than a 9% move in the stock after the announcement, so be ready for notable volatility in the tech industry. While the dollar remains strong, the improved German IFO expectations indicate some resilience in the Eurozone. Recent PMI data also shows that the struggling German manufacturing sector is stabilizing near a neutral 50, adding to cautious optimism. If the US inflation number is lower than expected on Friday, the EURUSD could see a strong upward move. For currency pairs, the rising US yields are likely to support USDJPY in the short term, making it sensitive to any changes in Fed expectations. With the UK on holiday today, GBPUSD is mainly influenced by the dollar’s momentum. It’s wise to exercise caution and avoid large directional bets until after Wednesday’s Nvidia report and Friday’s important PCE data. Create your live VT Markets account and start trading now.European markets show sluggishness as the dollar strengthens slightly while investors await upcoming economic data.
European markets were quieter on August 25, 2025, due to a UK holiday. Traders are cautious and haven’t reacted strongly to recent developments. Fed Chair Powell has a dovish outlook, suggesting possible rate changes ahead. Barclays and BNP Paribas expect two Fed rate cuts this year, based on insights from Jackson Hole. Meanwhile, the US 10-year yield rose slightly to 4.277%.
Market activity reflects this cautious mood, with European equities dipping and S&P 500 futures down by 0.2%. Gold fell by 0.1%, priced at $3,369.57, while WTI crude increased by 0.6% to $64.15. Cryptocurrencies showed volatility: Bitcoin dropped by 2.1% to $111,130, and Ethereum fell nearly 4%, staying below $4,800. Currency movements showed a slight gain for the dollar: EUR/USD and GBP/USD both fell by 0.1%, while USD/JPY rose by 0.3%.
Upcoming US Jobs Report
The markets remain cautious as they await important economic data, particularly the US jobs report scheduled for September 5. This report is vital for future decisions by the central bank, as market sentiment is careful and watchful. With a strong chance of a Fed rate cut, the upcoming US jobs report on September 5 is a key focus for the next two weeks. The market sees an 83% likelihood of a cut, so any major changes in the jobs data could cause significant volatility. This suggests that trading options on indices and currencies could be advantageous for navigating the expected price changes surrounding the report. The VIX is currently low at 16.5 but is likely to rise as the jobs report approaches. This trend was observed during the uncertainty of the 2022-2023 rate hike cycle. Traders should be ready for this increase in implied volatility, which may raise costs for new options trades as the event nears. Acting sooner may provide a more cost-effective way to position for this crucial data point.Market Opportunities
The dollar’s current strength may be a temporary pause rather than a full reversal. A weak jobs report, potentially under 150,000 jobs, could reinforce the dovish outlook and lower the dollar again. We’re exploring opportunities to take bullish positions on pairs like EUR/USD using call options, particularly around the important 1.1700 level. For equities, the current sluggishness in S&P 500 futures could be a potential buying opportunity before the market’s next upward movement. If labor market data is weak and confirms a rate cut, it could spark a rally, indicating the start of an easing cycle, which has historically been positive for stocks, as seen in 2019. We’re considering call spreads on the S&P 500 to position for this potential upside with defined risk. In the crypto market, we remain cautious as Bitcoin tests its 100-day moving average near $110,000 for the first time in months. A drop below this key level could lead to a significant sell-off due to automated trading reactions. Derivative traders might want to buy put options to guard against long positions or speculate on a further downturn. Create your live VT Markets account and start trading now.Powell’s dovish remarks boosted NZDUSD after RBNZ’s unexpected rate cut, significantly influencing trader expectations.
The NZD/USD pair saw some ups and downs due to changes in the US dollar, influenced by Fed Chair Powell’s soft comments. There is an 85% chance of a rate cut in September, and traders expect 54 basis points of easing by the end of the year. The US Non-Farm Payroll (NFP) report next week could greatly impact interest rate expectations. Strong data may decrease the likelihood of cuts, while weak data could increase chances for a third cut by year-end.
On New Zealand’s side, the Reserve Bank of New Zealand (RBNZ) predicts two more cuts after their recent dovish rate cut. The minutes revealed a discussion about a 50 basis point cut, which gained support from two members. Initially, the NZD fell but later rebounded due to Powell’s comments. Technical analysis shows the NZD/USD pair is near a key zone around 0.5850, where sellers might sell off and buyers may look for a breakthrough towards 0.5970.
