THE ETERNAL SOVEREIGN

Category: Forex Market

  • Dollar ticks higher as euro, pound dip after central banks stand pat

    The U.S. dollar inched higher on Thursday, clawing back some strength amid ongoing volatility in equity markets, while attention turned to the euro and sterling following key central bank rate decisions. By 13:43 ET (18:43 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—was up 0.2% at 97.77, hovering near a two-week high and extending its rebound from levels close to four-year lows.

    Stock market volatility lends support to the dollar

    Heightened volatility across global equity markets—driven largely by concerns over stretched artificial intelligence spending—has prompted traders to rotate back into the U.S. dollar as a safe haven.

    Analysts at ING noted that a more challenging equity backdrop typically triggers a move away from risk and pro-cyclical currencies toward the dollar, a dynamic they said has likely provided the greenback with some support this week. They added that while it remains unclear whether the current correction in U.S. technology stocks has further to run, a fully invested buy side appears increasingly vulnerable to negative surprises.

    The dollar also found support late last week following the nomination of Kevin Warsh as the next Federal Reserve chair, with markets viewing him as less dovish than previously anticipated. Meanwhile, private payrolls data pointed to a cooling U.S. labor market, although the recent brief government shutdown has delayed the release of key employment figures scheduled for Friday.

    Even so, several weak labor market signals emerged on Thursday. January job cuts rose to their highest level for that month since 2009, initial jobless claims exceeded expectations, and December job openings data fell short of forecasts.

    Euro and pound move into focus

    In Europe, the euro edged lower, with EUR/USD down 0.1% at 1.1799 after the European Central Bank left interest rates unchanged, in line with expectations. The ECB’s Governing Council said inflation is likely to stabilize around its 2% target over the medium term, while noting that the eurozone economy remains resilient despite a challenging global backdrop. Data released earlier in the week showed euro area CPI inflation eased to 1.7% year-on-year in January, from 1.9% in December.

    Commenting on the decision, Mark Wall, chief European economist at Deutsche Bank, said the ECB was striking a necessary balance between downside risks and underlying strengths, adding that holding rates steady appeared appropriate given external vulnerabilities alongside domestic resilience, partly supported by increased defence and infrastructure spending in Germany.

    Sterling also weakened, with GBP/USD falling 0.9% to 1.3544 after the Bank of England kept its benchmark rate unchanged. The Monetary Policy Committee said it expects inflation to return to its 2% target by the spring. Sanjay Raja, chief UK economist at Deutsche Bank, noted that while a rate cut was closer than anticipated, the meeting was more about positioning within the MPC, as rising economic trade-offs continue to fuel uncertainty over how restrictive current policy remains.

    Yen in focus ahead of weekend elections

    In Asian trading, USD/JPY edged 0.1% higher to 156.84, as the Japanese yen remained under pressure ahead of this weekend’s lower house elections. Prime Minister Sanae Takaichi’s party is widely expected to secure a larger majority, raising expectations of increased fiscal spending from Tokyo. Ongoing concerns about Japan’s stretched public finances have weighed heavily on the yen in recent weeks, with losses compounded by Takaichi’s remarks downplaying currency weakness.

    Elsewhere, USD/CNY dipped slightly to 6.9378, with the Chinese yuan hovering near its strongest level in almost three years. The currency has been supported by a series of firm midpoint fixings from the People’s Bank of China, keeping the pair comfortably below the psychologically important 7.00 level.

    The Australian dollar weakened, with AUD/USD sliding 0.4% to 0.6960, slipping back below 0.70 after two sessions of solid gains following a hawkish Reserve Bank of Australia meeting on Tuesday. The RBA raised interest rates by 25 basis points and upgraded its growth and inflation forecasts for the year.

    Sources: Anuron Mitra

  • USD/JPY: Gains Limited Below 157.00 as Risk Aversion Persists

    USD/JPY paused its advance near the 157.00 mark during Thursday’s Asian session, as a renewed bout of risk aversion revived safe-haven demand for the Japanese yen.

    That said, the yen remains on fragile footing amid ongoing concerns over Japan’s fiscal position under Prime Minister Sanae Takaichi’s expansionary spending agenda, helping to limit downside pressure on the pair.

    Looking ahead, the U.S. JOLTS Job Openings report could provide fresh impetus for near-term trading.

    USD/JPY Technical Analysis

    The Japanese yen emerged as the weakest-performing G8 currency on Wednesday. Its sharp underperformance has lifted USD/JPY above the 156.80 level at the time of writing, putting the pair on course for a roughly 3% rebound from last week’s lows.

    Fundamental Analysis

    Investors are offloading the yen broadly ahead of this weekend’s snap election. Rising support for Prime Minister Takaichi has fuelled concerns that a stronger electoral mandate would allow her to extend tax cuts and expand stimulus spending, heightening fears of fiscal strain.

    Markets Brush Aside Intervention Concerns

    Tokyo authorities have warned of possible intervention to curb excessive yen volatility, but those concerns have been largely brushed aside. Comments from Prime Minister Takaichi highlighting the benefits of a weaker yen, along with the U.S. Treasury Secretary’s denial of any coordinated effort to stabilise the currency, have instead driven the yen sharply lower across the board.

    The U.S. dollar, however, is not especially strong on Wednesday. While markets continue to react positively to the nomination of Kevin Warsh as the next Federal Reserve Chair and to the end of the brief partial government shutdown, the recent rally in the U.S. Dollar Index appears to be losing momentum.

    Attention now turns to upcoming U.S. data, including the Services PMI and the ADP Employment Change report. The latter could be particularly influential, as the government shutdown has delayed Friday’s official nonfarm payrolls release, leaving private-sector jobs data as a key guide for markets.

    Sources: Fxstreet

  • AUD/USD slips below 0.7000 following mixed Australian trade data

    AUD/USD is trading lower below the key 0.7000 psychological level during Thursday’s Asian session, pressured by mixed Australian trade data. The pair is also weighed down by a firm U.S. dollar, which is hovering near a two-week high. With limited domestic catalysts, traders are now turning their attention to the upcoming U.S. JOLTS job openings data for fresh direction.

    AUD/USD Technical Outlook

    Should bullish momentum intensify, AUD/USD is likely to encounter its next resistance at the 2026 peak of 0.7093 (Jan 29), followed by the 2023 high at 0.7157 (Feb 2).

    On the downside, a break below the February low at 0.6908 (Feb 2) may trigger a deeper pullback toward the interim 55-day SMA at 0.6693, ahead of the 2026 trough at 0.6663 (Jan 9). Additional downside support is seen at the 100-day SMA at 0.6628, with stronger support at the 200-day SMA at 0.6563 and the November low at 0.6421 (Nov 21).

    Momentum indicators remain constructive and point to further upside potential, although the pair’s overbought readings suggest the risk of a near-term correction. The RSI hovers near 72, while the ADX around 50 continues to signal a strong underlying trend.

    Bottom line

    AUD/USD continues to be heavily influenced by global risk appetite and developments in China’s economy. A sustained move above the 0.7000 handle would reinforce a more credible bullish outlook.

    For the time being, a weaker U.S. dollar, stable—though not particularly strong—domestic data, a still-hawkish tilt from the RBA, and modest backing from China leave the balance of risks skewed toward further upside rather than a pronounced pullback.

    Fundamental Analysis

    AUD/USD remains entrenched in its broader uptrend despite renewed selling pressure emerging on Wednesday. Any near-term pullbacks are expected to attract buying interest, as the Reserve Bank of Australia continues to project a clearly hawkish stance following its latest rate decision.

    The Australian Dollar is struggling to extend Tuesday’s advance, easing back and once again testing the psychologically significant 0.7000 mark.

    The retreat comes as the U.S. Dollar regains some traction, with markets having largely absorbed the RBA’s hawkish hike and refocusing attention on U.S. economic and monetary policy developments.

    Australia: Growth Is Cooling, Not Collapsing

    Recent Australian data have been underwhelming rather than alarming, reinforcing a well-established narrative. Economic activity is slowing, but in a controlled manner, with momentum easing rather than breaking down—supporting the soft-landing view.

    January PMI surveys align with this assessment, as both Manufacturing and Services strengthened and remained firmly in expansion territory, at 52.3 and 56.3 respectively. Retail sales continue to show resilience, and although the trade surplus narrowed to A$2.936 billion in November, it remains solidly positive.

    Growth is moderating only gradually, following a 0.4% quarter-on-quarter rise in GDP in Q3. On an annual basis, output expanded by 2.1%, matching the RBA’s projections.

    The labour market remains a standout performer. Employment jumped by 65.2K in December, while the unemployment rate unexpectedly edged down to 4.1% from 4.3%.

    Inflation, however, continues to be the key challenge. December CPI surprised to the upside, with headline inflation accelerating to 3.8% year-on-year from 3.4%. The trimmed mean rose to 3.3%, in line with market expectations but slightly above the RBA’s 3.2% forecast. On a quarterly basis, trimmed mean inflation increased to 3.4% in the year to Q4, marking the highest level since Q3 2024.

    China: A Backdrop of Support, Not a Catalyst

    China continues to offer a generally supportive backdrop for the Australian dollar, though without the momentum needed to drive a sustained upswing.

    Economic growth ran at an annualised 4.5% in the October–December quarter, with quarter-on-quarter expansion at 1.2%. Retail sales rose 0.9% year-on-year in December—respectable, but not particularly compelling.

    More recent indicators point to a renewed loss of momentum. Both the NBS Manufacturing PMI and the Non-Manufacturing PMI slipped back into contraction territory in January, at 49.3 and 49.4 respectively.

    By contrast, the Caixin surveys painted a slightly brighter picture, with the Manufacturing PMI edging up to 50.3 to remain in expansion, while the Services PMI increased to 52.3.

    Trade stood out as a relative bright spot, as the surplus widened sharply to $114.1 billion in December, supported by nearly 7% growth in exports and a solid 5.7% rise in imports.

    Inflation signals remain mixed. Consumer prices were unchanged at 0.8% year-on-year in December, while producer prices stayed firmly negative at -1.9%, underscoring that deflationary pressures have yet to fully fade.

    For now, the People’s Bank of China is maintaining a cautious stance. Loan Prime Rates were left unchanged in January at 3.00% for the one-year and 3.50% for the five-year, reinforcing expectations that policy support will remain gradual rather than aggressive.

    RBA: Leaning Hawkish, In No Hurry to Ease

    The RBA raised the cash rate to 3.85% in a decisively hawkish move that largely met expectations. Upward revisions to both growth and inflation forecasts signal firmer economic momentum and increasingly broad-based price pressures. Core inflation is now projected to remain above the 2–3% target band for much of the forecast horizon, reinforcing the case for a restrictive policy stance.

    The central message is that inflation is becoming more demand-driven. The RBA cited stronger-than-expected private demand as a key justification for tighter policy, even as productivity growth remains subdued. While Governor Bullock described the move as an “adjustment” rather than the beginning of a renewed hiking cycle, the signal was clear: policymakers are uneasy with the upward drift in inflation.

    For markets, this implies interest rates are likely to stay higher for longer, limiting the scope for near-term easing. From an FX perspective, this provides marginal support for the Australian dollar—particularly against low-yielding peers—even as the RBA’s emphasis on full employment tempers the likelihood of an aggressive tightening phase.

    In the wake of the decision, markets are now pricing in nearly 40 basis points of additional tightening by year-end.

    Positioning: Shifting Sentiment Toward the AUD

    The latest positioning data suggest the worst of the bearish sentiment toward the Australian dollar may have passed. CFTC figures show that non-commercial traders have returned to a net long stance for the first time since early December 2024, although the position remains modest at just over 7.1K contracts in the week ending January 27.

    Open interest has also climbed to its highest level in several weeks, exceeding 252K contracts, indicating that traders are beginning to re-engage with the market. That said, the move appears tentative rather than a strong conviction call on a sustained appreciation in the AUD, at least for now.

    Key Drivers Ahead

    Near term: Market attention is shifting back toward the United States. Incoming economic data, tariff-related developments, and ongoing geopolitical headlines are likely to drive movements in the U.S. dollar. For the Australian dollar, the key swing factors remain domestic labour market and inflation data, and how these shape expectations for the RBA’s next policy decision.

    Risks: The AUD remains highly sensitive to global risk sentiment. A sharp deterioration in risk appetite, renewed concerns over China’s outlook, or an unexpected resurgence in the U.S. dollar could quickly unwind recent gains.

    Sources: Fxstreet

  • Strength in the Chinese yuan is key for broader market sentiment, according to BofA Securities.

    The Chinese yuan has recently attracted strong demand, and Bank of America Securities believes this momentum could become a key driver of foreign exchange markets in both the near and longer term. On Tuesday, the People’s Bank of China set the yuan’s daily midpoint at 6.9533 per U.S. dollar—75 pips stronger than the prior fix—marking its firmest level in nearly 33 months and breaking below the 6.96 threshold. BofA analysts cited solid export performance and firmer policy guidance as reasons for upgrading their USD/CNY forecasts to 6.7 for the end of Q3 and Q4, from 6.8.

    According to the bank, the yuan’s strength may have broader implications for global FX markets, as signs emerge that appreciation is spreading across trade-weighted measures, including the CFETS basket, and increasingly influencing emerging-market currencies. While correlation does not prove causation, BofA noted that the alignment between bilateral and trade-weighted CNY gains is becoming difficult to ignore. A softer U.S. dollar is further reinforcing EM currency strength alongside the yuan.

    High U.S. tariffs have encouraged China to redirect exports from the U.S. toward Europe, a shift reflected in the European Union’s expanding trade deficit with China, now nearing levels last seen during the Covid period. Although part of this imbalance stems from a weaker yuan versus the euro, unlike during the pandemic, the widening deficit has not led to euro weakness. Instead, EUR/CNY has climbed to a ten-year high, intensifying pressure on European exporters and renewing calls for yuan appreciation. BofA expects Chinese export momentum into Europe to continue in the short term, though heightened EU scrutiny and anti-dumping measures could pose challenges over the medium term, potentially placing downward pressure on EUR/CNY.

    The case for yuan appreciation is gaining traction, reinforced most recently by comments from President Xi emphasizing the goal of building a “powerful currency” that is widely used in global trade, investment, and foreign exchange markets, and that ultimately achieves reserve-currency status. This builds on Xi’s 2020 remarks outlining China’s ambition to reach high-income status by 2025 and significantly expand economic output by 2035. However, BofA cautioned that aggressive currency appreciation could lead to overvaluation and pose risks to financial stability.

    In this context, the outcome of U.S.–China competition in artificial intelligence will be critical for productivity growth and the long-term sustainability of relative currency valuations. Given the continued dominance of the U.S. dollar and the U.S.-centered global financial system, BofA expects USD leadership to persist over the next decade. While full internationalization of the renminbi appears unlikely, a more realistic approach may involve expanding CNY usage across the Global South and Asia, potentially reducing the need for a sharply stronger yuan.

    Sources: Peter Nurse

  • The dollar edged higher, extending recent gains, while the euro slipped after inflation data.

    The U.S. dollar held steady on Wednesday after a sharp rebound from near four-year lows, while the euro weakened following the release of key regional inflation data.

    By 11:54 ET (16:54 GMT), the Dollar Index was up 0.3% at 97.69 and has gained more than 1% since Kevin Warsh was nominated as the next Federal Reserve chair.

    The dollar remained resilient despite softer labor market data.

    The dollar got a lift late last week after Kevin Warsh was nominated to succeed Federal Reserve Chair Jerome Powell, with markets viewing him as more hawkish and supportive of shrinking the Fed’s balance sheet.

    Attention has now turned to Warsh’s Senate confirmation and the potential implications of his appointment for U.S. interest rates when he is set to take over from Powell in May.

    A brief government shutdown had little impact on the greenback, as lawmakers approved additional funding this week, though it did delay the release of key employment data originally due on Friday.

    Traders also shrugged off a soft ADP payrolls report for January released on Wednesday.

    Eurozone consumer prices fall.

    In Europe, the euro slipped slightly, with EUR/USD down 0.1% at 1.1802, despite the release of weaker-than-expected preliminary eurozone inflation data. Consumer prices eased to an annual rate of 1.7% last month, below the ECB’s 2% target and down from 2% in December.

    The data did little to alter expectations that the European Central Bank will keep interest rates unchanged at 2% for a fifth consecutive meeting. Policymakers have recently expressed concern about the euro’s rapid rise against the dollar and its dampening effect on inflation. The euro touched a 4½-year high of 1.2084 last week.

    According to Macquarie strategist Thierry Wizman, the euro is being pulled by opposing forces. Falling inflation could pave the way for policy easing in 2026, potentially weighing on the currency as euro area rates lag those elsewhere. However, this is being offset by improving growth prospects, supported by stronger survey data and a more favorable political backdrop, including eased budget tensions in France and renewed reform momentum in Germany. Wizman said stronger growth could ultimately provide greater support for the euro than lower rates would undermine it.

    GBP/USD fell 0.3% to 1.3657, as the Bank of England was also expected to leave interest rates unchanged at its policy meeting on Thursday.

    The yen remained under pressure.

    In Asia, USD/JPY rose 0.5% to 156.55, leaving the pair near a two-week high.

    The yen faced renewed pressure this week after comments from Prime Minister Sanae Takaichi cast doubt on whether Tokyo would step in to support the currency. Attention has shifted to a snap lower house election on February 8, with Takaichi’s party expected to secure a strong victory and strengthen her grip on parliament.

    Elsewhere, USD/CNY edged up to 6.9415, hovering near its lowest level since mid-2023. AUD/USD slipped 0.4% to 0.6988 after rallying earlier in the week on a hawkish Reserve Bank of Australia meeting. The RBA raised interest rates by 25 basis points and lifted its growth and inflation forecasts for the year.

    Sources: Anuron Mitra

  • The Japanese yen slides further against the dollar as fiscal and political worries outweigh the BoJ’s hawkish stance.

    • The Japanese yen stays under pressure as fiscal worries and political uncertainty outweigh stronger-than-expected data.
    • Concerns over possible intervention and the BoJ’s increasingly hawkish stance may deter traders from adding new bearish yen positions.
    • Rising expectations of further Fed easing weigh on the U.S. dollar and could limit upside in USD/JPY.

    The Japanese yen (JPY) continues its downward trajectory against the U.S. dollar for a fourth consecutive session on Wednesday, sliding to a near two-week low during Asian trading. Persistent concerns over Japan’s fiscal position—linked to Prime Minister Sanae Takaichi’s expansionary spending agenda—remain a key drag on the currency. In addition, heightened political uncertainty ahead of the February 8 snap election further weakens sentiment toward the yen, driving USD/JPY above the 156.00 level.

    At the same time, markets remain cautious amid the risk of coordinated Japan–U.S. intervention aimed at curbing excessive yen weakness. Expectations of gradual policy normalization by the Bank of Japan may also discourage traders from adding aggressive bearish positions. Meanwhile, expectations that the Federal Reserve will deliver two additional rate cuts limit U.S. dollar demand, potentially capping further upside in USD/JPY ahead of later U.S. economic data releases.

    Yen sellers stay in charge as fiscal strains and political uncertainty persist.

    Japan’s services sector gathered momentum at the start of 2026, with business activity expanding for a tenth straight month and at the fastest pace in nearly a year. The Jibun Bank Services PMI rose to 53.7 from 51.6 in December, coming in slightly above market expectations of 53.4. The figures point to a more sustained recovery in the services industry, which represents about 70% of Japan’s GDP.

    Despite the encouraging data, market reaction was subdued as concerns over Japan’s fiscal outlook continued to weigh on sentiment. Investor unease has been amplified by Prime Minister Sanae Takaichi’s expansionary fiscal agenda, including aggressive spending plans and proposed tax cuts. As part of her campaign ahead of the February 8 snap lower house election, Takaichi has pledged to suspend the 8% consumption tax on food for two years, bringing renewed focus to Japan’s already stretched public finances and keeping the yen under pressure on Wednesday.

    Meanwhile, a recent and unusual rate check by the New York Federal Reserve was interpreted as the clearest indication so far of coordination between Japanese and U.S. authorities to curb excessive yen weakness. This lowers the bar for potential intervention and could help limit further JPY losses, particularly alongside expectations of a more hawkish Bank of Japan.

    The Summary of Opinions from the BoJ’s January meeting, released Monday, revealed that policymakers discussed rising inflationary pressures stemming from a weaker yen. Board members also agreed that additional rate hikes would be appropriate over time, a stance that could provide underlying support for the JPY.

