This Week in Forex: EUR/USD and USD/JPY Forecasts Amid Upcoming Rate Decisions
Expectations around central bank decisions are setting the stage for a pivotal week ahead in the forex markets. The ECB is seen holding rates stable, while U.S. rate cut speculation continues to mount. As traders brace for the outcomes, here’s how the major FX pairs—EUR/USD and USD/JPY—may react.
Market Drivers to Watch
1. Federal Reserve & U.S. Dollar Outlook
- Markets anticipate the Fed cutting rates by 25 bp in September, driven by cooling inflation and a softer labor market—50 bp cuts now seem off the table.Reuters+2Reuters+2
- Treasury Secretary Scott Bessent added to dovish sentiment by advocating a half-point cut, pushing expectations higher.The Guardian
- The U.S. dollar paused after a strong rally, signaling investor caution ahead of pending data and speeches.The Tradable
2. European Central Bank (ECB)
- A Reuters poll shows the ECB likely to keep rates at 2.00% through September, shifting expectations from earlier forecasts of cuts.Reuters
- Market consensus now reflects a “higher for longer” outlook, with minimal easing expected and a possibility of renewed tightening if conditions warrant.Reuters
3. Bank of Japan (BoJ) & Japanese Yen
- Japan’s stronger-than-expected GDP lifted the yen, amid growing expectations that the BoJ may finally tighten monetary policy.Reuters
- An FX Empire outlook highlights upcoming U.S. data and Fed remarks at Jackson Hole as key catalysts for USD/JPY direction.FXEmpire
- Recent USD/JPY movements suggest the pair is holding firm at higher lows; a stronger greenback around Jackson Hole could add another leg upward.Forex+1
Pair-by-Pair Forecasts
EUR/USD Forecast
Outlook: Slightly bearish to neutral
- With the ECB holding steady and Fed rate cut expectations rising, the dollar is likely to see relative strength.Reuters+2Reuters+2Capital.com
- Analyst projections vary: ING sees a rise to 1.15 by year-end and 1.17 by Q4 2026, while Scotiabank forecasts 1.16 in H2 2025 and 1.22 by end of 2026.Capital.com
- Short-term buyers outnumber sellers, signaling moderate bullish technical sentiment.Capital.com
Key Levels
Support likely near 1.16–1.17, with resistance around 1.18–1.20. Major Fed or ECB signals may push it lower or higher.
USD/JPY Forecast
Outlook: Potential for yen strength, elevated volatility
- BoJ tightening speculations and robust Japanese GDP have buoyed the yen.Reuters
- FX Empire points to Fed commentary around Jackson Hole as a major driver—hawkish U.S. tone may lift USD/JPY, while dovish cues could boost the yen.FXEmpire
- Technically, the pair remains supported at higher lows, with renewed USD strength likely fueling further advances.Forex+1
- Medium-term models suggest GBP/USD may remain elevated—but the risk of sharp moves remains near central bank announcements.Cambridge CurrenciesFXEmpireReuters
Key Levels
Expect crucial action between 145–150, with resistance at 146–148. Stay alert for breakout or reversal scenarios.
Strategies for Traders
| Strategy Type | EUR/USD | USD/JPY |
|---|---|---|
| Range Trading | Trade between 1.16–1.18 | Trade between 145–148 |
| Event Breakouts | Play strong Fed or ECB cues | Watch Jackson Hole speeches and data |
| Risk Management Tip | Use tight stops; consider lower leverage ahead of speeches |
Final Thoughts
- EUR/USD may face downside pressure unless the ECB signals tightening or growth. However, resilient eurozone data or hawkish surprises could offer relief.
- USD/JPY is one to watch—BoJ cues and Fed tone around Jackson Hole are likely to dictate whether momentum continues higher or reverses.