Potential Upside Trends
In the 4-hour and 1-hour charts, the trends indicate potential upward movement, but there is a risk of a false breakout. Buyers are likely targeting higher prices, while sellers are watching for a drop below the 0.5850 level. Important upcoming economic data includes the US Consumer Confidence report, Jobless Claims figures, and the PCE price index. We are closely monitoring the NZD/USD pair around the 0.5850 level, which was reached following Powell’s dovish comments last Friday. This rally helped the kiwi recover losses from the recent dovish rate cut by the RBNZ. The market now sees an 85% chance of a US rate cut in September. This shift from the Fed was expected after the July NFP report came in lower than anticipated at 155,000 jobs. Additionally, recent CPI data from early August 2025 showed inflation easing to 2.9%. This week’s PCE inflation report on Friday is now crucial. A weak number could strongly support the case for a rate cut in September.Strategies For Traders
From our perspective, the RBNZ’s dovish stance is backed by New Zealand’s slow Q2 GDP growth of only 0.2% and faster-than-expected cooling of inflation. This creates a tricky situation where both central banks seem inclined to ease policies. Essentially, it’s about which currency will weaken faster. Given the uncertainty around the 0.5850 level and significant US data this week, we notice implied volatility increasing. Derivative traders might consider strategies that profit from major price movements, regardless of direction. Buying a strangle, which involves out-of-the-money puts and calls, could be a cost-effective way to prepare for a breakout after the PCE data. For those with a specific direction in mind, the current setup offers clear levels for option strategies. Traders might buy put options with a strike price below 0.5800 to bet on a price rejection from this zone, providing defined risk. On the other hand, a clear break above 0.5850 could lead to buying call options targeting the 0.5970 trendline. Create your live VT Markets account and start trading now.Gold stays stable as it awaits a decisive breakout amid fluctuating market conditions and inflation worries.
Gold prices increased by 1% on Friday, bouncing back from a slow week. However, overall performance remains weak, with a slight decrease of 0.2% on Monday, bringing the price to $3,366.
Since the end of May, gold has been stuck in a narrow range, with buyers supporting the 100-day moving average. This situation keeps a positive outlook but shows a lack of energy to push prices higher.
Gold’s Stabilization Phase
Gold is in a holding pattern, waiting for a breakout from its current stabilization phase. The actions of the Federal Reserve and the bond market will significantly impact gold’s next steps. Typically, higher interest rates create challenges for gold. Yet, it’s the real interest rates that truly affect its performance. Keeping an eye on inflation and Treasury yields is essential, as they help determine real rates and consequently influence gold. Gold has been steady around $3,366 since the end of May 2025, following a strong increase earlier in the year due to expectations of Federal Reserve rate cuts. The 100-day moving average provides strong support, keeping buyers engaged. The market has already factored in two rate cuts by the Fed earlier this year, lowering the target rate to 4.00%. However, the recent July CPI figure of 3.1% has raised concerns about the timeline for future cuts. This uncertainty is the main reason for the current lack of movement.Possible Market Changes
It’s critical to monitor the bond market closely for hints. With the 10-year Treasury yield at 3.8%, the real yield is just 0.7%, which is low enough to support gold prices. If upcoming inflation data drives the real yield closer to zero or negative, it could trigger a significant rally. For derivative traders, the steady market indicates attractive options premiums for low volatility strategies, such as selling strangles outside the recent range. However, this calm period likely won’t last, especially with important economic data on the horizon, pointing to potential price swings. To get ready for a breakout, buying long-dated call options might be a wise move to capture gains if inflation surprises on the upside and real yields drop. On the flip side, if disinflation speeds up faster than expected, put options could protect against a fall below the current range. The next CPI report and the Fed’s comments in September will be crucial for direction. Create your live VT Markets account and start trading now.The dollar weakened as Powell’s dovish comments raised expectations for a September rate cut.
The USDCAD pair fell after Fed Chair Powell made dovish comments at the Jackson Hole Symposium. His remarks raised expectations for a possible rate cut in September, now at an 85% chance. Traders also expect 54 basis points of easing by the end of the year, impacting US interest rate predictions and the USD.
Now, all eyes are on the upcoming US Non-Farm Payroll (NFP) report, which will likely influence interest rate forecasts. Strong data could shift the rate cut probability to a 50/50 chance, while weaker data may confirm dovish expectations. In Canada, inflation is steady, staying close to the upper target range, and recent employment reports have been positive.