    On the other side, the U.S. dollar has struggled to extend last week’s rebound from a four-year low, despite support from the nomination of Kevin Warsh as the next Federal Reserve chair. Even the approval of a government funding package to end a partial shutdown failed to generate meaningful upside for the greenback.

    Looking ahead, traders are awaiting the U.S. ADP employment report and the ISM Services PMI. In addition, remarks from influential FOMC members could shape near-term USD demand amid expectations for two more Fed rate cuts in 2026, with implications for the USD/JPY pair.

    USD/JPY must clear the 156.50 confluence zone to reinforce bullish momentum.

    Wednesday’s push above the 156.00 handle builds on the overnight breakout through the 50% retracement of the 159.13–152.06 decline, tilting the near-term bias in favor of USD/JPY bulls. The 14-period Relative Strength Index stands at 66.9, remaining below overbought territory and pointing to a solid, albeit increasingly mature, upswing.

    That said, the MACD histogram, while still in positive territory, is narrowing—an early sign of waning bullish momentum. The MACD line remains above the Signal line, with both oscillating close to the zero level, underscoring a more cautious and transitional setup.

    As a result, further upside is likely to face notable resistance around the 156.51 confluence, which combines the 100-period Simple Moving Average on the 4-hour chart and the 61.8% Fibonacci retracement. A sustained move above this zone would be required to reassert a constructive short-term outlook.

    A decisive break could pave the way toward the 78.6% retracement at 157.62. Conversely, an inability to clear this hurdle would leave the rebound exposed to renewed downside pressure. Moreover, USD/JPY continues to trade below a downward-sloping 100-period SMA, suggesting that upside attempts may remain constrained for now.

    Sources: Haresh Menghani

  • Australian dollar steady after China services PMI release

    • The Australian dollar strengthened after the Composite PMI surged to 55.7 in January, marking the fastest pace of expansion in nearly four years.
    • The Aussie also benefited as markets priced in an 80% probability of an interest rate hike in May, along with around 40 basis points of additional policy tightening.
    • Meanwhile, the U.S. dollar remained subdued for a second straight session.

    The Australian dollar strengthened against the U.S. dollar on Wednesday, extending gains of more than 1% from the previous session. The AUD/USD pair held firm after China’s Services Purchasing Managers’ Index (PMI) rose to 52.3 in January from 52.0 in December, beating market expectations of 51.8. As China is Australia’s largest trading partner, improvements in Chinese economic activity tend to support the Aussie.

    The AUD also drew support from upbeat domestic PMI data. Seasonally adjusted figures from S&P Global showed Australia’s Composite PMI climbed to 55.7 in January from 51.0 in December, marking the strongest expansion in 45 months. The Services PMI jumped to 56.3 from 51.1, its highest reading since February 2022, exceeding the flash estimate of 56.0 and remaining well above the 50.0 threshold. This extended the run of expansion in services activity to two years.

    The Reserve Bank of Australia raised its Official Cash Rate by 25 basis points to 3.85% on Tuesday, pointing to stronger-than-expected economic growth and persistently elevated inflation. As the tightening cycle gathers momentum, markets have increased the odds of another rate hike in May to around 80% and are now pricing in roughly 40 basis points of additional tightening through the rest of the year.

    Speaking at the post-meeting press conference, RBA Governor Michele Bullock said inflationary pressures remain uncomfortably high, warning that a return to the target range will take longer than previously expected and is no longer acceptable. She emphasized that the board will remain data-dependent and avoid providing forward guidance.

    U.S. dollar little changed after recent losses

    The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, remained subdued for a second straight session, trading near 97.40 at the time of writing.

    Data released on Monday showed an unexpected rebound in U.S. manufacturing activity, underscoring economic resilience. The ISM Manufacturing PMI rose to 52.6 in January from 47.9 in December, comfortably beating expectations of 48.5.

    Markets have also been assessing President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, a move widely interpreted as signaling a more disciplined and cautious approach to monetary easing. The dollar found some support earlier as risk sentiment improved after the U.S. Senate reached an agreement to advance a government funding package, averting a shutdown, according to Politico.

    Producer-side inflation in the U.S. remained firm, reinforcing the Fed’s policy stance. Headline PPI held steady at 3.0% year-over-year in December, unchanged from November and above expectations for a slowdown to 2.7%. Core PPI, which excludes food and energy, accelerated to 3.3% from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.

    Fed officials struck a cautious tone. St. Louis Fed President Alberto Musalem said additional rate cuts are not warranted at this stage, describing the current 3.50%–3.75% policy rate range as broadly neutral. Atlanta Fed President Raphael Bostic echoed this view, urging patience and arguing that policy should remain modestly restrictive.

    In Australia, inflation data showed mixed signals. The RBA’s trimmed mean inflation rose 0.2% month-over-month and 3.3% year-over-year, while the monthly CPI jumped 1.0% in December, exceeding forecasts of 0.7%. Export prices climbed 3.2% quarter-on-quarter in Q4 2025—the first increase in three quarters and the strongest gain in a year—while import prices rose 0.9%, beating expectations for a decline.

    China’s RatingDog Manufacturing PMI edged up to 50.3 in January from 50.1 in December, in line with expectations and marking the fastest pace of factory expansion since October.

    Additional Australian indicators pointed to easing inflation momentum and improving labor demand. The TD-MI Inflation Gauge rose 3.6% year-over-year in January, while monthly inflation increased just 0.2%, the weakest pace since August. Meanwhile, ANZ Job Advertisements surged 4.4% month-over-month in December, posting the strongest increase since February 2022 and signaling renewed momentum in hiring toward year-end.

    Australian dollar rebounds toward three-year highs near 0.7100

    The AUD/USD pair was trading near 0.7030 on Wednesday. Analysis of the daily chart shows the pair remains within an ascending channel, pointing to a sustained bullish bias. The 14-day Relative Strength Index (RSI) stands at 73.30, signaling strong upward momentum, though conditions appear increasingly stretched.

    AUD/USD recently rebounded toward 0.7094, its highest level since February 2023, reached on January 29. A decisive break above this resistance could open the way for a move toward the upper boundary of the ascending channel around 0.7210. On the downside, initial support is seen at the nine-day Exponential Moving Average (EMA) near 0.6964, which coincides with the channel’s lower boundary. A deeper pullback could bring the 50-day EMA at 0.6759 into focus.

    AUD/USD: Daily Chart

    Sources: Akhtar Faruqui

  • Canadian dollar gains as rising oil prices provide support

    The Canadian dollar strengthened by 0.3% against the U.S. dollar on Tuesday, buoyed by a rise in oil prices.

    The loonie traded within a range of 1.3637 to 1.3685 per U.S. dollar, as crude oil—one of Canada’s key export commodities—climbed 1.5%.

    At the same time, yields on Canada’s 10-year government bonds rose to a four-week high of 3.465%.

    Sources: Investing

  • Forex Seasonality: Can Seasonal Patterns Withstand Ongoing U.S. Dollar Weakness?

    The U.S. dollar weakened broadly in January, defying its usual seasonal strength — what lies ahead in February?

    Key Takeaways From February Forex Seasonality

    The U.S. dollar weakened broadly in January, defying its typical seasonal strength. While USD/JPY has historically underperformed in February, the relevance of seasonal averages may be diminished amid anticipated political developments on both sides of the Pacific. Meanwhile, tonight’s RBA meeting could be pivotal in determining whether AUD/USD retreats from three-year highs and aligns with its traditionally weak February seasonality.

    The start of a new month provides an opportunity to revisit the seasonal patterns that have shaped the forex market over more than five decades, following the dismantling of the Bretton Woods system in 1971 and the emergence of the modern foreign exchange regime.

    As always, these seasonal tendencies reflect historical averages, and individual months or years can deviate from long-term norms. As such, seasonality should be used alongside other forms of analysis when building a robust, long-term trading strategy, as past performance is not necessarily indicative of future results.

    Euro Forex Seasonality – EUR/USD Chart

    Historically, February has tended to be mildly bullish for EUR/USD, with the world’s most heavily traded currency pair posting an average gain of around 0.3% over the past 50-plus years. In January, EUR/USD defied its typical seasonal pattern, pushing higher to briefly touch a 4.5-year high near 1.21 before retreating to finish the month lower. For a U.S. dollar that has historically underperformed against the euro, the prospect of another government shutdown—potentially delaying key economic releases such as the NFP report—offers an encouraging backdrop.

    British Pound Forex Seasonality – GBP/USD Chart

    As shown in the chart above, GBP/USD has historically tended to decline in February, posting average returns of roughly -0.3% since 1971. Similar to the euro, sterling has advanced for three consecutive months and briefly surged to multi-year highs in January before retreating to finish back within last year’s trading range. While no changes to interest rates are anticipated, this week’s BOE and ECB meetings remain key event risks for European currencies.

    Japanese Yen Forex Seasonality – USD/JPY Chart

    February has historically been a mildly bearish month for USD/JPY, with the pair posting average declines of around 0.2% since the Bretton Woods era. The year began with a volatile but ultimately weaker January for USD/JPY, running counter to its usual seasonal pattern amid broad-based U.S. dollar softness. With idiosyncratic political factors exerting an outsized influence on markets on both sides of the Pacific, traders may want to be cautious about placing too much weight on USD/JPY’s seasonal history at present.

    Australian Dollar Forex Seasonality – AUD/USD Chart

    Shifting focus to Australia, AUD/USD has historically posted modest declines in February, averaging losses of around 0.2% since 1971. In January, the Australian dollar rallied sharply, breaking out of a three-year range on the back of strong domestic employment and inflation data. While the RBA is widely expected to deliver a rate hike shortly after publication, the central bank’s forward guidance for the remainder of the year may prove more influential for the currency than the rate decision itself.

    Canadian Dollar Forex Seasonality – USD/CAD Chart

    Finally, February has historically been a mildly supportive month for USD/CAD, delivering an average gain of around 0.2%. At the time of writing, the pair is holding above support near its 15-month low in the mid-1.3500s after briefly dipping below that level last month. However, USD/CAD remains below its key medium- and long-term moving averages clustered around the 1.3800 area, marking that zone as a critical hurdle if bulls are to regain control after a difficult three-week stretch.

    As always, we close by emphasizing that seasonal patterns are not definitive—even when they appear to be tracking well. This analysis should be paired with a thorough review of current fundamental and technical conditions across the major currency pairs.

    Sources: Matthew Weller

  • NZD/USD rebounds toward the mid-0.6000s as the USD softens and Fed–RBNZ policy divergence supports the pair

    • NZD/USD sees renewed buying interest on Tuesday as multiple factors weigh on the US Dollar.
    • Expectations for two additional Fed rate cuts in 2026, along with a positive risk environment, undermine demand for the greenback.
    • The Reserve Bank of New Zealand’s relatively hawkish stance supports the NZD and adds to the pair’s upside.

    The NZD/USD pair shows notable resilience below the 0.6000 psychological level and gathers strong upside momentum during Tuesday’s Asian session. Spot prices advance to the 0.6040–0.6045 zone in the past hour, snapping a two-day losing streak amid a modest pullback in the US Dollar.

    As markets digest Kevin Warsh’s nomination as the next Federal Reserve Chair, expectations that the Fed will deliver two additional rate cuts this year continue to cap the US Dollar’s rebound from a four-year low reached last week. At the same time, an upbeat risk environment weighs on the Greenback’s safe-haven appeal and supports demand for the risk-sensitive New Zealand Dollar.

    Investor sentiment was further buoyed after US President Donald Trump announced on Monday that the United States and India have finalized a trade agreement and will immediately move to reduce tariffs on each other’s goods. In addition, signs of easing tensions between the US and Iran over Tehran’s nuclear program have reduced fears of military escalation, reinforcing the positive market mood.

    Further support for the Kiwi comes from the Reserve Bank of New Zealand’s relatively hawkish outlook on the policy path. The RBNZ has signaled a potential end to its easing cycle after cutting rates to 2.25% in November, and now projects the cash rate at 2.20% in the first quarter of 2026 and 2.65% by the fourth quarter of 2027.

    Meanwhile, the release of the December 2025 Job Openings and Labor Turnover Survey (JOLTS) and the US Nonfarm Payrolls (NFP) report has been delayed due to a partial US government shutdown. As a result, commentary from key FOMC officials will be closely watched for cues on USD direction and could provide fresh impetus to NZD/USD, which appears poised to extend its two-week uptrend.

    Sources: Haresh Menghani

  • Gold edges higher as the USD weakens; gains capped amid easing geopolitical tensions

    • Gold sees modest buying interest on Tuesday as the USD takes a breather from its rebound off a four-year low.
    • Kevin Warsh’s nomination as the next Fed Chair may help limit USD downside and restrain gains in the precious metal.
    • Easing geopolitical and trade tensions could continue to cap further upside in XAU/USD.

    Gold (XAU/USD) extends Monday’s rebound from the $4,400 area — its lowest level since January 6 — and picks up modest follow-through during the Asian session on Tuesday. However, the metal struggles to sustain the upside momentum, paring part of its intraday gains and easing back toward the $4,856 zone amid a confluence of bearish factors.

    US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair has removed a major source of uncertainty. In addition, a stronger-than-expected US ISM Manufacturing PMI released on Monday has helped the US Dollar hold onto its recent recovery from a four-year low, creating headwinds for gold prices.

    Further weighing on the precious metal are signs of easing US–Iran tensions over Iran’s nuclear program, the US–India trade agreement, and CME Group’s decision to increase margin requirements for precious metals futures. These factors, combined with a generally positive risk tone in global equity markets, call for caution among XAU/USD bulls.

    As a result, it may be prudent to wait for sustained follow-through buying before concluding that the recent sharp corrective decline from the $5,600 region — the record high reached last week — has fully played out. Looking ahead, the US JOLTS Job Openings data could provide fresh direction later in the North American session.

    Daily Digest Market Movers: Gold supported by a weaker USD; upside remains limited amid upbeat risk sentiment

    US President Donald Trump on Friday nominated Kevin Warsh to replace Jerome Powell as Federal Reserve Chair in May, subject to Senate confirmation. Given Warsh’s hawkish credentials, he is expected to remain alert to any rise in inflation expectations.

    Separately, CME Group announced over the weekend that margin requirements for precious metals futures will be raised from Monday’s market close. This triggered a second consecutive day of liquidation, pushing gold to a four-week low on Monday.

    On the data front, the Institute for Supply Management reported that US manufacturing activity expanded for the first time in a year. The Manufacturing PMI jumped to 52.6 in January from 47.9 previously, signaling a sharp rebound.

    Meanwhile, Trump said on Monday that the US and India have finalized a trade agreement and will immediately begin lowering tariffs on each other’s goods. In addition, expectations that the US and Iran will resume nuclear talks on Friday further lifted investor confidence.

    The US Dollar eases on Tuesday, retreating from an over one-week high reached the previous session, offering some support to gold during Asian trading. However, the aforementioned headwinds may continue to cap upside in the precious metal.

    Market participants will look ahead to the US JOLTS Job Openings report on Tuesday, followed by Wednesday’s US ADP private employment data and ISM Services PMI. These releases, along with Fed commentary, are likely to influence the USD and XAU/USD.

    Gold’s mixed technical picture calls for caution before aggressive directional positioning

    The commodity displayed resilience below its 50-day Simple Moving Average (SMA) and rebounded from the 50% Fibonacci retracement of the July 2025–January 2026 rally on Monday. The rising slope of the SMA indicates that downside moves may continue to attract buying interest. In addition, XAU/USD remains above the 38.2% retracement level, located around the $4,645–4,650 region, which should provide immediate support. The Relative Strength Index (RSI) is currently at 51.91 and trending higher, signaling stabilizing momentum.

    That said, the Moving Average Convergence Divergence (MACD) remains below both the signal line and the zero line, maintaining a bearish bias. The expanding negative histogram suggests that downside momentum is gaining traction. On the upside, any further recovery could shift focus toward the 23.6% retracement at $4,995.94. Conversely, a failure to defend the initial support zone may leave the rebound exposed to deeper consolidation.

    Sources: Haresh Menghani

  • RBA Governor Bullock to speak after interest rate hike

    The Reserve Bank of Australia’s board voted on Tuesday to raise the Official Cash Rate by 25 basis points to 3.85% from 3.60% at the conclusion of its February policy meeting, in a move widely anticipated by markets.

    Overview of the RBA’s Monetary Policy Statement

    The Reserve Bank Board’s policy decision was unanimous. The Board reaffirmed that it will continue to closely monitor incoming data and evolving risks when determining future policy settings.

    Although inflation has fallen significantly from its 2022 peak, it rose materially in the second half of 2025. Recent data confirm a renewed strengthening in inflationary pressures, partly reflecting tighter capacity constraints and stronger-than-expected private demand. The Board judged that inflation is likely to remain above the target range for some time and therefore considered an increase in the cash rate target appropriate.

    While some of the inflation pickup is expected to be temporary, demand has been growing faster than anticipated and capacity pressures are greater than previously assessed. Labour market conditions remain slightly tight, though they have stabilised in recent months. The Board reiterated its commitment to achieving price stability and full employment and stated it would take whatever action it deems necessary to meet its mandate.

    There remains considerable uncertainty around the outlook for domestic activity, inflation, and the degree of monetary policy restrictiveness. The forecasts assume the cash rate rises to 3.9% by June and 4.2% by December, with higher inflation projections extending through to the end of 2027. The assumed policy tightening is expected to help restore balance between demand and supply, although the economy is currently judged to be operating above potential.

    Private demand growth was much stronger than expected in late 2025, financial conditions may now be somewhat accommodative, and credit growth has accelerated, with the cash rate sitting below some estimates of neutral. The RBA significantly lifted its forecasts for business investment—partly driven by data centre expansion—as well as government spending and dwelling investment, while noting that some sector-specific demand may not persist.

    GDP growth is projected at 2.3% in Q4 2025, slowing to 1.8% in Q4 2026 and 1.6% in Q4 2027. CPI inflation is forecast at 4.2% in Q2 2026, easing to 3.6% by Q4 and returning to around 2.6–2.7% by 2027–28. Trimmed mean inflation follows a similar path. The unemployment rate is expected to gradually rise to 4.3% by Q4 2026 and 4.6% by mid-2028.

    Globally, economic growth in 2025 has been stronger than anticipated, with downside risks diminishing.

    AUD/USD response to the RBA’s interest rate decision

    The Australian Dollar attracts renewed buying interest immediately after the RBA’s decision, pushing AUD/USD back above 0.7000. At the time of writing, the pair is up 0.75% on the day.

    The following section was published on February 2 at 21:45 GMT as a preview of the Reserve Bank of Australia’s (RBA) policy announcement.

    The Reserve Bank of Australia is expected to raise interest rates by 25 basis points to 3.85% in February. Comments from RBA Governor Michele Bullock and updated economic forecasts may provide guidance on the future path of rate hikes. The Australian Dollar is likely to experience heightened volatility around the RBA policy announcement.

    The Reserve Bank of Australia is widely anticipated to lift the Official Cash Rate (OCR) from 3.6% to 3.85% following the conclusion of its first monetary policy meeting of 2026.

    The decision is scheduled for release at 03:30 GMT on Tuesday, alongside the Monetary Policy Statement (MPS) and quarterly economic forecasts. This will be followed by a press conference with RBA Governor Michele Bullock at 04:30 GMT.

    The Australian Dollar is expected to see sharp moves as markets digest the RBA’s policy decision and revised economic outlook.

    RBA is set to break the global easing trend

    The Reserve Bank of Australia is widely expected to deliver its first interest rate increase in more than two years at its February policy meeting on Tuesday, breaking from the global easing trend as it seeks to rein in mounting inflationary pressures.

    Speaking at the press conference following the December policy decision, RBA Governor Michele Bullock stressed the central bank’s commitment to controlling inflation, stating that “the Board will do what it needs to do to get inflation down.” She added that if incoming data showed inflation was not easing, it would be taken into account at the February meeting.

    Data released by the Australian Bureau of Statistics (ABS) last Wednesday showed inflation accelerating, with the monthly Consumer Price Index (CPI) rising to 3.8% in December from 3.4% in November, exceeding market expectations of a 3.6% increase.

    Core inflation also surprised to the upside, as the trimmed mean CPI — the RBA’s preferred underlying inflation gauge — climbed 0.9% quarter-on-quarter in the fourth quarter, above forecasts of a 0.8% rise.

