Monday’s forex session opened the final trading week of February with measured consolidation across major USD pairs, as traders reduced directional exposure ahead of a dense macroeconomic calendar. After several weeks of fluctuating expectations surrounding Federal Reserve policy timing, markets entered a phase of recalibration rather than momentum trading.
US Treasury yields moved marginally lower early in the session before stabilizing, removing immediate upside pressure from the dollar while also preventing aggressive selling. This created a balanced environment in which most major pairs traded within established ranges. Market participants appeared reluctant to initiate new positions before upcoming inflation and growth signals that could redefine expectations for the Federal Reserve policy trajectory.
Risk sentiment remained neutral overall. Equity markets traded without strong conviction, commodities were mixed, and volatility indicators continued drifting toward monthly lows, all signs of a market waiting for confirmation rather than attempting prediction.
EUR/USD
Technical Analysis
EUR/USD stabilized after recent corrective pressure, trading within a narrow consolidation band above short-term support. The pair respected the lower boundary of its February range, suggesting buyers remain active on dips despite fading upside momentum. On the four-hour chart, price formed a compression structure marked by lower volatility and overlapping candles, a classic pre-breakout environment.
Momentum indicators flattened near neutral levels, indicating equilibrium between buyers and sellers. Resistance remained clearly defined near recent highs, while support held firm just below current price action. Until either boundary breaks decisively, EUR/USD remains technically range-bound.
Fundamental Analysis
Fundamentally, euro stability reflected the absence of new catalysts rather than renewed strength. Markets continue to evaluate relative monetary policy paths between the ECB and the Fed. While longer-term expectations still anticipate gradual US policy easing later in 2026, incoming US data has been resilient enough to delay aggressive repricing. This balance prevented strong directional conviction, leaving EUR/USD sensitive primarily to dollar-side developments.
GBP/USD
Technical Analysis
GBP/USD traded similarly sideways, holding above near-term support despite several intraday attempts to push lower. The pair remained within a broader ascending structure on higher timeframes, though short-term momentum softened noticeably. The inability of sellers to break support suggested underlying demand remains intact, but equally, buyers lacked momentum to retest recent highs.
Volatility compression continued, implying a potential expansion later in the week once macro catalysts emerge.
Fundamental Analysis
Sterling lacked domestic drivers, leaving price action dependent on dollar dynamics. Expectations surrounding the Bank of England remain relatively stable, with markets pricing gradual policy normalization rather than rapid easing. However, without fresh UK economic data, GBP/USD moved primarily in response to shifting US yield expectations and global sentiment.
USD/JPY
Technical Analysis
USD/JPY paused near elevated levels after a sustained multi-week advance. Price action formed a tight consolidation just below recent highs, signaling exhaustion rather than reversal. Buyers continued defending pullbacks toward short-term support zones, maintaining the broader bullish structure.
Momentum indicators cooled from overbought territory, a necessary development for trend sustainability. The pair now appears to be building a base for either continuation or a deeper corrective pullback depending on upcoming yield movements.
Fundamental Analysis
The yen remained structurally weak due to persistent policy divergence. Japanese monetary conditions remain accommodative relative to global peers, preserving yield differentials in favor of the dollar. However, traders showed increasing caution about pushing USD/JPY aggressively higher without fresh catalysts, particularly given heightened sensitivity to potential policy commentary or intervention rhetoric at elevated exchange rates.
Market Outlook
Monday’s session suggested markets are transitioning into event-driven trading mode. With volatility compressed and positioning lighter, upcoming economic data carries increased potential to trigger directional expansion.
EUR/USD and GBP/USD remain coiled within ranges, while USD/JPY sits near technically sensitive highs. The next decisive move will likely depend on whether incoming US data reinforces economic resilience or revives expectations of earlier Fed easing.
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