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GBP - Sterling approaches a critical technical turning point
Sterling begins the week at an important technical inflection point against the Dollar. Having recovered from its June lows, GBP/USD is now testing the long-term descending trendline that has defined the broader downtrend throughout 2026.
At the same time, buyers continue to defend the rising support established in late June, leaving the pair compressed within a symmetrical triangle. This increasingly tight trading range suggests that volatility is being absorbed ahead of a potentially significant directional move.
The near-term technical picture has improved. Sterling has reclaimed its 100-day moving average around $1.3400, while momentum indicators have recovered into constructive territory. However, neither price action nor momentum has yet provided confirmation that a broader trend reversal is underway.
Markets will therefore be watching closely to see whether Sterling can deliver a decisive break above long-standing trendline resistance. Such a move would represent the first meaningful interruption to the sequence of lower highs that has characterised the market this year. Failure to break higher would reinforce the view that recent gains remain corrective within a broader bearish structure.
Against the Euro, Sterling has stabilised after ending its recent decline. The support region around €1.1650 has so far attracted consistent buying interest, allowing GBP/EUR to recover towards €1.1700.
While the strong momentum that drove July's advance has moderated, the broader medium-term outlook remains constructive. The recent pullback appears to be a healthy consolidation rather than a deterioration in trend, with price continuing to hold comfortably above the 100-day moving average.
Should support around €1.1650 continue to hold, markets are likely to view the current consolidation as a foundation for a renewed move higher in line with the prevailing medium-term trend.
No Major Weekly Data
EUR - Structural drivers continue to support the Euro
The Euro enters the week supported by resilient Eurozone economic data, lower energy prices and a broadly constructive macro backdrop. However, EUR/USD has yet to fully reflect these supportive fundamentals.
Part of that restraint followed reports that US authorities may have participated in activity involving EUR/JPY during Friday's coordinated intervention. While this attracted market attention, the scale of US Euro-denominated reserves is relatively modest compared with global FX liquidity, suggesting any direct impact on the Euro is likely to prove temporary.
The more significant driver for EUR/USD remains US monetary policy.
Markets continue to price the Federal Reserve's September meeting as the key catalyst for the next major move, with this week's US economic releases expected to shape expectations around the interest rate outlook.
Consensus remains that incoming US data will determine whether EUR/USD can challenge resistance around $1.1615-$1.1620 or instead retreat back below $1.1500. Until greater policy clarity emerges, trading conditions are likely to remain driven primarily by relative interest rate expectations rather than short-term intervention headlines.
No Major Weekly Data
USD - Fed expectations continue to anchor Dollar sentiment
Despite confirmation of coordinated intervention by US and Japanese authorities, the US Dollar has remained comparatively resilient.
Ordinarily, large-scale intervention and softer oil prices would be expected to weigh on the currency. Instead, markets continue to focus on the Federal Reserve's policy path, with expectations for a September rate increase recovering after briefly easing following last week's Federal Open Market Committee communication.
Current market pricing reflects approximately 16–17 basis points of tightening, indicating that investors continue to assign meaningful probability to further policy action. Elevated long-term Treasury yields and persistently high borrowing costs remain central considerations in that assessment.
Attention now turns to a series of high-impact US labour market releases, including JOLTS job openings, ADP employment, and Friday's Non-Farm Payrolls report.
Consensus expectations for payroll growth remain around 75,000–80,000, a level that is unlikely, on its own, to materially weaken expectations for further Federal Reserve tightening. As a result, markets are not yet pricing a sustained decline in the Dollar.
Nearer term, investors will also monitor the July ISM Manufacturing PMI for additional insight into US economic momentum.
While intervention-related headlines may continue to generate short-term volatility, the broader direction of the Dollar is expected to remain driven by incoming macroeconomic data and evolving interest rate expectations.
Major Weekly Data:
Monday 3rd
3:00pm - ISM Manufacturing PMI & ISM Manufacturing Prices
Tuesday 4th
3:00pm - JOLTS Job Openings
Wednesday 5th
1:15PM - DP Non-Farm Employment Change & ISM Services PMI
Thursday 6th
1:30PM - Unemployment Claims
Friday 7th
1:30pm - Average Hourly Earnings m/m, Non-Farm Employment Change & Unemployment Rate
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