    In response to the stronger inflation data, money markets lifted the implied probability of a February rate hike to 73%, up from 60% previously, according to Reuters.

    Australia’s four major banks — ANZ, Westpac, Commonwealth Bank of Australia and National Australia Bank (NAB) — have also revised their outlooks, now expecting a 25-basis-point rate increase from the RBA in February.

    Further support for a policy tightening came from the labour market. ABS data released on January 22 showed the unemployment rate unexpectedly falling to 4.1% in December from 4.3%, marking its lowest level since May. Net employment rose sharply by 65.2K after declining by 28.7K in November.

    How will the RBA’s decision affect AUD/USD?

    The Australian Dollar faces two-way risks against the US Dollar in the run-up to the RBA policy decision.

    AUD/USD could end its recent correction and regain upside momentum if Governor Michele Bullock’s remarks and updated economic forecasts indicate that further rate increases remain likely in the months ahead.

    On the other hand, the pair may extend its pullback should Governor Bullock temper expectations for additional tightening, particularly if inflation projections appear stable.

    Dhwani Mehta, Asian Session Lead Analyst at FXStreet, outlines the key technical levels to watch following the policy announcement.

    “AUD/USD is trading below the 0.7000 mark ahead of the RBA rate decision, consolidating after a pullback from a three-year high of 0.7094 reached on Thursday. The 14-day Relative Strength Index (RSI) has retreated from overbought conditions and is now testing the 60 level, indicating that the broader bullish bias remains intact.”

    Mehta adds, “The pair could reverse higher and embark on a fresh uptrend toward the 0.7050 psychological level if the RBA delivers a hawkish rate hike. Further resistance is located at the 2026 high of 0.7094, followed by the February 2023 peak at 0.7158. Conversely, a dovish outcome could see AUD/USD probe the 0.6900 region. A decisive break below this area may open the door to further losses toward the 0.6850 psychological level, with the 0.6800 round figure acting as the final support for buyers.”

    Sources: Fxstreet

  • RBA raises rates by 25 bps as expected, flags persistent inflation risks

    The Reserve Bank of Australia raised its policy rate by 25 basis points on Tuesday, in line with expectations, and cautioned that inflation is likely to stay above target in the months ahead.

    The unanimous decision lifted the cash rate target to 3.85% from 3.65%, following a renewed uptick in inflation late last year that pushed underlying price pressures back above the RBA’s 2%–3% target range.

    The central bank said private demand remained resilient and domestic capacity constraints persisted, factors it expects will keep inflation elevated for some time. While some of the recent rise in inflation reflects temporary influences, the RBA noted that demand has been expanding faster than anticipated, capacity pressures are stronger than previously assessed, and labour market conditions remain tight.

    The RBA stopped short of signalling further rate increases, instead reaffirming its commitment to maintaining price stability and full employment, and said it would take whatever action it deems necessary to achieve those objectives.

    Sources: Ambar Warrick

  • Dollar seeks footing in re-basing move

    The U.S. dollar has extended its modest recovery as gold and silver have sold off sharply, and conditions now appear stable enough for incoming data to drive FX markets this week. The U.S. economic calendar is set to culminate in solid payrolls and unemployment figures, potentially leaving room for further upside in the dollar.

    Elsewhere, the European Central Bank may avoid focusing heavily on the euro in its messaging, while the Reserve Bank of Australia could deliver a rate hike as soon as tonight.

    USD: Some Health Restored

    The dollar is showing renewed strength. The de-basement trade that appeared to drive last week’s sharp decline in the USD has begun to unwind following Kevin Warsh’s nomination by President Donald Trump as the next Federal Reserve chair. The steep correction in previously overbought precious metals has likely provided additional support for the dollar, although we have consistently argued that the earlier USD selloff had become overly disconnected from underlying macro fundamentals.

    With the dollar now partially recovered, we expect price action to realign more closely with incoming data and short-term rate dynamics this week. The U.S. economic calendar is busy, featuring ISM surveys (with manufacturing due today), JOLTS and ADP reports ahead of Friday’s payrolls release. Our expectation is for around 80,000 jobs added and an unchanged unemployment rate of 4.4%, which could help underpin further stabilization or recovery in the dollar.

    In the meantime, we are watching closely for signs of dip-buying interest in EUR/USD. We see the key support zone around 1.1880–1.1900, and the recent break below this area suggests some renewed confidence in the dollar. A renewed rally in the euro without clear data or event-driven justification would imply that damage to the dollar may be more persistent. For now, however, we maintain a short-term bullish outlook for the USD.

    EUR: Concerns over euro strength may be overstated

    This week’s key question is how concerned the European Central Bank truly is about the euro’s recent appreciation. With EUR/USD no longer hovering near the much-feared 1.20 level, the likelihood of an explicit reaction from ECB officials has diminished—any comments were always more likely to emerge after the meeting or in the minutes rather than in the main policy statement.

    At Thursday’s meeting, there may be little to prompt a change in President Christine Lagarde’s long-standing reluctance to comment on exchange rate levels. At the same time, markets do not appear to be pricing in significant risk of verbal pushback against euro strength, suggesting that the threshold for a negative euro response is relatively low.

    Eurozone core inflation data due on Wednesday are expected to ease slightly to 2.2%. Our economists see a marginally higher print of 2.3%, but either outcome is unlikely to have much impact on the currency. For now, EUR/USD should continue to be driven largely by dollar sentiment, and if confidence in the USD continues to recover as expected, we see the pair moving toward our short-term fair value estimate of 1.1770 in the near term.

    AUD: RBA rate hike hangs in the balance

    The Australian dollar has been among the hardest hit by the abrupt unwinding of long positions in gold and silver. More broadly, AUD/USD appeared to be pricing in an excessive amount of optimism in January, particularly given unchanged interest rate differentials. Unlike EUR/USD—where rate expectations have shifted little on the euro side—AUD/USD has seen notable moves at the front end of the curve on both sides.

    Markets are now pricing in around 19 basis points of tightening from the Reserve Bank of Australia at tonight’s meeting, and we align with consensus in expecting a 25 bp rate hike to 3.85%. That said, the decision looks finely balanced. While the upside surprise in December CPI, coupled with a strong housing market, supports a hike, the RBA is unlikely to signal the start of a new tightening cycle. With markets already pricing at least one additional hike by year-end, any indication that this move is “one and done” would limit the support a hike could provide to the Australian dollar.

    In our view, the impact of RBA tightening on AUD/USD is more likely to become apparent beyond the near term, once the overwhelming volatility in the U.S. dollar subsides. Consistent with our USD outlook, and given that market pricing is already skewed toward a hawkish outcome, we expect AUD/USD to trade lower in the coming weeks before eventually settling into a more sustainable recovery path beyond the 0.70 level.

    Sources: Francesco Pesole

  • February 2026 Forex Outlook: Dollar Selling Likely to Persist

    As January 2026 draws to a close, FX markets find themselves at a pivotal juncture, shaped by diverging central bank policies and evolving technical signals. After delivering a cumulative 175 basis points of rate cuts since September 2024, the Federal Reserve now faces a critical inflection point. Meanwhile, the European Central Bank has wrapped up its easing cycle, and the Bank of Japan appears poised to begin its first substantive tightening phase in decades.

    Together, these dynamics have fueled sustained U.S. dollar weakness—a trend that looks set to continue as U.S. economic growth moderates and investor confidence deteriorates.

    From a technical standpoint, the dollar is underperforming against its major counterparts and is trading near multi-month lows. In this outlook, we examine the greenback’s performance versus USD/JPY, EUR/USD, and GBP/USD, incorporating both fundamental drivers and technical considerations.

    USD/JPY – Weekly Timeframe

    USD/JPY is currently trading in the mid-150s after failing to sustain gains near the 160 region, where price action appears to have formed a double-top structure. While the pair continues to find support along a rising trend line in place since January 2021, bearish RSI divergence has intensified, signaling potential downside risk for the U.S. dollar in the months ahead.

    Key resistance remains near 160, while a support base is evident in the 148–150 zone. A decisive weekly close below this area would strengthen the bearish outlook, potentially opening the door toward the 138 level and aligning with the broader theme of ongoing dollar selling.

    EUR/USD – Weekly Timeframe

    EUR/USD is currently trading near a key resistance zone around 1.19. This area carries both psychological significance and technical importance, representing a measured move based on Fibonacci projections. With no evident bearish divergence at present, the possibility of a sustained break above 1.20 cannot be dismissed. Such a move would likely open the path toward the 1.30 level over the coming months, in line with the broader outlook of continued U.S. dollar weakness.

    GBP/USD – Daily Timeframe

    Sterling’s advance against the U.S. dollar appears to be driven more by dollar weakness than by underlying pound strength. JP Morgan strategist Nelligan cautions that any meaningful outperformance in sterling is more likely to materialize in the first half of the year, with fiscal concerns potentially resurfacing in the second half.

    GBP/USD projections align with the broader bearish-dollar theme outlined in this report, with the Sigmacast ensemble from Sigmanomics’ classical models pointing to higher levels over the medium term. From a technical perspective, the pair has recently pulled back after closing above a key descending trend line that had capped upside since early 2025.

    Sources: Fxstreet

  • EUR/USD Signals a Breakdown — Could the Pair Fall Further?

    Key Highlights

    • EUR/USD began a renewed downturn after failing to hold above 1.2080.
    • The pair slipped below a crucial bullish trend line, with prior support located around 1.1880 on the 4-hour chart.

    EUR/USD Technical Outlook

    On the 4-hour timeframe, EUR/USD broke beneath an important ascending trend line at 1.1880, triggering the latest leg lower. Price action also moved below the 38.2% Fibonacci retracement of the rally from the 1.1577 swing low to the 1.2083 peak.

    Near-term support is seen around 1.1820, aligning with the 50% Fibonacci retracement of the same upward move. A stronger support zone for buyers could emerge near the 1.1800 level.

    The key support level is positioned at 1.1770. A break below this zone could expose EUR/USD to a test of the 200-period simple moving average (green, 4-hour), followed by the 100-period simple moving average (red, 4-hour).

    On the upside, any renewed advance is likely to encounter resistance near 1.1910. The first major obstacle for buyers stands around 1.1940, with an additional barrier near 1.1960. A decisive close above 1.1960 would strengthen the bullish case and potentially pave the way for a move back toward the 1.2080 area.

    Sources: Aayush Jindal

  • Weekly FX Outlook: EUR/USD, Crude Oil, Bitcoin, Silver & Gold

    Fundamental Analysis & Market Sentiment

    Last week’s best trade ideas were as follows:

    • Long EUR/USD after a daily close above 1.1866, resulting in a 0.24% loss.
    • Long Silver, which ended with a loss of 18.62%.
    • Long Gold after a daily close above $5,000, producing a 2.26% loss.

    Taken together, these positions generated a total loss of 21.12%, or 7.04% per asset. While this was a sizable drawdown, the broader performance of my weekly forecasts over recent weeks remains positive, as earlier gains were exceptionally strong and more than offset this setback.

    Key market data from last week:

    • U.S. Federal Reserve policy meeting: No surprises, with interest rates left unchanged.
    • U.S. Producer Price Index (PPI): The standout data release of the week. Inflation came in far hotter than expected, with headline PPI rising 0.5% month-on-month and core PPI increasing 0.7%, versus forecasts of just 0.2% for both. This reinforced a more hawkish Fed outlook, lifted the U.S. dollar, and accelerated the sharp reversal in Silver (and Gold). As a result, expectations for a second U.S. rate cut in 2026 were pushed back to October.
    • Bank of Canada policy meeting: No change to interest rates, as anticipated.
    • Australian CPI: Inflation exceeded expectations, with an annual rate of 3.8% versus 3.5% forecast, strengthening the case for possible RBA rate hikes and supporting the Australian dollar early in the week.
    • Canadian GDP: Slightly weaker than expected, showing zero month-on-month growth.
    • U.S. unemployment claims: In line with forecasts.

    While PPI and Australian inflation influenced market moves, two broader developments likely had an even greater impact:

    • Federal Reserve leadership: President Trump announced his nominee for the next Fed Chair, Kevin Warsh. Although regarded as a hawk, Warsh is now thought to favor lower interest rates. The nomination contributed to the collapse of the Silver rally and provided additional support to the U.S. dollar.
    • Geopolitical tensions: The U.S. continued its military buildup near Iran, raising the risk of a wider regional conflict. Polymarket currently assigns a high probability to a U.S. strike on Iran in March, despite President Trump still referencing the possibility of a diplomatic agreement. These tensions appear to be supporting crude oil prices, with WTI crude reaching a new four-month high last week.

    Meanwhile, the S&P 500 briefly pushed to a fresh record above 7,000. Although the index remains resilient, upside momentum is limited. In my view, a clearer resolution to U.S.–Iran tensions is needed before a more decisive directional move can develop.

    The Week Ahead: 2nd – 6th February

    The most significant data releases for the coming week, ranked by expected market impact, include:

    • U.S. Average Hourly Earnings and Non-Farm Payrolls
    • Preliminary University of Michigan Inflation Expectations
    • European Central Bank main refinancing rate decision and monetary policy statement
    • Bank of England official bank rate decision, voting breakdown, and monetary policy report
    • Reserve Bank of Australia cash rate decision, rate statement, and monetary policy statement
    • U.S. JOLTS job openings
    • Preliminary University of Michigan consumer sentiment
    • U.S. ISM services PMI
    • U.S. ISM manufacturing PMI
    • U.S. unemployment rate
    • New Zealand unemployment rate
    • Canadian unemployment rate
    • U.S. weekly unemployment claims

    This will be a particularly busy and potentially market-moving week, with three major central banks delivering policy decisions. Please note that Friday is a public holiday in New Zealand, which may reduce liquidity in related markets.

    Monthly Forecast February 2025

    For the month of January 2026, I forecasted that the USD/JPY currency pair would rise in value. Unfortunately, this was a losing trade.

    For the month of February, I forecast that the EUR/USD currency pair will rise in value.

    Weekly Forecast 2nd February 2026

    Last week, three currency crosses experienced unusually high volatility, prompting the following weekly trade forecasts:

    • Short NZD/JPY, which resulted in a 0.57% loss.
    • Short AUD/JPY, ending with a 0.32% loss.
    • Short NZD/CAD, producing a 0.39% loss.

    Overall, the Swiss franc and the New Zealand dollar emerged as the strongest major currencies of the week, while the U.S. dollar was the weakest. Market conditions were relatively subdued, with directional volatility dropping sharply—only 11% of major currency pairs and crosses moved by more than 1% over the week.

    Technical Analysis

    Key Support/Resistance Levels for Popular Pairs

    US Dollar Index

    Last week, the U.S. Dollar Index formed a notably large bullish pin bar, rejecting a fresh four-year low. On its own, this price action is bullish. However, the broader technical structure remains bearish, with the index still trading below its levels from 13 and 26 weeks ago. As a result, the technical outlook for the U.S. dollar is mixed.

    The nomination of Kevin Warsh as Federal Reserve Chair provided some support to the dollar during the week. Nevertheless, the forward outlook remains uncertain, and I believe the most attractive trading opportunities in the near term are likely to be independent of U.S. dollar direction.

    EUR/USD

    The EUR/USD pair recently staged a strong long-term bullish breakout as the U.S. dollar accelerated lower and printed a new 3.5-year low. However, the move quickly failed, with price retreating sharply and finding minimal follow-through support.

    This price action suggests the breakout may have been a temporary spike, although the potential for a sustained bullish trend should not be dismissed, as EUR/USD has historically shown a tendency to trend cleanly once momentum is established.

    That said, the appointment of a new Fed Chair and the renewed strength in the U.S. dollar late in the week—driven by hotter inflation data—argue for a more cautious stance.

    Accordingly, I would only consider a long position following a daily (New York close) above 1.2039.

    WTI Crude Oil

    WTI crude oil has surged strongly in recent sessions as the risk of a regional conflict centered on Iran has intensified. Prediction markets are currently assigning a high probability to a U.S. strike on Iran in March, a scenario that could significantly disrupt global crude supply. Against this backdrop, prices pushed to a new four-month high by the end of last week, with a daily close above $66.25 marking a potential six-month high.

    However, two important cautions should be noted:

    • While a daily close above $66.25 would typically attract trend-following buying, the current moving average structure does not confirm a bullish setup. Even in the event of military conflict, the move could prove to be a short-lived spike, especially if a rapid U.S. victory follows, potentially resulting in a failed breakout.
    • Unlike recent Democratic administrations, the Trump administration is likely to take aggressive steps to suppress crude oil prices, which could cap or reverse upside momentum.

    Bitcoin

    BTC/USD has finally completed a decisive bearish breakdown below the long-term support zone just above $81,000. Price is now firmly established beneath this level and has pushed to a new nine-month low, a development that is technically significant and clearly bearish.

    While equities and precious metals have rallied strongly in recent months, Bitcoin peaked at a record high several months ago and has since trended steadily lower. This divergence highlights a broader downturn across the crypto sector, with Bitcoin now showing clear signs of structural weakness.

    Despite early expectations that Bitcoin would fundamentally reshape global finance, real-world adoption remains limited outside parts of Africa. Practical usability is still constrained, and its underlying value proposition remains uncertain.

    Although I generally avoid short-selling, Bitcoin appears entrenched in a long-term bearish trend. I would not consider buying at current levels. Short positions may be worth considering, but only with strict risk management, as shorting is best suited to experienced traders.

    XAG/USD

    Silver experienced an exceptionally volatile week, surging more than 15% to hit a new all-time high and the long-discussed $120 options target, before suffering a dramatic reversal. The sell-off unfolded sharply on Thursday and Friday—particularly Friday—when prices plunged 28% in a single session.

    I had previously cautioned that the move was highly vulnerable to a sharp correction, and that while a long position was justified, it should be taken with a reduced position size.

    The sheer magnitude of the collapse, even with some bullish undertones and modest resilience in the bounce from the weekly lows, strongly suggests that another record high is unlikely in the near term. This extraordinary rally appears to be finished, and the most probable next phase is a period of erratic consolidation, marked by large swings and gradually diminishing volatility.

    XAU/USD

    Much of the analysis above regarding Silver also applies to Gold. That said, gold’s volatility was noticeably lower, and its price action showed greater resilience at the lows.

    While gold is also likely to enter a period of sideways consolidation, the underlying structure suggests it may recover to the upside more quickly than silver.

    Bottom Line

    My preferred trade for the coming week is:

    • Long EUR/USD, contingent on a daily (New York) close above 1.2039.

    Sources: Adam Lemon

  • USD/JPY holds above 155.00 as BoJ reiterates gradual tightening stance

    USD/JPY traded steadily after the Bank of Japan signaled that the risk of falling behind the curve has not increased meaningfully. Japanese Prime Minister Sanae Takaichi noted that a weaker Yen supports exports and helps offset the impact of US tariffs on the auto sector. Meanwhile, the US Dollar gained support following Kevin Warsh’s nomination as Federal Reserve Chair.

    USD/JPY is holding steady after three consecutive days of gains, trading near 155.20 during Asian hours on Monday. Upside momentum may be capped as the Japanese Yen remains relatively calm following the Bank of Japan’s January Summary of Opinions.

    The BoJ’s Summary of Opinions indicated that the risk of falling behind the policy curve has not increased materially, though members emphasized that timely policy action is becoming more important. With real interest rates still deeply negative, policymakers agreed that additional rate hikes would be appropriate if the outlook for growth and inflation remains intact, while continuing to favor a gradual tightening path. Over the weekend, Japanese Prime Minister Sanae Takaichi said a weaker Yen could benefit export-driven industries and help shield the auto sector from the impact of US tariffs.

    The pair may still find support as the US Dollar strengthens following President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair. Markets view Warsh’s appointment as signaling a more disciplined and cautious approach to monetary easing.

    US producer inflation data also underpinned the Dollar, reinforcing the Federal Reserve’s restrictive policy stance. Headline PPI remained unchanged at 3.0% year over year in December, above expectations for a slowdown to 2.7%, while core PPI accelerated to 3.3% from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.

    Echoing this view, St. Louis Fed President Alberto Musalem said further rate cuts are not justified at this stage, describing the current 3.50%–3.75% policy rate range as broadly neutral. Atlanta Fed President Raphael Bostic also urged patience, arguing that monetary policy should remain modestly restrictive.

    Sources: Fxstreet

  • NZD/USD climbs above 0.6000 following Chinese PMI data

    NZD/USD edged higher to around 0.6025 during early Asian trading on Monday. China’s RatingDog Manufacturing PMI increased to 50.3 in January 2026, in line with expectations. Meanwhile, US producer prices rose strongly in December, with PPI climbing 0.5% month over month.

