The US dollar drifted sideways during the week of August 17–21, 2026, as EUR/USD closed near 1.1593 and GBP/USD outperformed, advancing toward 1.3620 on the back of resilient UK inflation and a 150-basis-point yield advantage over the ECB. USD/JPY consolidated near 158.32 despite stronger Japanese Q2 GDP, while AUD/USD held near 0.7073 and EUR/GBP slipped toward 0.8520. With Fed rate-hike expectations pared back to 30% for September and all three major central banks on hold, currency markets remained range-bound ahead of Wednesday’s FOMC minutes.
EUR/USD Spot Rate: 1.1593
▲ +0.2% 🔵 Outlook: Neutral | Support: 1.1435 · Resistance: 1.1625
Week in Review
The euro edged higher against the dollar, testing the key 1.1600 resistance level after breaking above its 200-day EMA. However, the pair failed to sustain a clear breakout, ending the week within the 1.14–1.17 forecast range as traders weighed divergent Fed and ECB policy outlooks.
Key Drivers: ECB deposit rate held at 2.25% while Fed target range remains at 3.50%–3.75% · FOMC minutes revealed broader hawkish dissent beyond the three known voters · Eurozone flash PMIs for August showed mixed growth momentum across the bloc
Forward Outlook
The near-term path depends on whether EUR/USD can hold above the 200-day EMA and overcome the 1.1625 resistance. A dovish repricing of Fed hike odds could open the door toward 1.1700, while a hawkish surprise may pull the pair back to the 1.1400 floor.
GBP/USD Spot Rate: 1.3620
▲ +0.6% 🟢 Outlook: Bullish | Support: 1.3300 · Resistance: 1.3700
Week in Review
Sterling extended its gains to trade near its strongest level since mid-July, supported by a 150bp yield advantage over the ECB and expectations of firm UK CPI. The pair tested the upper half of its 1.33–1.37 range before settling near 1.3620.
Key Drivers: UK CPI expected to rise later this year as higher energy prices pass through · Bank Rate at 3.75% with three MPC members voting for an increase to 4.00% · Soft US payrolls and cooling inflation data undermined the dollar
Forward Outlook
The inflation trajectory will determine whether the MPC hikes in September. If UK CPI surprises to the upside, GBP/USD may challenge the 1.3700 ceiling. Conversely, a soft print could see a pullback toward the 1.3300 range floor as rate expectations recalibrate.
USD/JPY Spot Rate: 158.32
▲ +0.2% 🔵 Outlook: Neutral | Support: 156.75 · Resistance: 160.25
Week in Review
The yen weakened modestly despite strong Q2 GDP data from Japan, as USD/JPY retraced 50% of its late-July intervention-driven drop. The Bank of Japan’s gradual tightening stance failed to fully offset the ongoing rate differential with the US.
Key Drivers: Japan Q2 GDP beat expectations but fiscal risk premium remains elevated · US-Japan 2-year rate differentials continue to favor the dollar · BOJ policy normalization is slower than markets had previously priced
Forward Outlook
USD/JPY faces resistance near 160.25. A sustained break above could target 163.75, while stronger-than-expected Japanese growth or accelerated BOJ tightening may push the pair back toward the 156.75 support zone.
AUD/USD Spot Rate: 0.7073
▲ +0.3% 🔵 Outlook: Neutral | Support: 0.6845 · Resistance: 0.7215
Week in Review
The Australian dollar recorded marginal gains, trading within a bullish channel near 0.7073. Strong commodity-linked carry and RBA hike expectations provided a floor, though the pair faced technical resistance near the 0.7215 area.
Key Drivers: RBA cash rate at 4.35% with markets pricing 60% odds of one more hike · Australia employment and wage data remained on tap for the week · Commodity demand linked to energy and defense spending continues to support AUD
Forward Outlook
AUD/USD may attempt a test of the 0.7215 resistance if risk appetite holds firm. However, a rejection from that level could trigger a decline toward 0.6845, especially if the RBA signals an extended pause.
EUR/GBP Spot Rate: 0.8520
▼ -0.3% 🔴 Outlook: Bearish | Support: 0.8400 · Resistance: 0.8620
Week in Review
The cross drifted lower as sterling outperformed the euro on the back of wider rate differentials and firmer UK data. The pair held within its implied 0.84–0.86 range but slipped toward 0.8520 as markets priced a more resilient British economy.
Key Drivers: Bank Rate at 3.75% sits 150 basis points above the ECB deposit facility at 2.25% · UK GDP grew 0.4% in Q2 while eurozone inflation ticked up to 2.9% · Euro area services inflation at 3.3% limited the ECB’s room to diverge from hold
Forward Outlook
The 150bp UK-ECB rate gap should keep EUR/GBP capped near 0.8620. A break below 0.8400 would require a material dovish shift from the Bank of England or a hawkish pivot from the ECB, neither of which appears imminent.
⚠️ Risk Events — Next Week
| Event | Date | Impact | Affected |
|---|---|---|---|
| UK CPI y/y | August 19, 2026 | high | GBP |
| FOMC Meeting Minutes | August 19, 2026 | high | USD |
| Australia Employment Change | August 19, 2026 | medium | AUD |
| Eurozone Flash PMIs | August 21, 2026 | medium | EUR |
Analyst Note
The dollar lacks a clear directional catalyst after soft US payrolls and cooling CPI, leaving DXY pinned near the lower end of its 99.50–100.00 range. Sterling appears best positioned to benefit from residual inflation surprises, while the yen’s fate hinges on whether stronger domestic data accelerates BOJ normalization beyond current expectations.
This report is for informational purposes only and does not constitute financial advice. Published by Elven Financial Research.