Forex Trends and Strategies
The Bank of Canada has kept interest rates steady but is open to changes based on growth and inflation data, anticipating 23 basis points of easing by year-end. On the daily USDCAD chart, sellers are likely aiming for a drop to the 1.36 level, while buyers are seeking a rise to 1.40 if prices exceed 1.3860. On the 4-hour chart, a significant trendline supports bullish movement, with buyers targeting 1.40 and sellers looking to break to 1.36. The 1-hour chart offers limited new insights, with similar strategies in place for both buyers and sellers. Upcoming data includes US Consumer Confidence, Jobless Claims, and Canadian GDP figures. Following the Federal Reserve’s dovish stance at Jackson Hole, the US dollar faces considerable pressure. Currently, the market is pricing in an 85% chance of a rate cut in September 2025, altering momentum in the USDCAD pair. This sets the stage for further US dollar weakness in the coming weeks. There is a clear divergence between the central banks. Canada’s inflation remains around 3%, boosted by a surprising rise in their July 2025 employment report. In contrast, the latest US PCE data from July 2025 indicated a decrease to 2.7%, allowing the Fed more flexibility to ease policy. This gap in policies creates a strong case for selling US dollars against Canadian dollars. Looking back at late 2023, we saw a similar situation when expectations for Fed cuts increased, leading to a sharp decline in the dollar over several weeks. The current setup resembles that past scenario, suggesting potential for further declines. The upcoming US Non-Farm Payrolls report will be a key test for this analysis.Market Reactions and Economic Data
For traders expecting ongoing USDCAD weakness, buying put options with a strike price at or below 1.36 seems wise. This strategy takes advantage of the downward momentum while managing risk, especially if prices struggle to stay above the major upward trendline. Any rise towards 1.3860 could be viewed as a chance to increase bearish positions. On the other hand, a surprisingly strong US jobs report, such as one over 250,000, could quickly reverse these bearish bets and push USDCAD higher. In this case, traders might consider using call options to position for a break above the 1.3860 level, with the primary target shifting toward 1.40. The forthcoming economic data, especially the US PCE price index and Canadian GDP this Friday, is expected to trigger significant volatility. This environment is ideal for strategies like straddles or strangles for those anticipating a large price move but uncertain about the direction. These reports will be crucial in determining if the trend of cooling US economic activity continues. Create your live VT Markets account and start trading now.Traders expect potential rate cuts by year-end after Powell’s speech and are monitoring upcoming data.
After Fed Chair Powell’s speech, market prices returned to levels seen before the speech. Traders viewed Powell’s comments on policy changes as a sign that interest rates could be lowered, leading to expectations of more than 60 basis points of cuts by the end of the year and a strong chance of a rate cut in September.
Next up is the Non-Farm Payroll (NFP) report, which will impact interest rate predictions. Strong employment data might create a 50/50 chance of a September rate cut and suggest a more aggressive stance later. On the other hand, weak data could raise the likelihood of a third rate cut by year-end.
Central Bank Expectations
Currently, expectations show the Fed likely to cut rates by 54 basis points by year-end, with an 85% chance of a cut at the next meeting. Other central banks like the ECB, BoE, BoC, RBA, and RBNZ have various probabilities and projected changes. The SNB expects a 7 basis point change, likely keeping rates steady. In contrast, the BoJ predicts an 18 basis point increase by year-end, with an 88% chance of maintaining current rates. After Powell’s speech, the market initially reacted strongly, anticipating major rate cuts, but then calmed down. Now, 54 basis points of cuts are expected by year-end. The upcoming Non-Farm Payrolls report, set for the first week of September 2025, will play a crucial role in shaping Federal Reserve policy expectations. To provide context, the latest core CPI reading for July 2025 was 2.8%, the lowest since early 2023, suggesting a dovish stance from the Fed. In late 2024, several weak labor reports marked the end of interest rate hikes. A disappointing NFP result next week would confirm this trend and likely increase the chances of a third rate cut this year.Trader Strategies
Derivative traders should prepare for volatility around this important jobs report. A strong report, for example, adding over 225,000 jobs, could challenge current predictions, making it tempting to sell interest rate futures as the likelihood of a September cut decreases. Conversely, a weaker report under 150,000 jobs could strengthen the dovish outlook, making it sensible to buy futures or call options on Treasury bonds. It’s also important to note the clear differences with the Bank of Japan, which is the only central bank anticipating an 18 basis point hike. This is primarily due to Japan’s Q2 2025 wage growth hitting a 30-year high, prompting a shift in the central bank’s strategy. This divergence might weaken carry trades that depend on a strong dollar compared to the yen. Meanwhile, central banks like the ECB and BoE are expected to hold steady, offering fewer short-term opportunities. However, markets anticipate more aggressive cuts for Australia and New Zealand, forecasting 37 and 35 basis points of easing, respectively. This suggests ongoing weakness for the Australian and New Zealand dollars, assuming their domestic data aligns with these expectations. Create your live VT Markets account and start trading now.MUFG believes the dollar may decline further because of Fed policy easing and global divergence.