    The NZD/USD pair is trading on a positive note around 0.6025 during early Asian hours on Monday. The New Zealand Dollar remains supported against the US Dollar following the release of China’s Manufacturing PMI data, while traders await further direction from the US ISM Manufacturing PMI report due later in the day.

    Data published by RatingDog showed that China’s Manufacturing Purchasing Managers’ Index rose to 50.3 in January from 50.1 in December, marking the highest reading since October 2025 and coming in line with market expectations. The data may offer modest support to the China-sensitive Kiwi, given China’s status as New Zealand’s largest trading partner.

    US President Donald Trump’s selection of Kevin Warsh as the next Federal Reserve (Fed) Chair could boost the US dollar. Markets expect Warsh may lean toward a smaller Fed balance sheet and likely favor lower interest rates but would stop well short of the more aggressive easing associated with some of the other potential candidates. 

    Additionally, hotter-than-expected US producer price inflation could lift the Greenback and create a headwind for the pair. The Bureau of Labor Statistics revealed on Friday that US Producer Price Index (PPI) rose to 3.0% year-over-year (YoY) in December, beating estimates of 2.7%. Meanwhile, the PPI rose to 0.5% month-over-month (MoM) in December, above the market consensus and the previous reading of 0.2%. This report could further strengthen the case for the Fed to hold rates steady while policymakers monitor how inflation trends.

    Sources: Fxstreet

  • Australian dollar slips even as China’s RatingDog PMI shows improvement

    The Australian Dollar softened even as China’s RatingDog Manufacturing PMI edged up to 50.3 in January from 50.1. Meanwhile, Australia’s TD-MI Inflation climbed 3.6% year over year, though the monthly increase eased to 0.2%, its slowest pace since August. The US Dollar could gain further support after Donald Trump nominated Kevin Warsh as Fed Chair, a move seen as signaling a more cautious stance on monetary easing.

    The Australian Dollar weakened against the US Dollar on Monday, extending losses after falling more than 1% in the prior session. The AUD/USD pair stayed under pressure despite China’s RatingDog Manufacturing PMI ticking up to 50.3 in January from 50.1 in December, in line with market expectations. While the reading signaled a modest expansion in factory activity, it marked the strongest growth since October.

    Meanwhile, Australia’s TD-MI Inflation Gauge rose to 3.6% year over year in January from 3.5% previously. On a monthly basis, inflation increased by 0.2%, easing sharply from December’s two-year high of 1% and registering its slowest pace since August.

    ANZ Job Advertisements surged 4.4% month over month in December 2025, rebounding from a revised 0.8% decline and marking the first increase since July. The rise was also the strongest monthly gain since February 2022, pointing to renewed hiring momentum toward the end of the year.

    The data come ahead of the Reserve Bank of Australia’s policy meeting on Tuesday, following the central bank’s decision to keep the cash rate unchanged at 3.6% for a third consecutive meeting in December. Policymakers are widely expected to maintain a cautious stance, as underlying inflation remains above target and labor market conditions stay relatively tight, supporting a restrictive and data-dependent policy approach.

    Meanwhile, Australia’s Consumer Price Index increased 3.8% year over year in December, up from 3.4% previously. With headline inflation still exceeding the RBA’s 2–3% target range, recent PMI and employment indicators strengthen the argument for a tighter monetary policy bias.

    US Dollar edges lower ahead of ISM Manufacturing PMI

    The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is edging lower after posting gains of more than 1% in the previous session, trading near 97.10 at the time of writing. Market attention is turning to the release of the US ISM Manufacturing PMI for January later in the day.

    Despite the modest pullback, the US Dollar had recently drawn support following President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair, a move markets viewed as signaling a more disciplined and cautious approach to monetary easing. The Greenback also benefited from improved risk sentiment after the US Senate reached an agreement to advance a government funding package, averting a potential shutdown, according to Politico.

    US producer-side inflation data further underpinned the Dollar, reinforcing the Federal Reserve’s restrictive policy stance. Headline PPI remained unchanged at 3.0% year over year in December, exceeding expectations for a slowdown to 2.7%. Core PPI, which excludes food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.

    Federal Reserve officials echoed a cautious tone on easing. St. Louis Fed President Alberto Musalem said additional rate cuts are not justified at present, describing the current 3.50%–3.75% policy rate range as broadly neutral. Atlanta Fed President Raphael Bostic also urged patience, arguing that monetary policy should remain modestly restrictive.

    In Australia, inflation and trade data pointed to continued price pressures. The RBA’s Trimmed Mean inflation rose 0.2% month over month and 3.3% year over year, while the monthly CPI jumped 1.0% in December from zero previously, exceeding forecasts of 0.7%. Export prices increased 3.2% quarter over quarter in Q4 2025, rebounding from a 0.9% decline in Q3 and marking the strongest gain in a year, while import prices climbed 0.9%, beating expectations for a fall and reversing a prior decline.

    Following the data, markets now price in more than a 70% probability of a 25-basis-point rate hike by the Reserve Bank of Australia from the current 3.6% cash rate, up from around 60% previously. Rates are fully priced at 3.85% by May and near 4.10% by September.

    Australian Dollar slides toward key confluence support near 0.6900

    The AUD/USD pair is trading near 0.6940 on Monday. Analysis of the daily chart shows the pair continuing to move higher within an ascending channel, pointing to a sustained bullish bias. The 14-day Relative Strength Index has eased from the 70 level to around 67, suggesting a cooling in bullish momentum rather than a trend reversal.

    On the upside, AUD/USD could recover toward 0.7093, its highest level since February 2023, reached on January 29. A sustained break above this level would open the door for a test of the channel’s upper boundary near 0.7190. On the downside, initial support is seen at a confluence zone around the nine-day Exponential Moving Average at 0.6927, which aligns closely with the lower boundary of the ascending channel near 0.6920.

    AUD/USD: Daily Chart

    Sources: Investing

  • Asia FX trades flat as stronger dollar weighs; yen weakens following Takaichi comments

    Most Asian currencies traded in narrow ranges on Monday, while the dollar strengthened as investors assessed U.S. President Donald Trump’s nomination for the next Federal Reserve chair.

    The Japanese yen weakened in volatile trading after remarks from Prime Minister Sanae Takaichi suggested a reduced likelihood of currency market intervention by Japanese authorities.

    Broader moves across Asian currencies were subdued as investors awaited further economic signals this week, including a policy meeting by the Reserve Bank of Australia and the release of key U.S. jobs data.

    Dollar gains after Trump taps Warsh as Fed chair nominee

    The dollar index and its futures each rose around 0.1% in Asian trading, extending last week’s gains after the greenback staged a sharp rebound from a near four-year low.

    The dollar’s advance was driven largely by U.S. President Donald Trump’s nomination of former Federal Reserve governor Kevin Warsh to succeed Jerome Powell as Fed chair.

    Warsh is broadly seen as aligned with Trump’s push for significantly lower interest rates, but is also viewed as a critic of the Fed’s asset-purchase programs—suggesting that longer-term monetary policy under his leadership may prove less dovish than markets initially expected.

    “We expect a Warsh-led Fed to favour a smaller balance sheet, limiting support for large-scale fiscal expansion,” ANZ analysts said in a note.

    The analysts added that Warsh may view labour market weakness as the greater threat to the Fed’s dual mandate of maximum employment and price stability, and would likely back additional rate cuts if confirmed in the months ahead.

    Powell’s term is set to expire in May. The current Fed chair said last week that his successor should remain independent of political pressures.

    Yen weakens after Takaichi remarks

    The Japanese yen underperformed its Asian peers on Monday, with USD/JPY climbing as much as 0.5% to trade above the 155 level.

    The currency weakened after comments from Sanae Takaichi highlighted the benefits of a softer yen during a recent campaign speech—remarks that contrasted with earlier warnings from her administration against sustained currency weakness. Takaichi later appeared to moderate her stance, noting that a weaker yen supports exporters.

    Previously, a series of comments from Japanese officials, including Takaichi, cautioning against excessive yen moves had fueled speculation of possible government intervention. That speculation helped the yen strengthen sharply in January, though it remains near levels that have triggered intervention in the past. Recent media reports have suggested Japan and the United States may be considering coordinated measures to support the currency.

    Elsewhere in Asia, currencies traded in a narrow to softer range amid a lack of near-term catalysts. The Australian dollar slipped about 0.2% against the U.S. dollar, with attention focused on Tuesday’s Reserve Bank of Australia meeting, where a 25-basis-point rate hike is widely expected.

    Expectations of a rate hike by the Reserve Bank of Australia were driven mainly by data pointing to a rebound in Australian inflation during the second half of 2025.

    The South Korean won weakened, with USD/KRW climbing about 0.5%, as heavy outflows from domestic equity markets weighed on the currency amid selloffs in major technology stocks.

    The Chinese yuan was largely unchanged, with USD/CNY flat as markets showed little response to mixed January purchasing managers’ index readings.

    The Singapore dollar edged higher, with USD/SGD slipping 0.1%, while the Taiwan dollar was steady against the greenback.

    The Indian rupee also weakened, with USD/INR rising roughly 0.2% and hovering near record levels, after investors reacted cautiously to the government’s fiscal 2027 budget, which signaled increased spending to bolster the manufacturing sector.

    Sources: Investing

  • Weekly Forex & Markets Outlook: WTI Crude, GBP/USD, EUR/USD, DAX, Gold, Silver, USD/JPY, USD/CHF

    WTI Crude Oil

    The $66 level in WTI crude oil has proven to be a notable resistance zone, and prices are now retreating from that area. There is considerable uncertainty in the market over whether potential strikes against Iran could occur over the weekend, adding a layer of geopolitical risk.

    Even so, underlying supply-and-demand dynamics remain a significant constraint on price action. As a result, large, sustained moves appear unlikely, and the prevailing strategy may continue to favor selling into rallies rather than chasing upside momentum.

    British Pound

    The British pound pushed above the 1.3750 level, but buying momentum now appears to be fading as selling pressure shows signs of exhaustion. Notably, the weekly candlestick resembles a shooting star, a pattern that often signals difficulty in sustaining further gains.

    From here, a pullback could see GBP/USD slide toward the 1.35 area, a major round number with strong psychological significance. Part of this shift in sentiment may be tied to Kevin Warsh’s nomination as the next Federal Reserve Chair, as his comparatively hawkish stance has strengthened expectations for tighter U.S. monetary policy, weighing on the pound.

    EUR/USD

    The euro staged a strong rally earlier in the week but then reversed sharply after the initial upside move. This price action suggests the market may be entering a period of consolidation, raising the possibility that the recent breakout was a false move.

    Much will depend on how traders respond to the nomination of the new Federal Reserve Chair. For now, the euro appears to be losing momentum. On the downside, the 1.16 level could come into play. However, if buyers step back in quickly over the coming week, the pair could regain strength and push higher, potentially revisiting the 1.20 area, with a further extension toward 1.23 if bullish momentum builds.

    DAX

    The German DAX has spent most of the week in negative territory but continues to hold above the 24,500 level, an area that has become important support after previously acting as resistance. This ability to stabilize at a former breakout zone suggests underlying buying interest remains intact.

    Overall, the index appears to be in the process of bottoming and potentially turning higher, with scope for a renewed push to the upside. Looking further ahead, the outlook remains constructive. Ongoing fiscal support and heavy government spending in Germany should provide a tailwind for equities, leading to expectations that the DAX could be among the stronger-performing indices this year. As a result, the broader bias remains bullish.

    Silver

    Silver has become the focal point of market discussion after an extraordinary week of price action. After surging to around $122, the metal suffered a dramatic reversal, ending Friday in what can only be described as a sharp selloff.

    In a single session, silver plunged below the $90 level, and momentum now suggests a potential move toward $80. After such an extreme rally, a correction was inevitable, and the market now appears to be experiencing that long-overdue pullback.

    The selloff was likely exacerbated by the nomination of a more hawkish-than-expected Federal Reserve Chair, adding pressure to precious metals. Even in normal conditions, silver is known for its volatility, and the current environment has only amplified those swings. For now, price action has become exceptionally unstable, making silver largely untradeable for many participants.

    Gold

    Gold has been hit hard as well, but unlike silver, it benefits from strong central bank support, which should help it recover more quickly. Silver had moved so far beyond its fundamental norms that it began to resemble the kind of speculative excess often seen in smaller cryptocurrencies.

    Gold, by contrast, continues to attract substantial institutional and central bank demand. That said, it is possible the market has already set a peak, although it may be too soon to say so definitively. Given the way trading unfolded on Friday, it is difficult to ignore the risk of continued downside follow-through.

    Still, considering that gold was trading near $1,700 just two years ago, some form of correction was inevitable. When markets become stretched and overheated, this kind of reset is ultimately unavoidable.

    USD/JPY

    The U.S. dollar initially sank sharply against the Japanese yen over the week, but that move has since reversed decisively. The rebound suggests markets may be reassessing what now appears to have been an overly aggressive bet against the dollar.

    Given the significant interest rate differential between the two currencies, this type of recovery is broadly in line with how the pair might be expected to trade. Technically, USD/JPY found support at the 50-week EMA, and if prices can reclaim the 155 level, the next upside target could be a move toward 158 yen.

    USD/CHF

    The U.S. dollar declined sharply against the Swiss franc, briefly testing the 0.76 level. While that price point may not be especially significant on its own, it does raise the possibility of Swiss National Bank intervention if franc strength becomes excessive—a risk that remains in the background.

    Technically, the pair appears to be forming a hammer pattern following the breakdown, and more importantly, the U.S. dollar has begun to strengthen more broadly across global markets. Taken together, these factors suggest USD/CHF could be setting up for a rebound in the near term.

    Sources: Christopher Lewis

  • Will the ECB react to the euro’s recent strength? Analysts asses

    The euro’s recent surge has brought renewed attention to the European Central Bank, though economists argue it is unlikely to prompt any near-term policy action.

    Last week, the single currency climbed to $1.20 against the U.S. dollar for the first time since mid-2021, marking an unusually swift move by historical standards. According to Capital Economics, the euro has strengthened by a similar scale over a 10-day period only a few times in the past decade, while its trade-weighted exchange rate has reached a record high.

    Even so, analysts expect the inflationary impact across the euro zone to remain modest. Capital Economics cited ECB sensitivity analysis showing that if the euro stabilizes at current levels, headline inflation next year would be roughly 0.1 percentage points lower than projected in the ECB’s December forecasts.

    While this slightly increases downside risks to inflation, the brokerage said it falls far short of the threshold that would justify foreign-exchange intervention on price-stability grounds.

    The ECB is likely to address the euro’s strength at its meeting next week, but concrete action appears improbable. Although the central bank has the authority to intervene in currency markets to prevent disorderly moves that could threaten price stability, Capital Economics noted that the euro would need to rise much further before such measures were considered. Even then, intervention through dollar purchases is viewed as highly unlikely.

    Historically, the ECB has stepped into currency markets only twice—once in late 2000 and again in March 2011—both times to support, rather than weaken, the euro. Those interventions were coordinated with other major central banks. Capital Economics added that a coordinated effort to push the euro lower now looks extremely unlikely, particularly given the U.S. administration’s preference for a weaker dollar.

    ECB officials have so far played down the recent appreciation. Vice President Luis de Guindos has previously described levels above $1.20 as “complicated,” while also calling the level itself “perfectly acceptable.” Meanwhile, Austria’s central bank governor has characterized the latest rise as “modest.”

    Capital Economics expects ECB President Christine Lagarde to reiterate that policymakers are closely monitoring exchange-rate developments, but not to actively try to talk the currency down.

    Although intervention is unlikely in the near term, prolonged euro strength could influence policy over time. Capital Economics said ECB analysis suggests that if the euro were to appreciate gradually to between $1.25 and $1.30 over the next three years, headline inflation in 2028 would be about 0.3 percentage points lower.

    Under such conditions, policymakers would be more inclined to respond through stronger verbal guidance and lower interest rates rather than direct currency market intervention.

    For now, economists say the euro’s rise largely reflects U.S. dollar weakness rather than stronger euro zone fundamentals, reducing the need for an immediate response. As a result, the ECB is expected to remain on the sidelines unless the appreciation becomes substantially larger and more persistent, according to Capital Economics.

    Sources: Investing

  • Japan’s Prime Minister highlights the benefits of a weak yen, even as the government takes steps to curb the currency’s decline.

    Japanese Prime Minister Sanae Takaichi highlighted the advantages of a weaker yen during a campaign speech, striking a note that contrasted with her finance ministry’s stance, which has kept all measures on the table to address excessive currency volatility.

    She later walked back her remarks, clarifying that she holds no particular preference regarding the yen’s direction.

    “Many people argue that the weak yen is a negative at the moment, but for exporters it represents a significant opportunity,” Takaichi said on Saturday, ahead of the snap election scheduled for February 8.

    “Whether in food exports or automobile sales, even with U.S. tariffs in place, the weaker yen has acted as a cushion. That support has been extremely valuable,” she added.

    Takaichi also said she aims to strengthen Japan’s economy against currency swings by encouraging greater domestic investment.

    FILE PHOTO: Japan’s Internal Affairs Minister Sanae Takaichi attends a news conference at Prime Minister Shinzo Abe’s official residence in Tokyo, Japan September 11, 2019. REUTERS/Issei Kato/File Photo

    The yen has been trading near 18-month lows against the U.S. dollar, fuelling inflation and raising expectations of potential interest-rate increases by the central bank. Finance Minister Satsuki Katayama has repeatedly stated that authorities are prepared to step in to stabilise the currency if needed — comments widely interpreted by markets as a signal of possible intervention.

    In a post on X on Sunday, Takaichi reiterated that she does not support either a strong or weak yen.

    “I did not state that one is better or worse,” she wrote, adding that the government is closely watching financial markets and that, as prime minister, she will avoid making specific remarks on exchange-rate levels.

    “My intention was simply to say that we want to build an economic framework capable of withstanding exchange-rate volatility, not — as some reports have implied — to promote the advantages of a weak yen.”

    Former prime minister and finance minister Yoshihiko Noda, who co-leads the largest and newly formed opposition group, the Centrist Reform Alliance, said a weak yen is hurting households, according to Nikkei on Sunday.

    “Amid an excessive depreciation of the yen, no one feels comfortable when they look at their household finances,” Noda was quoted as saying. “The viewpoint of ordinary citizens is absent, which once again raises serious concerns for me.”

    The yen jumped after reports that the New York Federal Reserve had joined Japanese authorities in contacting banks to inquire about exchange rates for potential yen purchases — a move traders often view as a signal that intervention could be imminent.

    The currency’s prolonged slide, alongside a recent surge in Japanese government bond yields to record levels, underscores investor unease over the country’s stretched fiscal position.

    Takaichi is seeking voter approval for her push to revive inflation and reflate the economy.

    Sources: Reuters

  • EUR/USD falls as Warsh Fed nomination and strong US PPI fuel Dollar rally

    • EUR/USD drops 0.75% as Kevin Warsh’s Fed nomination lifts US yields and fuels Dollar demand.
    • Hot US producer inflation reinforces expectations for a steady Fed, pushing Treasury yields above 4.25%.
    • Solid German and Eurozone GDP figures fail to counter Dollar strength driven by policy repricing.

    EUR/USD slid 0.75% in the North American session as broad US Dollar strength followed Trump’s mildly hawkish Fed nominee and an inflation report supporting a steady-rate stance. The pair was trading at 1.1882 at the time of writing, down from a session high of 1.1974.

    Euro sinks below 1.19 as hawkish Fed leadership signals and sticky inflation crush rate-cut hopes

    Kevin Warsh has been named by President Trump as the next Chair of the Federal Reserve, confirming rumors that surfaced late Thursday. Financial markets reacted swiftly, sending precious metals sharply lower while the US Dollar climbed nearly 1%, as measured by the US Dollar Index (DXY), which tracks the greenback against six major peers. The DXY is on course to close above the 97.00 mark.

    US Treasury yields also advanced, with the 10-year yield rising toward 4.25%. Meanwhile, US producer-side inflation edged higher, moving further away from the Federal Reserve’s 2% target and reinforcing the case for keeping interest rates unchanged. In addition to the December Producer Price Index (PPI) release, comments from Federal Reserve officials remained in focus.

    Separately, breaking news reported that the US Senate reached an agreement to pass a government funding package later tonight, averting a potential shutdown, according to Politico.

