The forex market on August 29, 2025, witnessed a mixed bag of movements, with the US Dollar showing some resilience after earlier weakness, largely influenced by an uptick in inflation data. The Euro remained under pressure following dovish remarks from the ECB, while the Yen continued its struggle amidst growing concerns about intervention. Geopolitical tensions in Eastern Europe added a layer of caution, keeping risk sentiment somewhat subdued.
Key Developments & News:
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US Inflation Data (CPI): The headline Consumer Price Index (CPI) for July came in slightly hotter than expected, rising 0.4% month-on-month and 3.4% year-on-year. Core CPI, excluding volatile food and energy prices, also edged higher at 0.3% MoM and 3.2% YoY. This data has tempered earlier market expectations of an imminent Fed rate cut, providing some support for the US Dollar.
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ECB Commentary: European Central Bank President Christine Lagarde delivered a somewhat dovish speech, reiterating concerns about the Eurozone’s sluggish economic growth and hinting at the possibility of further monetary easing if inflation continues to undershoot targets. This has weighed on the Euro.
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BoJ Intervention Watch: Speculation continues to mount regarding potential intervention from the Bank of Japan (BoJ) as the Yen hovers near multi-decade lows against the Dollar. While no direct action has been taken, verbal warnings from Japanese officials are increasing, creating a cautious atmosphere around USD/JPY.
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Geopolitical Tensions: Renewed skirmishes in Eastern Europe have fueled some risk aversion in the market, with investors seeking safe-haven assets. This has provided a minor boost to the Swiss Franc but has generally capped upside potential for riskier currencies.
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Oil Prices: Crude oil prices stabilized after earlier volatility, with Brent trading around $85 a barrel. This has had a mixed impact, supporting commodity-linked currencies like the AUD and CAD, but also contributing to inflation concerns globally.
Major Currency Pair Updates:
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EUR/USD: The pair continued its downtrend, breaking below the 1.0800 psychological level to trade around 1.0770. The hotter US inflation data combined with dovish ECB rhetoric created a strong bearish bias.
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Technical Levels: Immediate resistance lies at 1.0800, followed by 1.0830. Support is identified at 1.0750 and then 1.0720.
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Outlook: The bearish trend is likely to persist in the near term, with eyes on upcoming Eurozone inflation data and further ECB commentary.
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GBP/USD: The Cable saw a modest recovery from earlier lows but remained capped below 1.2600, currently trading around 1.2585. UK economic data was relatively light, leaving the pair more susceptible to broader USD movements.
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Technical Levels: Resistance is at 1.2620 and 1.2650. Support can be found at 1.2550 and 1.2520.
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Outlook: The pair is likely to trade within a tight range, awaiting fresh impulses from either side of the Atlantic.
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USD/JPY: The pair saw some profit-taking after hitting fresh highs earlier in the week, now trading around 146.10. However, the underlying bullish momentum remains strong due to the widening interest rate differential and lack of concrete BoJ action.
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Technical Levels: Key resistance is at 146.50 and 147.00. Support levels are at 145.80 and 145.40.
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Outlook: Traders will be on high alert for any signs of BoJ intervention. Absent that, the path of least resistance remains to the upside.
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USD/CHF: The safe-haven Swiss Franc gained some traction against the Dollar amidst geopolitical concerns, pushing the pair down to 0.8980.
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Technical Levels: Resistance is at 0.9000 and 0.9020. Support lies at 0.8960 and 0.8930.
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Outlook: Geopolitical developments will be the primary driver for this pair in the coming days.
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Other Notable Movements:
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AUD/USD: The Aussie Dollar found some support from stable commodity prices but remained under pressure from the stronger USD, trading around 0.6480.
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USD/CAD: The Loonie weakened slightly against the Greenback, with the pair around 1.3620, despite steady oil prices, reflecting broader USD strength.
Market Sentiment & Potential Effects:
Market sentiment is cautiously optimistic but remains sensitive to economic data and geopolitical headlines. The hotter-than-expected US inflation data has shifted the narrative somewhat, suggesting that the Federal Reserve may maintain its hawkish stance for longer than previously anticipated. This could provide further impetus for the US Dollar in the coming days.
The Eurozone’s economic fragility and the dovish tone from the ECB suggest continued weakness for the Euro. Traders will be closely watching for any further indications of monetary policy divergence between the Fed and the ECB.
The Yen remains a wild card, with the threat of intervention always looming. Any significant move by the BoJ could trigger sharp swings in USD/JPY and potentially impact broader market sentiment.
Outlook for Traders:
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USD Strength: The US Dollar appears poised for further strength if upcoming economic data continues to support a hawkish Fed narrative.
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Divergence Plays: Look for opportunities in currency pairs where central bank policies are diverging, such as EUR/USD.
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Risk Management: Geopolitical risks necessitate careful risk management.
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BoJ Watch: Keep a close eye on Japanese officials’ comments and any signs of intervention.
As always, traders should conduct their own thorough analysis and manage risk effectively.