MUFG has shared insights on the Federal Reserve’s new stance, hinting that a rate cut could happen as soon as next month. This follows Chair Powell’s acknowledgment of risks to jobs, which may lead to layoffs. A weak jobs report for September might push the Fed to lower rates.
This change could weaken the dollar as the gap in policies between the U.S. and other central banks becomes clearer. The European Central Bank (ECB) and the Bank of England (BOE) are not expected to cut rates further this year, thanks to steady growth and ongoing price pressures. Rumors are also rising that the Bank of Japan (BOJ) might hike rates again by the end of the year.
USD/JPY Positioning Outlook
On the USD/JPY front, MUFG highlights a positioning aspect. Recent data shows that leveraged funds are increasing their short positions in JPY. This could be an opportunity to short the pair because of the current differences in policies. We believe that Powell’s recent remarks have opened the possibility for a rate cut next month. He is clearly focusing on the risks in the job market, recognizing that layoffs might be on the way. If the September jobs report is weak, it could prompt the Fed to start easing policy in October. This expected change could lead to a decline for the U.S. dollar, especially as the policy gap with other central banks widens. The latest U.S. Consumer Price Index (CPI) data from July 2025 shows inflation steady at 2.8%. This gives the Fed more room to concentrate on the weakening labor market, which added only 95,000 jobs. This stands in stark contrast to monetary policies in other countries.Monetary Policy Differences
For example, it seems unlikely that the ECB or BOE will lower rates further in 2025. Eurozone inflation has recently risen to 3.1%, while UK wage growth remains high at 4.5%. This means their efforts to combat inflation are ongoing. This difference should continue to put pressure on the dollar against the euro and the pound. At the same time, speculation is growing that the BOJ might implement another rate hike by year-end. With Japanese inflation consistently above the 2% target, the BOJ is feeling the pressure to normalize its policies, which may strengthen the yen in the medium term. In terms of USD/JPY, there is a significant opportunity for traders. Recent data indicates that speculative funds have increased their short positions in JPY to over 120,000 contracts. This crowded positioning hasn’t been seen since late 2024, making the pair susceptible to a sharp reversal. Thus, it’s a good time to consider short positions through options or futures. Create your live VT Markets account and start trading now.On that day, traders are only interested in the EUR/USD expiry at 1.1700.
One important foreign exchange option expiry to watch for on August 25 at 10 am New York time is for EUR/USD at the 1.1700 level.
As the markets settle after significant shifts, these expiries could impact price movements around this level before the US market opens. Traders are currently holding steady on expectations for the Federal Reserve, but this could change when Wall Street gets active.
Large Euro USD Option Expiry
With the large EUR/USD option expiry at 1.1700, we see prices temporarily staying near this level. The market is calm for now, but this may just be a pause as traders get ready for the US session. This stability provides a short break before possible volatility later in the day. Market caution is reasonable, especially after last week’s US inflation report, which came in a bit higher than expected at 3.1%. Reflecting on the aggressive interest rate hikes from 2022 to 2024, traders are alert for any signs that the Federal Reserve may continue tightening its policies. This suggests that any long positions in EUR/USD could face challenges from a potentially stronger dollar in the upcoming weeks. In Europe, the situation is different. Recent PMI data from Germany indicates a slowdown in manufacturing, with the index staying below 50. This difference in policy, where the Fed may stay hawkish while the European Central Bank cannot, is an important trend. Derivative traders should think about positioning for possible EUR/USD weakness, as a strong US economy paired with a weak Eurozone economy usually puts downward pressure on the pair.Market Volatility and Trading Strategies
Given the uncertainty, we’ve noticed 1-month implied volatility in EUR/USD options rising from its summer lows. This increases the cost of buying options but also opens doors for traders who expect the pair to break out of its recent range. Traders might consider purchasing put spreads as a cost-effective way to plan for a move down towards the 1.1550 support level we saw earlier this year. Create your live VT Markets account and start trading now.Germany’s August Ifo index reaches 89.0, exceeding expectations and indicating better overall business sentiment.
Germany’s Ifo business climate index for August hit 89.0, which is higher than the expected 88.6. The previous index value was 88.6 as well.
The current conditions sub-index stood at 86.4, just below the forecasted 86.7. Last month, it was 86.5. The expectations index rose to 91.6, exceeding the projected 90.3, and the earlier figure was adjusted from 90.7 to 90.8.