    Rising Treasury yields suggest investors see reduced odds that Warsh would pursue aggressive rate cuts to appease the White House. At the time of writing, the US 10-year Treasury yield was up around 1.5 basis points at 4.247%.

    In Europe, Germany’s economy expanded by 0.4% year-on-year, beating expectations. However, stronger-than-forecast GDP readings for Germany and the Eurozone, along with an uptick in German inflation, failed to offer meaningful support to EUR/USD.

    Looking ahead, the US economic calendar will feature a batch of labor market data, speeches from Fed officials, and January ISM Manufacturing and Services PMIs. In Europe, HCOB flash PMIs for the Eurozone, Germany, and France, alongside the European Central Bank’s monetary policy meeting, could inject volatility into EUR/USD.

    Daily market movers: Dollar comeback sends Euro tumbling

    St. Louis Fed President Alberto Musalem said there is no need for further rate cuts at present, noting that the current 3.50%–3.75% policy range is broadly neutral. He added that easing would only be warranted if the labor market weakens significantly or inflation falls materially.

    Fed Governor Stephen Miran backed Kevin Warsh as a strong candidate for Fed Chair, attributing the recent rise in producer prices largely to housing costs and portfolio management fees. Meanwhile, Fed Governor Christopher Waller said the labor market remains soft despite steady growth, arguing inflation would be closer to 2% without tariffs, which he said are keeping price growth near 3%. Waller added that policy should be closer to neutral, around 3%.

    Atlanta Fed President Raphael Bostic called for patience, stressing that interest rates should remain somewhat restrictive. He warned that the full inflationary impact of tariffs has yet to be felt and expects price pressures to persist.

    US producer inflation data reinforced the cautious tone. The Producer Price Index (PPI) held steady at 3.0% YoY in December, missing expectations for a slowdown to 2.7%. Core PPI accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline and highlighting ongoing upstream price pressures.

    In Europe, EU GDP grew 1.4% YoY in Q4, unchanged from Q3 but above expectations. Germany’s economy expanded 0.4% YoY, beating forecasts and improving from the prior quarter. German inflation, measured by the HICP, edged up to 2.1% in January from 2.0%, remaining within the ECB’s target range.

    Technical outlook: EUR/USD uptrend under threat after break below 1.1850

    The EUR/USD technical outlook suggests the uptrend is under threat after the pair failed to sustain gains above the 2025 high at 1.1918, accelerating the decline below 1.1850. The Relative Strength Index (RSI) has turned mildly bearish, indicating a shift in momentum that could open the door to further downside.

    On the downside, initial support is seen at 1.1800. A decisive break below this level could expose the 20-day simple moving average (SMA) at 1.1743.

    On the upside, immediate resistance stands at 1.1900. A move back above this level would bring 1.1950 into focus, followed by the yearly high at 1.2082.

    EUR/USD Daily Chart

    Sources: Fxstreet

  • Looking ahead to the week ahead: Warsh takes center stage alongside central banks

    The US Federal Reserve experienced an eventful week. On Monday, it contacted New York–based banks to assess their USD/JPY exposure, sparking speculation that Washington could be coordinating with Japan to address the Japanese Yen’s weakness. This development prompted a sharp sell-off in the US Dollar early in the week.

    The Fed’s midweek policy meeting resulted in no change to the federal funds rate, which was kept within the 3.50%–3.75% range, in line with expectations. During his press conference, Chair Jerome Powell avoided questions related to politics, his tenure, and the subpoena. However, he pointed to improving economic momentum and reduced risks to both inflation and the labor market.

    The US Dollar Index (DXY) has since rebounded toward the 96.90 level, recovering most of its weekly losses after President Donald Trump nominated former Fed Governor Kevin Warsh as the next Fed Chair on Friday. The nomination now awaits Senate approval. Looking ahead, the US is set to release several key data points next week, including the ISM Manufacturing PMI for January, MBA mortgage applications, Challenger job cuts, and weekly initial jobless claims.

    EUR/USD is hovering around the 1.1880 area after the US Dollar rebounded and recovered nearly all of its weekly losses. In the coming week, Hamburg Commercial Bank (HCOB) will release Manufacturing, Services, and Composite PMIs for both Germany and the Eurozone. Additional Eurozone data include the ECB Bank Lending Survey and December Producer Price Index (PPI), while Germany will publish December Factory Orders and Industrial Production figures.

    GBP/USD is trading near 1.3600 ahead of the Bank of England’s monetary policy announcement on Thursday. Governor Andrew Bailey’s subsequent press conference is expected to shed further light on the central bank’s outlook for interest rates. UK data releases include the final January S&P Global PMIs and the Halifax House Price Index.

    USD/JPY is holding close to the 154.50 level, paring earlier gains after Tokyo CPI data indicated easing inflation in January. Headline inflation slowed to 1.5% year-over-year from 2% in December, while core measures eased to 2%, undershooting forecasts. The softer inflation profile reduces pressure on the Bank of Japan to tighten policy.

    USD/CAD is trading around 1.3580, with the Canadian Dollar maintaining a slight edge against the greenback despite data showing economic stagnation in November. Monthly GDP was flat following a 0.3% contraction in the prior month and fell short of expectations for modest growth. Upcoming Canadian releases include January S&P Global PMIs and the Ivey PMI.

    Gold is trading near the $4,880 area after surrendering all weekly gains. Prices retreated from a record high of $5,598 as profit-taking emerged and the US Dollar strengthened sharply.

    Looking ahead: Emerging views on the economic outlook

    Scheduled central bank speakers for the week:

    Monday, February 2:
    – Bank of England’s Breeden
    – Federal Reserve’s Bostic

    Tuesday, February 3:
    – Federal Reserve’s Barkin

    Wednesday, February 4:
    – Federal Reserve’s Cook

    Thursday, February 5:
    – Bank of England Governor Andrew Bailey
    – Federal Reserve’s Bostic
    – Bank of Canada Governor Tiff Macklem

    Friday, February 6:
    – European Central Bank’s Cipollone
    – European Central Bank’s Kocher
    – Bank of England’s Pill
    – Federal Reserve’s Jefferson

    Central bank meetings and upcoming data set to influence monetary policy decisions

    Key economic data and policy events for the week:

    Monday, February 2:
    – Germany’s December Retail Sales
    – US ISM Manufacturing PMI

    Tuesday, February 3:
    – Reserve Bank of Australia monetary policy decision
    – US December JOLTS job openings

    Wednesday, February 4:
    – Eurozone January Harmonized Index of Consumer Prices (HICP)
    – US January ADP employment report

    Thursday, February 5:
    – Australia’s December trade balance
    – Eurozone December retail sales
    – Bank of England monetary policy decision
    – European Central Bank monetary policy decision

    Friday, February 6:
    – Canada’s January employment change
    – US January nonfarm payrolls
    – US February Michigan consumer sentiment

    Sources: Fxstreet

  • Forex Today: US Dollar surges, Gold tumbles amid focus on Trump’s Fed Chair choice

    Here is what you need to know on Friday, January 30:

    Markets were driven early Friday by the latest political and geopolitical developments linked to US President Donald Trump, as investors focused on the announcement of his pick for Federal Reserve Chair. Bloomberg reported that the Trump administration is preparing to nominate former Fed Governor Kevin Warsh for the role as early as Friday morning in the US.

    At the same time, the Wall Street Journal noted that President Trump and Senate Democrats have reached an agreement to avoid a government shutdown.

    Together with profit-taking and the Federal Reserve’s recent decision to keep interest rates unchanged, these developments helped revive demand for the US Dollar (USD), pushing it up from four-year lows against its major counterparts.

    Despite the rebound, the US Dollar remains on course for a second consecutive weekly decline, weighed down by concerns over President Trump’s unpredictable foreign policy stance and repeated challenges to the Federal Reserve’s independence.

    On Thursday, Trump threatened to levy a 50% tariff on all aircraft exported from Canada to the United States, accusing Ottawa of unfairly restricting the certification of Gulfstream business jets.

    Reuters also reported that Trump plans to hold talks with Iran, even as the Pentagon readies for potential military action and the US steps up its naval presence in the Middle East.

    In addition, the White House confirmed that Trump signed an executive order authorizing tariffs on countries that supply oil to Cuba.

    Looking ahead, market attention remains firmly on Trump’s nomination of the next Fed Chair, along with the upcoming US Producer Price Index (PPI) release, which could shape the Dollar’s next move.

    Before that, preliminary fourth-quarter 2025 GDP data from Germany and the Eurozone are expected to draw investor interest.

    In G10 currencies, AUD/USD remains under heavy pressure below the 0.7000 mark amid profit-taking ahead of a likely Reserve Bank of Australia (RBA) rate hike next week. USD/JPY hovers near 154.00, with the Japanese Yen staying weak after softer Tokyo CPI data reduced expectations for an early Bank of Japan (BoJ) rate increase.

    EUR/USD pares losses to reclaim the 1.1900 level, though downside risks persist ahead of key German and Eurozone GDP releases. GBP/USD continues to consolidate around 1.3750, weighed down by the ongoing recovery in the US Dollar.

    In commodities, Gold slides nearly 4% to trade around $5,200 in early European hours after briefly testing the $5,100 level during the Asian session. Meanwhile, WTI crude oil extends its retreat from five-month highs near $66.25, trading close to $64 as Trump signals openness to talks with Iran.

    Sources: Fxstreet

  • When will the German and Eurozone Q4 GDP figures be released, and what impact could they have on EUR/USD?

    Overview of German and Eurozone Q4 GDP

    Germany’s Federal Statistics Office will publish preliminary fourth-quarter GDP figures at 09:00 GMT on Friday, followed by Eurostat’s release of flash Eurozone GDP data at 10:00 GMT for the same period.

    Germany’s economy is expected to expand by 0.2% quarter-over-quarter in Q4, rebounding from stagnation in the previous quarter, while annual growth is forecast to remain unchanged at 0.3%. At the Eurozone level, seasonally adjusted GDP is projected to grow by 0.2% QoQ in the fourth quarter, down from 0.3% previously, with year-over-year growth seen moderating to 1.2% from 1.4%.

    How might Germany and the Eurozone’s Q4 GDP data influence the EUR/USD exchange rate?

    The EUR/USD pair may face downside pressure if Germany and Eurozone GDP figures come in line with forecasts. Investors will also closely monitor December unemployment data from both regions, as well as Germany’s Consumer Price Index (CPI for January).

    ECB policymaker Martin Kocher cautioned that additional strength in the Euro could lead the central bank to restart interest-rate cuts. After his remarks, market expectations for a summer rate reduction edged higher, with the implied probability of a July cut increasing to roughly 25% from around 15%. The ECB is set to meet next week and is broadly expected to leave interest rates unchanged.

    Meanwhile, EUR/USD is under strain as the US Dollar gains traction amid speculation that US President Donald Trump may nominate former Federal Reserve Governor Kevin Warsh as the next Fed Chair. Trump indicated late Thursday that he would reveal his decision on Friday morning, with markets leaning toward Warsh, who is perceived as relatively hawkish.

    From a technical perspective, EUR/USD is hovering near 1.1920 at the time of writing. Daily chart analysis continues to point to a bullish bias, with the pair holding within an ascending channel. A move toward the upper channel boundary near 1.2050 is possible, followed by 1.2082, the highest level since June 2021. On the downside, initial support is seen at the nine-day Exponential Moving Average (EMA) around 1.1870, with further support near the lower boundary of the channel at approximately 1.1840.

    Sources: Fxstreet

  • U.S. Dollar Index Hits 2008 Levels: Breakdown or Crowded Trade Trap?

    Markets absorbed last night’s FOMC decision without much surface reaction, but the takeaway was straightforward: the Fed is content to keep financial conditions accommodative. That stance weighed on the U.S. dollar and pushed yields lower, while gold and equities edged higher on solid earnings. In essence, the Fed did nothing to challenge the prevailing market narrative. Attention now shifts back to the charts, which are beginning to tell a compelling story.

    Is It Possible? DXY Slips Back to Its 2008 Trendline

    The DXY has drifted back into a long-term monthly trendline zone that has previously served as a key structural floor. For now, this move represents a test rather than a confirmed breakdown.

    What matters next:

    A decisive weekly close below this support area would confirm a genuine structural breakdown. Conversely, if the DXY stabilizes and rebounds, it would be an early signal that the crowded “short USD” trade may be vulnerable to a squeeze.

    This is precisely the kind of setup where long-term sentiment can be right, yet short-term positioning gets punished.

    EUR/USD Points to a Near-Term Pause as the Dollar Regains Some Strength

    EUR/USD is pushing into a dense resistance cluster, including the 1.20 psychological level, a multi-year trendline, channel alignment, and a bearish divergence on the weekly RSI.

    That combination typically leads to at least a pause or pullback, even if the longer-term bias remains bullish for EUR/USD (and bearish for the dollar). If EUR/USD does roll over, it would offer the cleanest “risk-on USD bounce” setup without having to guess.

    Key takeaway: A stall in EUR/USD here gives the DXY room to breathe.

    USD/CHF Is Also Trading at Extreme Levels

    USD/CHF is one of the clearest expressions of U.S. dollar pessimism. When it reaches extreme levels, two patterns typically emerge: downside momentum begins to fade as the trade becomes crowded, and volatility increases as even minor catalysts trigger repositioning.

    Even if dollar weakness persists, this is a zone where smooth continuation should no longer be assumed.

    USD/JPY: A Key Pressure Zone for a Potential Dollar Reversal

    USD/JPY is where macro theory collides with market reality. If a meaningful USD squeeze is going to materialize, this pair is almost certain to play a role.

    On the weekly chart, USD/JPY is interacting with a major structural pivot, pulling back into a former resistance area that is now attempting to act as support around 151–153. For now, price has printed a wick at this support zone, suggesting USD/JPY may pause here before any further downside acceleration.

    If this support holds, a rotation higher becomes increasingly plausible, with upside targets back toward the prior supply zones at 157.7–158.7, followed by 160.7–161.8.

    That wouldn’t imply the start of a new USD bull market, but rather a crowded-trade unwind, especially with the current consensus loudly focused on a yen carry unwind and broad USD bearishness.

    Bank of Japan Policy Decision

    The next Bank of Japan policy meeting is scheduled for 18–19 March 2026, with market expectations largely aligned:

    • No rate hike is expected in March
    • Attention will center on guidance, messaging, and any indications of follow-through later in 2026
    • A continued bias toward verbal intervention and tactical signaling, rather than immediate or aggressive FX action

    In short, the BOJ meeting is unlikely to be the catalyst itself. More often, it serves as the narrative justification after price has already picked a direction.

    That’s why USD/JPY should be viewed as a leading indicator rather than a reactive trade. Focus on the key levels, and let positioning and price action do the talking.

    Sources: Lee Yang

  • Japanese yen slips as soft Tokyo CPI adds to fiscal and political concerns

    • The Japanese yen edged lower after softer-than-expected Tokyo CPI data dampened expectations for an imminent Bank of Japan rate hike.
    • Persistent fiscal challenges and political uncertainty continued to pressure the currency, although fears of official intervention helped limit losses.
    • Meanwhile, concerns over the Federal Reserve’s independence could restrain any rebound in the U.S. dollar and cap gains in the USD/JPY pair.

    The Japanese yen (JPY) came under renewed selling pressure during Asian trading on Friday after data showed consumer inflation in Tokyo, Japan’s capital, slid sharply to a near four-year low in January. The weaker inflation reading reduces urgency for the Bank of Japan (BoJ) to move toward near-term rate hikes. In addition, concerns over Japan’s fiscal outlook, linked to Prime Minister Sanae Takaichi’s reflationary agenda, along with political uncertainty ahead of the February 8 snap election, continue to weigh on the currency. Coupled with modest U.S. dollar (USD) strength, these factors pushed USD/JPY toward the 154.00 level and the key 100-day Simple Moving Average (SMA) resistance.

    That said, expectations of coordinated intervention by U.S. and Japanese authorities to support the yen may discourage aggressive bearish positioning. At the same time, lingering trade uncertainty stemming from President Donald Trump’s tariff threats and broader geopolitical risks is tempering risk appetite, as reflected in the cautious tone across equity markets, which could help limit downside in the safe-haven JPY. Meanwhile, the USD may struggle to gain sustained traction amid expectations of further Federal Reserve rate cuts and ongoing concerns over the central bank’s independence, potentially capping further upside in USD/JPY.

    Japanese yen comes under pressure from soft Tokyo CPI, fiscal concerns and political uncertainty

    A government report released earlier on Friday showed that Tokyo’s headline Consumer Price Index (CPI) fell to 1.5% in January from 2.0% previously, marking its lowest level since February 2022. Core inflation, which strips out fresh food prices, also softened to 2.0% from 2.3% in December, while a broader measure excluding both food and energy eased to 2.4% from 2.6% the month before.

    The data signals easing demand-driven inflation pressures and diminishes the urgency for further monetary tightening by the Bank of Japan, following its December rate hike that lifted the policy rate to 0.75%, the highest level in three decades.

    Meanwhile, concerns over Japan’s fiscal outlook persist as Prime Minister Sanae Takaichi has anchored her snap election campaign on expanded stimulus measures and pledged to suspend the consumption tax on food, raising questions about fiscal sustainability.

    Adding another layer of complexity, reports of an unusual rate check by the New York Federal Reserve last Friday, following a similar move by Japan’s Ministry of Finance, have fueled speculation about potential coordinated U.S.-Japan intervention to curb yen weakness.

    On the geopolitical front, U.S. President Donald Trump announced plans on Thursday to decertify all Canada-made aircraft and threatened to impose 50% tariffs unless U.S.-built Gulfstream jets receive certification in Canada. The move marks a fresh escalation in U.S.-Canada trade tensions.

    These developments, alongside rising U.S.-Iran frictions and the prolonged Russia-Ukraine conflict, could help limit downside pressure on the safe-haven yen. The United States continues to deploy warships and fighter jets across the Middle East, while Secretary of War Pete Hegseth stated that Washington stands ready to act decisively under President Trump’s directives.

    Russia has also reiterated its invitation for Ukrainian President Volodymyr Zelensky to travel to Moscow for peace talks, although prospects for a deal remain slim amid deep divisions between the two sides.

    Meanwhile, the U.S. dollar received a modest boost amid speculation that Kevin Warsh may be appointed as the next Federal Reserve chair, lending additional support to the USD/JPY pair. President Trump is expected to announce his choice for Fed chair on Friday morning.

    Looking ahead, traders will take further cues from the release of the U.S. Producer Price Index (PPI), which, alongside comments from Federal Reserve officials, is likely to influence dollar demand and provide direction for USD/JPY into the weekend.

    USD/JPY bulls look for a sustained break above the 100-day SMA before adding new positions

    The 100-day Simple Moving Average (SMA) continues to trend higher and is currently located near 153.98, with USD/JPY trading just below this level. This keeps near-term sentiment on the heavy side, despite the broader uptrend suggested by the rising trend filter. A sustained move back above this dynamic resistance would help steady the short-term outlook.

    Momentum indicators show tentative signs of stabilization. The Moving Average Convergence Divergence (MACD) remains in negative territory, although its recent narrowing points to fading downside pressure. Meanwhile, the Relative Strength Index (RSI) stands at 37.81, below the neutral 50 mark but rebounding from oversold levels, indicating that bearish momentum is beginning to ease.

    On the upside, the 38.2% Fibonacci retracement of the 159.13–152.07 decline, located at 154.77, is likely to act as initial resistance. A daily close above this level would enhance the recovery setup and open the door to further gains as momentum improves. Conversely, failure to break above this barrier would keep rebounds limited and reinforce a cautious near-term bias.

    Sources: Fxstreet

  • USD: Politics take center stage over monetary policy – Commerzbank

    The U.S. dollar showed a limited reaction to the latest Federal Reserve meeting, with EUR/USD pushing toward the 1.20000 level. While the Fed’s messaging pointed to a low likelihood of a key rate cut in March—given that economic growth is now characterized as “solid”—market attention during the press conference shifted toward political issues.

    This focus, according to Commerzbank analysts Volkmar Baur and Michael Pfister, suggests a growing change in how investors perceive the Federal Reserve’s independence.

    Fed meeting weighs on US dollar

    Overall, the market appeared to place greater emphasis on the Fed’s slightly hawkish tone and policy tweaks. Expectations for additional rate cuts were trimmed marginally, but the adjustment was too small to have a meaningful impact on the currency.

    “The perception that political considerations are gradually influencing the Fed—or at least that markets believe this to be the case—was also reflected in Christopher Waller’s vote in favor of another cut to the key policy rate.

    Ultimately, even if the Fed remains capable of conducting an independent monetary policy, this perception alone could become problematic. If markets lose confidence in that independence, the U.S. dollar is likely to come under pressure.”

    Sources: Fxstreet

  • EUR/USD remains on course toward 1.2000

    EUR/USD extended Monday’s positive momentum, pushing closer to the key 1.2000 level and reaching highs not seen since June 2021. The latest advance reflects continued selling pressure on the U.S. dollar, supported by a constructive risk backdrop and renewed investor focus on potential tariff-related risks stemming from the White House.

    Macro & Fundamental Overview

    EUR/USD’s bullish momentum remains firmly intact, closely mirroring persistent selling pressure on the U.S. dollar, which continues to be weighed down by concerns over trade policy, questions surrounding the Federal Reserve’s independence, and renewed shutdown risks.

    The pair extended its advance for a fourth straight session on Tuesday, edging closer to the pivotal 1.2000 level for the first time since June 2021.

    The latest leg higher reflects a further deterioration in the dollar’s outlook amid revived trade tensions and geopolitical uncertainty, all ahead of the Federal Reserve’s interest rate decision due on Wednesday.

    Meanwhile, sentiment surrounding U.S.–European Union trade relations has improved after President Donald Trump softened his rhetoric last week regarding potential tariffs tied to the Greenland dispute. Markets have interpreted this shift positively, boosting risk appetite and lending support to the euro alongside other risk-sensitive currencies.

    By contrast, the U.S. dollar continues to underperform. The Dollar Index (DXY) remains under heavy pressure, extending its decline toward the 96.00 area — levels last seen in late February 2022.

    The FED: Rates on hold, politics in focus

    The Federal Reserve delivered its widely anticipated December rate cut, but the key signal came from its messaging rather than the policy action itself. A divided vote and Chair Jerome Powell’s measured language suggested that additional easing is far from assured.

    The Fed begins its two-day policy meeting today, with markets largely expecting rates to remain unchanged when the decision is released on Wednesday.

    However, monetary policy may not be the primary focus this time. Market attention has increasingly turned to questions surrounding the Fed’s independence after reports earlier this month of a Justice Department investigation involving Chair Powell.

    Compounding the uncertainty, President Trump has indicated that an announcement on his nominee for the next Fed Chair could be imminent, keeping scrutiny on the central bank well beyond the outcome of this week’s meeting.

    ECB urges patience, not complacency

    The European Central Bank left interest rates unchanged at its December 18 meeting, adopting a more measured and patient tone that has pushed expectations for near-term rate cuts further into the future. Modest upward revisions to growth and inflation projections helped underpin this approach.

    Minutes from the meeting, released last week, showed policymakers saw little immediate need to adjust policy. With inflation hovering near target, the ECB has room to remain patient, while still retaining flexibility should risks materialize.

    Governing Council members emphasized that patience does not equate to complacency. Monetary policy is viewed as appropriately calibrated for now, but not on autopilot. Markets appear to have absorbed this message, currently pricing in just over 4 basis points of easing over the coming year.

    Positioning remains constructive, but confidence has softened

    Speculative positioning remains tilted toward the euro, although bullish conviction appears to be easing.

    CFTC data for the week ended January 20 show non-commercial net long positions declining to a seven-week low of around 111.7K contracts. At the same time, institutional participants also reduced short positions, which now stand near 155.6K contracts.

    Meanwhile, open interest slipped to approximately 881K contracts, breaking a three-week streak of increases and suggesting that market participation may be thinning alongside fading confidence.

    Key Events Ahead

    Near term: The FOMC meeting is set to keep attention firmly on the U.S. dollar, while flash inflation data from Germany and preliminary GDP readings for the euro area will dominate the regional data calendar later in the week.

    Risk: A more hawkish-than-expected outcome from the Fed could quickly tilt momentum back in favor of the dollar. In addition, a clear break below the 200-day simple moving average would increase the risk of a deeper medium-term correction.

    EUR/USD Technical Outlook

    EUR/USD continues to exhibit a firm bullish bias, trading at levels last seen in mid-2021 while gradually shifting focus toward the key 1.2000 psychological handle.

    On the downside, initial support is located at the 2026 low of 1.1576 (January 19), reinforced by the closely watched 200-day simple moving average. A more pronounced correction could open the door to the November 2025 trough at 1.1468, followed by the August base at 1.1391.

    Momentum indicators remain broadly supportive of further gains, although elevated conditions may challenge the immediate upside. The Relative Strength Index is hovering near 75, pointing to overbought territory, while an Average Directional Index reading above 26 confirms the presence of a well-established trend.

    Bottom Line

    For the time being, EUR/USD continues to be influenced primarily by U.S.-centric developments rather than euro area dynamics.

    Absent clearer signals from the Federal Reserve on the extent of potential policy easing, or a more compelling cyclical recovery in the eurozone, any additional upside is likely to unfold in a steady, incremental manner rather than marking the beginning of a decisive breakout.

    Sources: Fxstreet

  • Japanese yen bulls grow more cautious as fiscal concerns and political uncertainty weigh on sentiment.

    The Japanese yen finds it hard to build on recent strong gains as worries over Japan’s fiscal position persist. However, a relatively hawkish Bank of Japan stance and concerns about potential currency intervention could continue to support the yen. Meanwhile, the US dollar remains near a four-month low on expectations of Fed rate cuts, helping to limit upside in USD/JPY.

    The Japanese yen comes under modest selling pressure during Tuesday’s Asian session, pulling back further from its strongest level against the US dollar since November 2025, reached a day earlier. Sentiment toward the yen remains fragile as investors worry about Japan’s fiscal outlook, driven by Prime Minister Sanae Takaichi’s expansive spending proposals and tax cut plans. A broadly upbeat mood in equity markets, along with domestic political uncertainty ahead of the snap election scheduled for February 8, is also weighing on the safe-haven currency.

    However, downside pressure on the yen may be limited by expectations that Japanese authorities could intervene to prevent excessive weakness, especially given the Bank of Japan’s relatively hawkish stance. Meanwhile, the US dollar stays near a four-month low as markets price in two additional Federal Reserve rate cuts this year. The ongoing “Sell America” theme further dampens demand for the greenback, which should help restrain USD/JPY movements as investors turn their attention to the key two-day FOMC meeting beginning later today.

    Japanese yen bears remain cautious as intervention speculation offsets political uncertainty.

    Japan’s already stretched public finances have come under sharper scrutiny following Prime Minister Sanae Takaichi’s campaign pledge to suspend the sales tax on food items ahead of the snap lower house election on February 8. Concerns over the country’s fiscal outlook have been a major driver behind the recent jump in long-dated Japanese government bond yields, which raises debt servicing costs and, in turn, limits the Japanese yen’s upside.

    Data released earlier on Tuesday showed a slowdown in wholesale inflation, with the Producer Price Index rising 2.4% year-on-year in December, down from 2.7% in November. Additional figures indicated that the Corporate Service Price Index increased 2.6% YoY, slightly lower than the previous reading. Overall, the data offered little to challenge the Bank of Japan’s tightening trajectory and had a limited impact on the yen.

    The BoJ recently raised its economic and inflation forecasts while keeping short-term rates unchanged at the conclusion of its two-day meeting last Friday, signaling its readiness to continue gradually lifting still-low borrowing costs. This stance contrasts sharply with expectations for a more dovish US Federal Reserve, leaving the US dollar under pressure near a four-month low and lending support to the yen amid fears of possible official intervention.

    Reinforcing this view, Prime Minister Takaichi said on Sunday that authorities are prepared to take action against speculative and highly abnormal market moves, following rate checks by Japan’s Ministry of Finance and the New York Fed on Friday. Still, traders appear reluctant to take aggressive positions ahead of the two-day FOMC meeting beginning today, which is expected to be a key driver for the US dollar and the USD/JPY pair in the near term.

    USD/JPY needs to establish a sustained break below the 100-day SMA to strengthen the case for further downside.

    The USD/JPY pair showed signs of resilience below its 100-day Simple Moving Average (SMA) on Monday, although it continues to trade beneath the 154.75–154.80 horizontal support zone. The MACD histogram has moved further into negative territory, with the MACD line below the signal line, reflecting bearish momentum that remains below zero. Meanwhile, the RSI stands near 32, close to oversold territory, suggesting that the downside move may be becoming stretched.

    A daily close below the 100-day SMA at 153.81, which currently provides near-term support, would give bears greater control. In contrast, sustained trading above this level would keep the broader bias supported by the rising SMA. Signs of stabilization would include a flattening MACD histogram and a move back toward the zero line, while an RSI rebound toward 50 would improve the overall tone. On the other hand, a dip below 30 on the RSI would increase the risk of deeper losses.

    Sources: Fxstreet

  • AUD/USD holds above 0.6900, hovering near a 16-month high.

    AUD/USD hovers near its 16-month high of 0.6940, supported by rising Australian three-year bond yields at 4.27%, while a weaker US Dollar amid political uncertainty and shutdown risks adds to the upside.

    AUD/USD is holding near its 16-month high of 0.6940 set in the prior session, trading around 0.6920 during Tuesday’s Asian hours, as markets await Australia’s December CPI data on Wednesday for fresh cues on the RBA’s policy outlook.

    The Australian Dollar is underpinned by higher government bond yields, with the policy-sensitive three-year yield climbing to 4.27%, its highest since November 2023, supported by confidence in Australia’s strong credit rating and the RBA’s relatively hawkish stance.

    Australia’s strong PMI and employment data have strengthened expectations of tighter RBA policy. While inflation has eased from its 2022 peak, recent figures point to renewed upward pressure, with headline CPI slowing to 3.4% YoY in November but still above the RBA’s 2–3% target range.

    AUD/USD may find further support as the US Dollar weakens on rising political uncertainty, with the risk of a partial US government shutdown ahead of the January 30 funding deadline after Senate Democratic leader Chuck Schumer vowed to oppose a key funding bill.

    Market caution is also heightened by uncertainty around the Federal Reserve, after President Donald Trump said he would soon name a successor to Fed Chair Jerome Powell, raising speculation over a more dovish policy stance. Attention now turns to Wednesday’s Fed decision.

    Sources: Minimarkets

  • The US Dollar Index edged lower toward 97.00 amid Fed uncertainty and US shutdown concerns

    The US Dollar Index stays under pressure near 97.00 in Tuesday’s Asian session as concerns over Fed independence grow ahead of expectations that rates will remain unchanged at Wednesday’s meeting.

    The US Dollar Index (DXY) weakened toward 97.00 in Asian trading on Tuesday, with investors awaiting the US ADP Employment Change and Consumer Confidence data later in the day.

    Concerns over the Federal Reserve’s independence have pushed the DXY to its lowest level since September 18, 2025, after President Donald Trump said he would soon name a successor to Fed Chair Jerome when his term ends in May. According to Reuters, betting markets see BlackRock executive Rick Rieder as the leading candidate.

    Tim Duy, chief US economist at SGH Macro Advisors, noted that the actions of the next Fed chair cannot be separated from broader economic conditions or their influence on other FOMC members.

    Adding to the USD’s downside risks are fears of a US government shutdown, with Senate Democratic leader Chuck Schumer pledging to block a funding bill that includes Homeland Security appropriations. Lawmakers face a January 30 deadline to avoid a partial shutdown.

    Meanwhile, the Fed is widely expected to keep rates unchanged at Wednesday’s meeting after three straight cuts late in 2025. Markets will focus on the press conference for signals on the economic outlook and future rate path, with any hawkish tone potentially limiting near-term USD losses.

    Sources: Fxstreet

  • Rate-Cut Expectations Waver as Conflicting Macro Signals Emerge

    Wednesday brings the FOMC meeting and Chair Powell’s press conference, and it wouldn’t be surprising if President Trump chose that moment—ideally around 2:30 p.m. ET—to announce his pick for the next Fed chair. Such timing would dominate headlines, catch financial media off guard, and inject maximum uncertainty into markets.

    That said, the Fed is not expected to cut rates at this meeting, which should keep the event relatively uneventful. In the bigger picture, what the Fed does between now and May may prove less important, particularly if a new chair is appointed and moves quickly toward easing.

    Markets appear to be dialing back expectations for aggressive rate cuts. Current pricing suggests the fed funds rate settles near 3.25% by December, with little additional easing beyond that. To meaningfully shift those expectations, the nominee would likely need to be notably dovish—something markets already anticipate, given the widespread assumption that Trump will select a policy-leaning accommodator.

    As a result, the risk of a breakout in the 2-year Treasury yield appears increasingly credible, with initial resistance near 3.62%. Beyond that, a move back toward the 4% level cannot be ruled out. From a technical perspective, the setup supports this view: the 2-year yield has formed multiple bottoms in recent months, and the RSI has begun to turn higher, signaling building upside momentum.

    The direction of the 2-year yield may ultimately be more closely linked to oil prices. With inflation still hovering near 3% and crude having fallen to around $60 from highs in the $120s, the message is clear: a rebound in oil prices could quickly reignite inflation pressures. That dynamic likely explains why the price action in oil and the 2-year yield charts has begun to look strikingly similar.

    The Bank of Japan once again chose to kick the can down the road, leaving rates unchanged and, in my view, offering little in the way of a clear policy roadmap. The yen’s strength on Friday appeared to be driven solely by reports of a possible “rate check” by the New York Fed on behalf of the U.S. Treasury—widely interpreted as a warning signal that currency intervention could be imminent. Perhaps the strategy is to keep markets stable until after the snap election in February. It’s hard to say, but it should be telling to see how markets react once Japan reopens on Monday.

    The Korean won also strengthened notably against the U.S. dollar on Friday. In recent weeks, there has been growing chatter that the KRW had become excessively weak, so it’s likely the currency took the developments around the yen as a warning signal and moved to reprice accordingly.

    The Korean won likely matters more than many investors realize, given the sizable exposure South Korean investors have built up in U.S. equities. That dynamic is probably one of the reasons the KRW has weakened so significantly in the first place—buying U.S. stocks requires selling won for dollars.

    If the KRW begins to strengthen from here, it could start to put pressure on that trade. For investors who are unhedged on the currency side, a stronger won increases the risk of FX-related losses on their U.S. equity holdings, potentially prompting position adjustments.

    Of course, this week also brings major earnings reports from Microsoft, Apple, Tesla, and Meta. From what I can see, all four stocks are currently sitting in positive gamma with positive delta positioning. Implied volatility typically builds into earnings because of the event risk, which sets up a familiar dynamic: unless a company delivers truly blowout results, the reaction can easily turn into a sell-the-news move. Once earnings are released, implied volatility collapses and hedges are unwound as delta decays, potentially putting pressure on the shares.

    Sources: Michael Kramer

  • When will the German IFO Survey be released, and what impact could it have on the EUR/USD exchange rate?

    Overview of the German IFO Survey

    Germany’s IFO Institute is set to release its January Business Survey on Monday at 09:00 GMT.

    The headline IFO Business Climate Index is forecast to edge up to 88.1 in January, from 87.6 in December. In the previous release, the Current Assessment Index stood at 85.6, while the Expectations Index came in at 89.7.

    How might the German IFO Survey influence the EUR/USD exchange rate?

    EUR/USD could trade sideways if the German IFO Business Survey meets expectations, as heightened safe-haven demand continues to cap upside momentum despite the pair opening with a gap higher. Meanwhile, the Euro may hold relatively steady after Eurozone PMI figures signaled weakness in the services sector in January, reinforcing expectations that the European Central Bank (ECB) will keep interest rates unchanged. Earlier data from Germany was more constructive, with the Services PMI exceeding forecasts and remaining in expansionary territory, while the Manufacturing PMI showed improvement but stayed below the 50 threshold.

    The pair comes under pressure as the US Dollar regains intraday strength, supported by rising risk aversion linked to trade and geopolitical concerns. US President Donald Trump warned of potential 100% tariffs on Canadian imports should Ottawa pursue a trade agreement with China. Canadian Prime Minister Mark Carney clarified that Canada has no intention of negotiating a free trade deal with Beijing. Trump also noted that a US aircraft carrier strike group is en route to the Middle East amid escalating tensions with Iran.

    From a technical perspective, EUR/USD pulls back after opening at four-month highs and is trading near 1.1860 at the time of writing. Despite the dip, the broader bullish structure remains intact, with the 14-day Relative Strength Index (RSI) hovering around 69.00, indicating strong—though stretched—momentum. The pair could attempt a retest of the four-month peak at 1.1897, close to the key psychological resistance at 1.1900. On the downside, immediate support is seen at the nine-day Exponential Moving Average (EMA) near 1.1739.

    Sources: Fxstreet

  • Micron and Nvidia Sit at the Top of AI Stocks

    Micron (MU) is a global leader in advanced memory and storage technologies, playing a critical role in converting data into actionable intelligence. The stock has surged amid the AI-driven rally, as Micron’s products have become an essential component of AI infrastructure, particularly in addressing persistent memory bottlenecks.

    The shares also highlight the effectiveness of the Zacks Rank framework. In August of last year, Micron was upgraded to the highly sought-after Zacks Rank #1 (Strong Buy) following upward revisions to earnings estimates, a shift that has since been accompanied by a strong and sustained rally in the stock price.

    As illustrated above, the Zacks Rank may also have helped mitigate downside risk last March.

    Why Micron Shouldn’t Be Overlooked

    Micron delivered outstanding results in its latest earnings report, surpassing consensus expectations on both revenue and earnings, driven by rapidly accelerating demand tied to AI workloads. Revenue surged more than 55% year-over-year to a record high, while adjusted EPS jumped an impressive 185%.

    The company’s cash-generation profile also strengthened significantly amid the favorable demand backdrop. Operating cash flow reached a record $8.4 billion during the period, sharply exceeding the $5.7 billion generated in the same period last year.

    The positive momentum appears set to continue, with Micron’s Q2 guidance pointing to new records across revenue, margins, earnings, and free cash flow. In short, Micron plays a critical role in enabling the AI boom, as memory capacity remains a key bottleneck in advanced systems. This strategic positioning places the company in a strong overall stance and helps shield it from concerns about being an AI “also-ran” or laggard.

    As illustrated below, Micron’s revenue has surged sharply in recent periods, reinforcing the strength of the current demand environment. The company’s top-line trajectory mirrors that of NVIDIA (NVDA – Research Report), widely regarded as the flagship beneficiary of the broader AI trade.

    Micron vs. NVIDIA

    While many AI-linked companies are likely to come under increased scrutiny in 2026, Micron represents a far more straightforward beneficiary of the broader infrastructure buildout. Memory remains a key bottleneck in AI systems, and MU has been capitalizing meaningfully on this constraint. The company recently announced its exit from the consumer memory segment, further underscoring its strategic focus on maximizing revenue from large-scale enterprise and data-center customers.

    Micron noted that “AI-driven growth in the data center has led to a sharp increase in demand for memory and storage,” adding that the decision to wind down its Crucial consumer business was made to improve supply allocation and support for larger, strategic customers in faster-growing markets.

    Overall, Micron stands out as one of the most compelling AI-related investment opportunities, drawing a clear parallel with NVIDIA. While NVIDIA dominates the GPU side of AI computing, Micron plays an equally critical role by supplying the high-performance memory required for those GPUs to operate efficiently.

    Turning to NVIDIA, the company once again delivered a double beat versus consensus in its latest, record-setting earnings report. Revenue reached $57 billion, up 62% year-over-year, alongside a 67% surge in earnings per share. Data Center revenue climbed to $51.2 billion, representing a robust 66% annual increase and comfortably exceeding consensus expectations of $49.1 billion.

    For investors looking to capitalize on the AI infrastructure buildout, both Micron (MU – Research Report) and NVIDIA (NVDA) stand out as premier choices, with each currently holding the highly sought-after Zacks Rank #1 (Strong Buy).

    Sources: Zack Investment

  • GBP/USD rises to four-month highs around 1.3600

    GBP/USD is extending its strong weekly rally and is edging closer to the 1.3600 handle on Friday, marking fresh four-month highs. The pair’s upside momentum is being fueled by a deepening decline in the US Dollar, while supportive UK economic data further reinforces the bullish trend.

    Fundamental Analysis Overview

    The latest PMI data signaled a strong expansion in overall business activity, driven by a notable pickup in both manufacturing and services. The Composite PMI surged to 53.9 in January from 51.4 in December, comfortably surpassing market expectations of 51.7.

    The Services PMI climbed to 54.3, exceeding both the forecast of 51.7 and the previous reading of 51.4, while the Manufacturing PMI also improved markedly, rising to 51.6 from 50.6.

    In addition, UK Retail Sales rebounded in December after two consecutive monthly declines. Data from the Office for National Statistics (ONS) showed that Retail Sales, a key gauge of consumer spending, increased by 0.4% month-over-month, defying expectations for a 0.1% contraction.

    On a year-on-year basis, consumer spending rose sharply by 2.5%, well above the consensus forecast of 1% and up from a revised 1.8% in November (previously reported at 0.6%).

    The stronger-than-expected Retail Sales figures are likely to reduce market expectations for near-term interest rate cuts by the Bank of England (BoE).

    Looking ahead, the UK economic calendar is relatively light next week, leaving broader market sentiment and expectations surrounding the BoE’s February policy decision as the primary drivers of Pound Sterling performance.

    GBP/USD Technical Outlook

    GBP/USD is trading around 1.3437 at the time of writing. The 20-day Exponential Moving Average is hovering near 1.3439, with price currently testing this dynamic resistance. A daily close above the moving average would strengthen near-term momentum. The Relative Strength Index (RSI) stands at 52, edging higher but still signaling broadly neutral momentum.

    Using the move from the 1.3780 peak to the 1.3006 trough, the 50% Fibonacci retracement at 1.3393 continues to act as a hurdle on rebounds, while the 61.8% retracement at 1.3485 limits upside potential. A decisive break above the latter would suggest the broader bearish bias is losing strength and could pave the way for a deeper recovery, whereas rejection at that level would likely keep the pair confined to a range.

    Sources: Fxstreet

  • Ueda Speech: BoJ Governor addresses the policy outlook following an anticipated interest rate hold

    Bank of Japan (BoJ) Governor Kazuo Ueda is speaking at a press conference, outlining the rationale for keeping the benchmark interest rate unchanged at 0.75% at the January policy meeting.

    Key takeaways from the BoJ press conference

    Japan’s economy is showing a moderate recovery and is expected to continue growing at a steady pace.

    The government’s economic stimulus package has improved the overall outlook.

    Underlying inflation is projected to rise gradually and move closer to the 2% target.

    Board members Takata and Tamura suggested revisions to the outlook report.

    The BoJ will continue to raise interest rates if economic and price projections are realized.

    Lending rates tied to the BoJ’s policy rate are already trending higher.

    Financial conditions remain accommodative despite the December rate hike.

    Foreign exchange movements are influenced by multiple factors.

    The governor refrained from commenting on specific yen levels but emphasized close monitoring of FX developments.

    Government bond yields are increasing at a rapid pace.

    The BoJ stands ready to conduct bond-buying operations flexibly in exceptional circumstances.

    Measures may be taken to support stable yield formation when necessary.

    Currency movements, particularly the yen, may be having a stronger impact on prices.

    Greater attention will be paid to foreign exchange trends going forward.

    The rise in long-term yields is partly influenced by end-of-fiscal-year factors.

    Price developments in April will be an important consideration when assessing the timing of future rate hikes.

    The section below was published at 3:35 GMT on January 23 to cover the Bank of Japan’s monetary policy announcement and the initial market reaction.

    The Bank of Japan (BoJ) board voted to keep the short-term policy rate unchanged at 0.75% at the conclusion of its two-day monetary policy meeting on Friday, a move that was widely expected.

    As a result, borrowing costs remain at their highest level in roughly three decades.

    Key takeaways from the BoJ’s policy statement

    Japan’s economy is expected to continue a moderate recovery.

    Consumer inflation is likely to pick up gradually.

    The virtuous cycle in which wage growth and inflation reinforce each other is expected to be sustained.

    The output gap is projected to improve over time and expand at a moderate pace.

    Medium- to long-term inflation expectations are seen rising gradually.

    No major imbalances are observed in Japan’s financial activity.

    The overall financial system remains stable.

    Firms’ moves to pass higher wages on to selling prices could strengthen more than previously anticipated.

    The recent increase in food prices, including rice, mainly reflects temporary supply-side factors.

    Significant uncertainty surrounds the global economic outlook, particularly due to trade policies that could push up import prices through supply-side channels.

    Trade measures announced so far may weigh on global economic growth.

    Regarding the US economy, close attention is needed on how tariffs could affect employment and income via weaker corporate profits.

    High uncertainty persists around China’s economic outlook, especially the future pace of growth.

    A sharp rise in import prices could further reinforce households’ cautious stance on spending.

    Current trade policies could lead to a shift in the long-term trend of globalisation.

    The Board raised its median real GDP growth forecast for fiscal 2025 to +0.9% from +0.7% in October.

    The fiscal 2026 median growth forecast was revised up to +1.0% from +0.7%.

    The fiscal 2027 median growth forecast was lowered to +0.8% from +1.0%.

    BoJ’s Quarterly Outlook Report: Key Highlights

    The Board kept its median core consumer price index forecast for fiscal 2025 unchanged at +2.7%, the same as in October.

    The median real GDP growth forecast for fiscal 2025 was revised up to +0.9% from +0.7% in October.

    Real interest rates remain at significantly low levels.

    Risks to the economic outlook are assessed as roughly balanced.

    The impact of foreign exchange volatility on prices has become more pronounced than in the past, as firms are more willing to raise prices and wages.

    Core consumer inflation is expected to slow to below 2% during the first half of this year.

    Companies’ efforts to pass higher wages on to selling prices could strengthen more than anticipated.

    Japan’s economy is projected to continue a moderate recovery.

    Market reaction following the BoJ policy announcements

    USD/JPY climbed further toward 158.60 in an immediate reaction to the Bank of Japan’s (BoJ) decision to keep interest rates unchanged, rising 0.11% on the day.

    The section below was published at 23:00 GMT on January 22 as a preview of the Bank of Japan’s interest rate decision.

    • The Bank of Japan is widely expected to leave interest rates unchanged at 0.75% on Friday.
    • The central bank is likely to wait and assess the effects of December’s rate hike before considering further tightening.
    • February’s general elections introduce an additional layer of uncertainty to the BoJ’s monetary policy outlook.

    The Bank of Japan (BoJ) is widely expected to keep its benchmark interest rate unchanged at 0.75% following the conclusion of its two-day monetary policy meeting next Friday.

    The Japanese central bank raised interest rates to their highest level in three decades in December and is now likely to keep policy unchanged on Friday to better evaluate the economic impact of earlier hikes.

    BoJ Governor Kazuo Ueda is expected to reaffirm the bank’s commitment to continued policy normalisation. As a result, investors will closely scrutinise his press conference for clues on the timing and extent of the next phase of the tightening cycle.

    What to anticipate from the Bank of Japan’s interest rate decision?

    The Bank of Japan is broadly expected to leave interest rates unchanged in January while signaling the possibility of further tightening if economic conditions unfold as projected.

    In December, the BoJ raised rates by 25 basis points to 0.75%, and the meeting minutes showed that some policymakers favor additional tightening, noting that real interest rates remain sharply negative once inflation is taken into account.

    Markets, however, have ruled out consecutive rate hikes, especially following Prime Minister Sanae Takaichi’s surprise call for snap elections and her proposal to suspend food and beverage taxes for two years to ease the burden on households amid rising inflation.

    While the implications of these political developments for monetary policy remain uncertain, the BoJ has emphasized a cautious, gradual normalization of policy, aiming to withdraw stimulus without undermining economic growth. As a result, the central bank is likely to wait for greater political clarity and for the effects of past rate increases to become clearer before moving again.

    Meanwhile, the yen has weakened steadily amid speculation surrounding the snap election. This raises the question of whether the currency’s depreciation will push the BoJ to adopt a firmer stance on monetary tightening.

    How might the Bank of Japan’s monetary policy decision influence the USD/JPY exchange rate?

    Markets have fully priced in a Bank of Japan rate pause on Friday, but the central bank will need to clearly signal further monetary tightening to curb the Yen’s ongoing weakness.

    Yen sellers have eased off in recent days, helped by broad US Dollar softness linked to the EU–US trade dispute following President Donald Trump’s threats over Greenland. Even so, USD/JPY is still up roughly 0.7% year to date and remains close to last week’s 18-month peak around 159.50.

    Investors are also concerned that Prime Minister Takaichi could secure stronger parliamentary backing after the elections, allowing her to push ahead with expansionary fiscal policies such as higher spending and tax cuts. This has heightened worries about Japan’s already stretched public finances, driving the Yen lower and pushing long-term government bond yields to record highs amid fears of a potential fiscal crisis.

    Meanwhile, recent remarks from BoJ Governor Ueda have reinforced the bank’s cautious tightening stance, suggesting Japan is transitioning toward a more sustainable inflation environment where wages and prices rise together. For the Yen’s recent, still-fragile rebound to continue, markets will need clearer evidence that interest rate hikes are on the horizon.

    USD/JPY 4-Hour Chart

    From a technical standpoint, FXStreet analyst Guillermo Alcalá views USD/JPY as undergoing a bearish correction, with an important support zone just above 157.40. He notes that while the pair has pulled back from recent highs, Yen buyers would need to push it below the 157.40–157.60 support area to invalidate the short-term bullish structure and open the door to a move toward the early-January lows near 156.20.

    A cautious or non-committal message from the BoJ would likely disappoint markets and weaken the Yen. In that scenario, Alcalá expects USD/JPY to climb to new long-term highs. He points out that technical signals are improving, with the 4-hour RSI rebounding from the 50 level, indicating strengthening bullish momentum. At the time of writing, the pair is challenging resistance around 158.70 (the January 16 high), which stands as the final hurdle before the 18-month peak close to 159.50.

    Sources: Fxstreet

  • UK retail sales rise 0.4% MoM in December, beating -0.1% forecast

    UK retail sales increased by 0.4% month-on-month in December, rebounding from a 0.1% decline in November, according to data released Friday by the Office for National Statistics.

    Markets had expected retail sales to fall by 0.1% during the month. Core retail sales, which exclude auto fuel, rose 0.3% month-on-month in December, reversing a revised 0.4% decline previously reported. The reading exceeded market expectations for a 0.2% fall.

    On an annual basis, UK retail sales increased 2.5% in December, up from a revised 1.8% previously and above the consensus forecast of 1.0%. Annual core retail sales also strengthened, climbing 3.1% compared with a revised 2.6% gain earlier, outperforming expectations of a 1.4% rise.

    Market response to the UK Retail Sales data

    The positive UK Retail Sales report has failed to lift the Pound Sterling, with GBP/USD down 0.06% on the day, trading at 1.3488 at the time of writing.

    The following section was published on January 23 at 5:11 GMT as a preview of the UK Retail Sales report.

    Overview of UK Retail Sales

    The UK calendar features the release of the December Retail Sales figures from the Office for National Statistics (ONS) on Friday at 07:00 GMT.

    Retail Sales are forecast to edge down by 0.1% month-on-month in December, following an identical 0.1% decline in November. On a yearly basis, sales are expected to increase by 1%, slightly higher than the previous 0.6% rise.

    Core Retail Sales, which exclude motor fuel, are also projected to slip by 0.2% MoM, in line with the prior reading, while annual growth is anticipated to improve to 1.4% from 1.2% in November.

    How might UK retail sales influence the GBP/USD exchange rate?

    The GBP/USD pair could show little reaction even if UK Retail Sales for December exceed expectations, as markets largely anticipate the Bank of England to maintain a cautious, gradual easing stance despite stronger price pressures seen in December. Attention is likely to shift instead to the preliminary January S&P Global PMI readings from both the UK and the US, scheduled for release later in the day.

    Sterling may find support if the US Dollar weakens amid rising risk aversion linked to geopolitical tensions. Earlier, US President Donald Trump threatened tariffs on European nations opposing his Greenland initiative, but later eased his stance after reaching a NATO framework agreement that opened the door to a potential deal.

    From a technical perspective, GBP/USD is holding firm after climbing more than 0.5% in the previous session, hovering near the 1.3500 level at the time of writing. The pair could aim for the three-month peak at 1.3562 as the next resistance. On the downside, initial support is seen at the nine-day EMA around 1.3451, followed by the 50-day EMA near 1.3398.

    Sources: Fxstreet

  • AUD gains after employment figures reinforce expectations of tighter RBA policy

    The Australian dollar moved higher after stronger-than-expected employment data reinforced expectations of a tighter policy stance from the Reserve Bank of Australia. Seasonally adjusted employment in Australia increased by 65.2K in December, while the unemployment rate declined to 4.1%. Meanwhile, the U.S. dollar firmed after Bloomberg reported that President Trump would pause tariffs on European countries opposing his push over Greenland.

    The Australian dollar strengthened against the U.S. dollar on Thursday after seasonally adjusted employment data from Australia reinforced expectations of a tighter monetary policy stance by the Reserve Bank of Australia. Data from the Australian Bureau of Statistics showed employment rose by 65.2K in December, reversing a revised loss of 28.7K jobs in November and well above the market forecast of a 30K increase. Meanwhile, the unemployment rate fell to 4.1% from 4.3%, beating expectations of 4.4%.

    Sean Crick, head of labour statistics at the ABS, noted that a rise in employment among people aged 15–24 helped lift overall employment levels and contributed to the drop in the unemployment rate. Meanwhile, the International Monetary Fund has called on the RBA to proceed cautiously, pointing out that inflation has remained above the Bank’s 2%–3% target range for an extended period, despite headline CPI easing faster than expected in November.

    U.S. dollar rises as Trump eases tariff threats against Europe

    The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, was steady after posting modest gains in the previous session, trading around 98.80 at the time of writing. The dollar found support after Bloomberg reported on Wednesday that President Donald Trump said he would step back from imposing tariffs on goods from European countries opposing his bid to take control of Greenland. Earlier, Trump had insisted there was “no going back” on his ambitions for Greenland and had threatened to impose new 10% tariffs on eight European Union nations.

    Trump also stated that the United States and NATO had “established the framework of a future deal on Greenland,” though he provided no details, leaving the scope and substance of the proposed agreement unclear.

    U.S. labor market data has pushed expectations for further Federal Reserve rate cuts back to June, with Fed officials signaling little urgency to ease policy until there is clearer evidence that inflation is moving sustainably toward the 2% target. Morgan Stanley analysts revised their 2026 outlook, now projecting one rate cut in June and another in September, compared with their earlier expectations for cuts in January and April.

    In Asia, the People’s Bank of China announced on Tuesday that it would keep its Loan Prime Rates unchanged, with the one-year and five-year LPRs remaining at 3.00% and 3.50%, respectively. Developments in China remain important for the Australian dollar, given the close trade relationship between the two economies.

    China’s industrial production grew 5.2% year-on-year in December, accelerating from 4.8% in November, supported by resilient export-led manufacturing. However, retail sales increased just 0.9% year-on-year, falling short of expectations of 1.2% and slowing from November’s 1.3%.

    In Australia, the TD-MI Inflation Gauge rose to 3.5% year-on-year in December from 3.2%, while monthly inflation jumped 1.0%, the fastest pace since December 2023 and a sharp acceleration from 0.3% in the previous two months.

    RBA policymakers acknowledged that inflation has eased significantly from its 2022 peak, but recent data points to renewed upward pressure. Headline CPI slowed to 3.4% year-on-year in November, the lowest level since August, yet remains above the RBA’s 2–3% target range. Trimmed mean CPI edged down to 3.2% from 3.3% in October.

    The RBA assessed that inflation risks have modestly tilted to the upside, while downside risks—particularly from global factors—have eased. Policymakers expect only one additional rate cut this year, with underlying inflation projected to stay above 3% in the near term before easing toward around 2.6% by 2027.

    Australian dollar tests the 0.6800 level near the top of its ascending channel

    AUD/USD was trading near 0.6790 on Thursday. Daily chart signals show the pair continuing to climb within an ascending channel, reflecting a sustained bullish bias. The nine-day exponential moving average remains above the 50-day EMA, with prices holding above both indicators, reinforcing the positive momentum and keeping upside pressure intact. Meanwhile, the 14-day Relative Strength Index stands at 69.93, close to overbought territory, suggesting momentum is becoming stretched.

    The pair is currently challenging immediate resistance at the psychological 0.6800 level, followed by the upper boundary of the ascending channel near 0.6810. A decisive break above the channel could open the door to 0.6942, marking the highest level since February 2023.

    On the downside, initial support is seen at the nine-day EMA around 0.6732. A move below this short-term support would undermine bullish momentum, bringing the lower boundary of the ascending channel near 0.6680 into focus, ahead of the 50-day EMA at 0.6656.

    AUD/USD: Daily Chart

    Sources: Fxstreet

  • UK CPI seen edging higher in December

    The UK’s Office for National Statistics (ONS) is set to release December CPI data on Wednesday. Headline inflation is expected to edge up to 3.3%, while core inflation is projected to remain sticky above 3.0% year-on-year.

    The UK Office for National Statistics (ONS) is scheduled to publish December Consumer Price Index (CPI) data at 07:00 GMT on Wednesday, a release closely watched by financial markets. Economists anticipate a mild pickup in inflationary pressures.

    UK inflation remains a key consideration for the Bank of England (BoE) and is typically a significant driver of Sterling movements. With the Monetary Policy Committee (MPC) due to meet on February 5, markets largely expect policymakers to leave the bank rate unchanged at 3.75%, though this week’s inflation figures are likely to influence the guidance and tone of the decision.

    What might the upcoming UK inflation report reveal?

    Headline UK CPI is projected to tick up to 3.3% year-on-year in December, compared with 3.2% in November. On a monthly basis, inflation is expected to rebound by 0.4%, reversing the 0.2% month-on-month decline seen previously.

    Meanwhile, core inflation—which excludes volatile food and energy prices and is more closely monitored by the Bank of England—is anticipated to remain steady at 3.2% annually. Month-on-month, core CPI is forecast to rise by 0.3% after falling 0.2% in November.

    What impact will the UK CPI data have on GBP/USD?

    In December, the Bank of England’s Monetary Policy Committee narrowly voted 5–4 to reduce the bank rate by 25 basis points to 3.75%, marking its fourth cut in 2025. Although policymakers pointed to easing inflation pressures and initial signs of a softening labour market, they emphasised that any additional policy loosening would proceed cautiously.

    The December Decision Maker Panel (DMP) survey largely reinforced this outlook and failed to alter expectations around the policy path. Persistent wage pressures continue to constrain the potential for significant repricing at the short end of the yield curve.

    One-year-ahead wage growth expectations rose slightly to 3.7% from 3.6%, while actual pay growth over the past year remains in the mid-4% range. Both indicators remain well above levels consistent with a sustained return of inflation to the BoE’s target.

    Overall, the survey does little to shift sentiment and supports the argument against accelerating rate cuts. Markets currently price in just over 42 basis points of easing for the year, with the BoE widely expected to keep rates unchanged at its next meeting.

    From a technical perspective, Pablo Piovano highlights that GBP/USD is facing resistance near its yearly lows around 1.3340, recorded on January 19. A further decline could open the door to the 55-day simple moving average at 1.3309, followed by the December low at 1.3179. Conversely, if buyers regain control, the year-to-date high at 1.3567 may act as the first upside hurdle, with little resistance beyond that until the September 2025 peak at 1.3726.

    Piovano also notes that momentum indicators remain supportive, with the Relative Strength Index rebounding to around 54 and the Average Directional Index near 20, pointing to a reasonably firm underlying trend.

    Sources: Fxstreet

  • Asia FX little changed; dollar under pressure from Greenland tariff fears

    Most Asian currencies traded within narrow ranges on Tuesday, while the U.S. dollar weakened as President Donald Trump’s renewed demands over Greenland dampened appetite for U.S. assets.

    Regional markets showed little response to China’s decision to keep a key lending rate unchanged, as expected, while the Japanese yen was steady after Prime Minister Sanae Takaichi called a snap election for early February.

    A U.S. market holiday on Monday limited overnight signals, leaving Asian markets broadly risk-averse after President Trump announced tariffs on Europe over Greenland over the weekend.

    Japanese yen little changed ahead of snap vote and BOJ meeting

    The Japanese yen weakened slightly on Tuesday, with USD/JPY slipping 0.1%, though the pair remained near recent highs amid a lack of strong supportive signals for the currency. Prime Minister Sanae Takaichi said on Monday that she will dissolve Japan’s lower house this week and call a snap election for February 8.

    With Takaichi enjoying solid approval ratings, the early election is expected to strengthen her mandate for additional fiscal stimulus. However, markets questioned the scope for further government spending, as Japanese government bonds extended their selloff, which in turn pressured the yen.

    The election announcement also comes ahead of a Bank of Japan policy meeting on Friday, with investors divided over whether the central bank has sufficient momentum to raise interest rates again.

    The central bank raised interest rates at its final meeting of 2025 and signaled that further hikes would be driven by sustained gains in inflation and wages. However, the BOJ may pause before tightening again until it gains clearer insight into Japan’s spring wage negotiations, scheduled for March–April.

    Dollar under pressure as Trump–Greenland tensions persist

    The dollar index and its futures slipped about 0.1% in Asian trading, as the greenback faced pressure from growing caution toward U.S. assets amid President Trump’s push to acquire Greenland.

    European leaders largely rejected Trump’s tariff threats and reiterated that Greenland should remain part of the Kingdom of Denmark. Trump on Monday renewed his demands for the island and declined to rule out the use of military force.

    The U.S. president is now set to attend the World Economic Forum in Davos, Switzerland, where he may hold discussions with European leaders on the Greenland issue. Asian currencies remained mostly subdued amid broader risk aversion linked to Trump’s Greenland stance.

    The Chinese yuan saw USD/CNY edge slightly lower, showing little response to the People’s Bank of China’s decision to leave its loan prime rate unchanged. The currency, however, stayed near its strongest levels in two and a half years after a series of firm midpoint fixings by the PBOC. Elsewhere, USD/TWD rose 0.3%, while AUD/USD gained 0.3%, with the Australian dollar supported by the softer U.S. dollar.

    The South Korean won weakened slightly, with USD/KRW rising 0.2%, while the Singapore dollar also softened as USD/SGD added 0.1%. The Indian rupee saw USD/INR edge up 0.1% and hover near the 91-per-dollar level, as growing concerns over the health of India’s economy weighed on the currency.

    Sources: Investing

  • U.S. dollar faces potential fallout from Greenland pressure

    Few analysts had a U.S. invasion of Greenland anywhere near the top of their 2026 market outlooks. President Trump’s surprise weekend tariff move has triggered a classic risk-off reaction, with gold rallying around 2%, equities down 1.0–1.5%, and the dollar coming under modest pressure. This week’s World Economic Forum in Davos is now set to become a focal point for U.S.–European diplomacy, with elevated FX volatility likely.

    USD: Too Early to Embrace the ‘Sell America’ Narrative

    Washington escalated its pursuit of Greenland over the weekend, with the threat of 10% tariffs—potentially rising to 25%—on eight European countries appearing consistent with a broader “maximum pressure” strategy to force a deal. Political commentary in Europe suggests this could mark the end of the EU’s long-standing policy of accommodation toward the U.S., with France emerging as a key advocate for deploying the EU’s Anti-Coercion Instrument, which allows for retaliatory measures spanning tariffs, taxation, and investment restrictions against coercive trade actions.

    The issue, alongside growing concerns about strains within NATO, is set to dominate the policy agenda in a week that might otherwise have focused on Ukraine. President Donald Trump is scheduled to speak at the World Economic Forum in Davos on Wednesday, followed by an EU leaders’ meeting on Thursday. A central question is whether Europe adopts China’s approach from last year—matching U.S. tariffs one-for-one—to ultimately force a de-escalation from Washington.

    Initial market reactions have been cautious but telling: gold has gapped roughly 2% higher, German DAX futures are down around 1.5%, and the U.S. dollar is marginally weaker. While U.S. cash markets are closed for the Martin Luther King Jr. holiday, S&P 500 futures are indicating losses of about 0.8%. Still, it may be premature to revive the “Sell America” narrative. As with last April’s near-50% “Liberation Day” tariff threats, investors appear reluctant to chase what often proves to be aggressive rhetoric that ultimately gives way to diplomatic negotiation.

    Nonetheless, these developments are likely to inject a degree of volatility into what has otherwise been a relatively calm investment environment. On the broader “Sell America” theme, we noted on Friday that there was little concrete evidence of meaningful de-dollarisation last year. Even in a scenario where geopolitical tensions were to escalate materially, it appears unlikely that the dollar would experience a sell-off on the scale of last year’s near-10% decline, particularly given that the buy-side was then unusually under-hedged in U.S. dollar exposure.

    Beyond the Greenland issue, this week may also bring clarity on the future leadership of the Federal Reserve. President Trump could announce his nominee to succeed Jerome Powell as Fed Chair. The dollar rallied on Friday after reports suggested Trump wants Kevin Hassett to remain at the National Economic Council, with Kevin Warsh now viewed as the leading candidate—an outcome that would be modestly supportive for the dollar if confirmed.

    Overall, U.S. economic data are likely to take a back seat to political developments in the coming days. In the near term, the dollar may probe lower levels. For DXY, gap resistance around 99.35 could cap upside, while a corrective move toward the 98.80–98.85 zone remains the mild tactical bias.

    EUR: Unwelcome Developments

    The renewed tensions surrounding Greenland and the prospect of fresh tariffs are particularly negative for European industry. This comes just as industrial confidence had begun to recover, with firms appearing to have adapted to last year’s tariff-related volatility. The latest developments are likely to sharpen the focus among European policymakers on boosting domestic demand and may even add momentum to long-delayed reforms such as the Savings and Investment Union, aimed at strengthening Europe’s capital markets and enhancing their competitiveness relative to the U.S.

    In FX markets, EUR/USD has established support just below 1.1600. Initial intraday resistance is seen near 1.1650, with scope for a move toward the 1.1690–1.1700 area if that level is cleared. Short-dated implied volatility for EUR/USD, both one-week and one-month, has edged higher, reflecting the elevated uncertainty surrounding the week ahead.

    GBP: Poised for Relative Outperformance This Week

    We believe this week’s U.K. data — November employment figures and December CPI — may offer modest support to sterling, potentially extending the short-covering rally that has been underway since late November. While EUR/GBP was initially seen as the more vulnerable cross, with downside risks toward 0.8600, early-week dollar softness could shift the bulk of the move into GBP/USD. A sustained break above the 1.3415–1.3420 zone would open scope for a move toward 1.3450–1.3460.

    That said, sterling historically underperforms during pronounced risk-off phases, and the current environment remains fluid with multiple cross-currents at play.

    Sources: Chris Turner

  • Trump’s Greenland tariff threat, China growth slowdown move markets

    Futures tied to major U.S. stock indexes fell after President Donald Trump raised the prospect of imposing tariffs as part of his push to acquire Greenland. European leaders discussed possible retaliation against the measures, which they described as a form of blackmail. Gold climbed to a fresh record high, while oil prices edged lower as traders assessed Trump’s remarks and the EU’s response. Elsewhere, China’s economic growth slowed in the fourth quarter but still met Beijing’s 2025 target.

    U.S. futures and global stocks decline

    U.S. stock futures pointed lower on Monday as investors weighed President Donald Trump’s threat to impose tariffs on several European countries until the United States is allowed to acquire Greenland.

    By 03:05 ET (08:05 GMT), Dow futures were down 404 points, or 0.8%, S&P 500 futures had fallen 66 points, or 1.0%, and Nasdaq 100 futures were off 336 points, or 1.3%.

    With U.S. cash markets closed for the Martin Luther King Jr. Day holiday, the immediate reaction to Trump’s latest tariff threat will be delayed. Risk-off sentiment has spread globally, dragging equities lower across Europe and Asia.

    ING analysts said Trump’s comments, following last year’s sweeping global tariffs, have pushed trade tensions into “an entirely new dimension,” driven less by economic considerations and more by political motives. They added that while past experience suggests caution in reacting to dramatic announcements, some of Trump’s threats over the past year have ultimately been carried out.

    Focus on Trump’s Greenland tariffs

    European leaders agreed on Sunday to intensify efforts to counter President Donald Trump’s tariff threats, with reports suggesting EU officials are considering strong retaliatory measures if the levies are imposed.

    On Saturday, Trump said he would introduce 10% tariffs on exports from eight European countries—Denmark, Sweden, France, Germany, the Netherlands, Finland, Norway and the United Kingdom—until the United States is able to acquire Greenland. He added that the tariffs would be raised to 25% if the purchase of the semi-autonomous Danish territory does not go ahead. Trump has framed the move as a national security necessity, a claim European governments have rejected, describing it as blackmail.

    Ahead of an emergency EU summit in Brussels on Thursday, member states are expected to debate a range of responses, including a potential €93 billion tariff package on U.S. imports and the possible use of the bloc’s “Anti-Coercion Instrument,” which could restrict U.S. access to investment, banking and services markets. Reuters, citing an EU source, reported that the tariff package currently has broader backing.

    Trump’s latest tariff threat has also cast doubt over the future of a U.S.–EU trade agreement reached last year, with EU officials saying they cannot approve the deal while Washington pursues control of Greenland. ING analysts said that while the outcome of the dispute remains uncertain, it underscores the lack of predictability in global trade and tariff policy.

    Gold reaches record high

    Gold prices climbed to record highs in Asian trade on Monday, nearing $4,700 an ounce, as investors rushed into safe-haven assets following President Trump’s latest tariff threat.

    Spot gold rose 1.6% to $4,667.33 an ounce by 02:26 ET (07:26 GMT), after earlier touching a record $4,690.75. U.S. gold futures also hit a new peak at $4,697.71 an ounce.

    Silver prices surged more than 4% to a fresh all-time high of $94.03 an ounce, supported by safe-haven demand as well as its role as an industrial metal.

    Oil prices edge lower

    Oil prices edged lower, giving back part of last week’s gains as markets weighed the growing risk of a trade dispute linked to Greenland. Brent crude slipped 0.1% to $59.74 a barrel, while U.S. West Texas Intermediate fell 0.1% to $55.95.

    Crude had rallied early last week on concerns that unrest in Iran could threaten oil supplies from the Middle East, a region that accounts for a significant share of global output. Much of that risk premium faded after President Trump ruled out immediate U.S. military action, leading prices to pull back before stabilizing toward the end of the week.

    China’s economy meets 2025 growth target

    China’s economy grew slightly more than expected in the fourth quarter of 2025, data released on Monday showed, as policy stimulus and a pickup in consumption helped the country meet its annual growth target.

    Gross domestic product rose 4.5% year on year in the October–December period, in line with forecasts but down from 4.8% in the previous quarter, marking the slowest pace in three years. On a quarter-on-quarter basis, GDP expanded 1.2%, marginally above expectations of 1.1%.

    The result brought full-year 2025 growth to 5%, meeting Beijing’s target. The government is widely expected to set a similar 5% growth goal again, as it continues to face heightened U.S. trade tensions, weak consumer demand and a prolonged property sector downturn.

    Sources: Investing

  • EUR/USD climbs above 1.1600 as Europe responds to Trump’s tariff threats

    • EUR/USD edges higher toward the 1.1625 area in early European trading on Monday, as the euro finds support from signs that Europe is prepared to respond to U.S. tariff measures.
    • The move follows President Donald Trump’s announcement of a 10% tariff on goods from several European countries, prompting pushback from European leaders.
    • Meanwhile, expectations that the Federal Reserve will keep interest rates unchanged at its January meeting—amid a resilient labor market and still-elevated inflation—have weighed on the U.S. dollar, providing additional support for the pair.

    The EUR/USD pair advances to around 1.1625 in early European trading on Monday, snapping a four-day losing streak. The U.S. dollar comes under modest pressure against the euro after President Donald Trump threatened to escalate tariffs on eight European nations opposing his proposal for the United States to acquire Greenland.

    U.S. markets are closed on Monday in observance of Martin Luther King Jr. Day.

    Over the weekend, Trump announced a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom, set to take effect on February 1. He added that the levy would rise to 25% in June unless an agreement is reached allowing the U.S. to purchase Greenland.

    Europe is set to respond after President Donald Trump imposed additional tariffs on key allies, with European leaders expected to convene an emergency meeting in the coming days to consider potential retaliation. Renewed concerns over a trade war and the longer-term implications of Trump’s latest move have weighed on the U.S. dollar, providing support for the EUR/USD pair.

    “While one could argue the tariffs are a threat to Europe, it is actually the dollar that is absorbing most of the impact, as markets appear to be pricing in a higher political risk premium for the U.S. currency,” said Khoon Goh, head of Asia research at ANZ.

    That said, stronger-than-expected U.S. labor market data released last week have delayed expectations for further Federal Reserve rate cuts until June, which could help cap downside pressure on the dollar. According to the CME FedWatch tool, markets are pricing in nearly a 95% probability that the Federal Open Market Committee will leave rates unchanged at its January 27–28, 2026 meeting.

    Sources: Investing

  • The global economy is increasingly constrained by a declining workforce

    Economic growth depends on population expansion and the formation of new households. While the idea of fewer people—less congestion, smaller crowds, and reduced strain on infrastructure—may seem appealing, the risks associated with population decline are often understated. Much like deflation, a shrinking population poses serious and potentially greater threats to long-term economic stability.

    Demographers use the “total fertility rate” (TFR), defined as the average number of births per woman, as a key measure of population sustainability. A TFR of at least 2.1 is required to maintain a stable population, with the additional 0.1 accounting largely for infant mortality. Although the global TFR stood at 2.24 last year, this figure masks significant regional disparities. Excluding Africa, the global fertility rate falls well below 2.0.

    In 2025, most major advanced economies reported TFRs under the replacement threshold of 2.0, underscoring the growing demographic challenge facing industrialized nations.

    No major developed economy currently records a total fertility rate above the 2.1 replacement threshold. Outside of Africa, global population growth is already in decline. Historically, from 1950 to 1970, the world’s wealthiest nations averaged more than 2.7 births per woman. Since 1995, however, that figure has fallen sharply to around 1.6, reaching a record low of approximately 1.5 during the 2020–2025 period.

    Globally, population growth remains marginally positive, driven largely by demographic expansion in Africa and rising life expectancy among older populations. However, Asia’s two largest economies—China and Japan—are experiencing population decline, a trend that constrains their long-term growth potential. More critically, shrinking cohorts of younger workers are increasingly unable to shoulder the financial burden of supporting aging populations that are living longer and often facing higher healthcare needs.

    China has formally abandoned its long-standing one-child policy, but behavioral patterns shaped by decades of enforcement have proven difficult to reverse. Today, many young couples are reluctant to have even a single child, prioritizing career advancement and higher incomes instead. Compounding the challenge, the legacy of the policy produced severe demographic distortions. Prior to 2010, widespread prenatal sex selection—driven by the desire to raise a single male “heir” to support parents in old age—led to a significant gender imbalance, with roughly 118 male births for every 100 female births between 2002 and 2008. The result is a surplus of men and a shrinking pool of potential spouses.

    In the mid-1990s, a typical Chinese household consisted of four grandparents, two parents, and one heavily relied-upon child—the so-called “young emperor.” This inverted demographic pyramid is financially unsustainable, as the burden of supporting multiple generations increasingly falls on a single income earner.

    Europe faces an even steeper demographic challenge. With an average fertility rate of just 1.4 children per woman and a comparatively generous system of old-age pensions, the region confronts mounting fiscal pressure. These constraints help explain Europe’s historical reliance on the United States for security spending—a strategy that may prove risky as President Donald Trump presses European nations to assume greater responsibility for their own defense.

    The United States remains in a stronger demographic position than Europe or much of Asia, in part because of its relatively effective assimilation of immigrants and higher rates of family formation in more conservative regions of the country. However, with the administration introducing tighter immigration restrictions and stepping up efforts to detain and deport undocumented workers, questions are emerging over whether there will be a sufficient supply of willing young workers to staff the growing number of factories being brought back onshore.

    Another structural risk embedded in these demographic trends is the growing strain on Social Security and Medicare. These programs function as intergenerational compacts, in which today’s workers finance the retirement and rising healthcare costs of the elderly. Unlike 401(k) plans or IRAs, they are not savings vehicles but largely unfunded entitlements built on historical assumptions of higher birth rates and a broad, growing workforce.

    As younger generations are increasingly less likely to marry, have children, or pursue stable, high-earning careers—instead relying more on gig-based employment—the system faces mounting pressure. These shifts raise serious concerns about the long-term sustainability of funding future benefits, particularly in a society producing fewer contributors to support the next generation of retirees.

    Sources: Investing

  • Australian dollar rises after China GDP tops expectations

    • The Australian dollar advanced after the TD-MI Inflation Gauge rose to 3.5% year-on-year in December.
    • China’s GDP grew 1.2% quarter-on-quarter in the fourth quarter of 2025, accelerating from the previous quarter and exceeding market expectations.
    • Meanwhile, the U.S. dollar struggled as risk aversion intensified amid escalating uncertainty surrounding U.S.–Greenland developments.

    The Australian dollar strengthened against the U.S. dollar on Monday after Australia’s TD-MI Inflation Gauge rose to 3.5% year-on-year in December, up from 3.2% previously. On a monthly basis, inflation jumped 1.0% in December 2025, marking the fastest pace since December 2023 and a sharp acceleration from the 0.3% increases seen in the prior two months.

    AUD/USD also found support from China’s key economic data, with developments in the Chinese economy closely watched given Australia’s strong trade links with China.

    Data from China’s National Bureau of Statistics showed industrial production grew 5.2% year-on-year in December, accelerating from 4.8% in November, supported by resilient export-led manufacturing activity.

    China’s GDP expanded 1.2% quarter-on-quarter in the fourth quarter of 2025, up from 1.1% in Q3 and above the market consensus of 1.0%. On an annual basis, GDP rose 4.5% in Q4, easing from 4.8% in the previous quarter but beating expectations of 4.4%.

    Meanwhile, retail sales rose 0.9% year-on-year in December, falling short of forecasts for a 1.2% increase and November’s 1.3% reading. In contrast, industrial output exceeded expectations, rising 5.2% YoY versus estimates of 5.0% and improving from 4.8% a month earlier.

    U.S. Dollar softens amid escalating uncertainty over the U.S.–Greenland dispute

    The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is under pressure and hovering near 99.20 at the time of writing. US financial markets remain closed on Monday in observance of Martin Luther King Jr. Day, resulting in thinner liquidity.

    The Dollar has come under renewed pressure amid rising risk aversion, fueled by growing uncertainty surrounding the US–Greenland dispute. Over the weekend, US President Donald Trump reiterated plans to impose tariffs on eight European nations that have opposed his proposal for the United States to acquire Greenland.

    According to Bloomberg, Trump said the US would levy a 10% tariff starting February 1 on imports from EU members Denmark, Sweden, France, Germany, the Netherlands, and Finland, as well as Britain and Norway. The tariffs would remain in place until Washington is allowed to proceed with the Greenland acquisition.

    Meanwhile, recent US labor market data have pushed expectations for additional Federal Reserve rate cuts further into the year. Fed officials have indicated limited urgency to ease policy until there is clearer evidence that inflation is sustainably returning to the 2% target.

    Reflecting this shift, Morgan Stanley revised its 2026 outlook, now projecting two rate cuts in June and September, compared with its prior forecast that anticipated cuts in January and April.

    Data from the US Department of Labor showed that Initial Jobless Claims unexpectedly declined to 198K for the week ending January 10, well below market expectations of 215K and down from the prior week’s revised 207K. The figures suggest layoffs remain subdued and the labor market continues to show resilience despite prolonged tight financial conditions.

    Inflation data offered mixed signals. Core CPI, excluding food and energy, rose 0.2% month-over-month in December, below expectations, while annual core inflation held steady at 2.6%, matching a four-year low. Headline CPI increased 0.3% MoM, in line with forecasts, leaving annual inflation unchanged at 2.7%. The data reinforced signs of easing price pressures after earlier readings were distorted by shutdown-related effects.

    In Australia, Reserve Bank of Australia (RBA) policymakers acknowledged that inflation has eased substantially from its 2022 peak, though recent data point to renewed upside risks. Headline CPI slowed to 3.4% YoY in November, the lowest level since August, but remains above the RBA’s 2–3% target range. Trimmed mean CPI edged down to 3.2% from 3.3% in October.

    The RBA noted that inflation risks have modestly shifted to the upside, while downside risks—particularly from global developments—have diminished. Policymakers currently expect only one additional rate cut this year, with underlying inflation projected to stay above 3% in the near term before easing toward 2.6% by 2027. Reflecting these expectations, ASX 30-Day Interbank Cash Rate Futures for February 2026 were trading at 96.35 as of January 16, implying a 22% probability of a rate hike to 3.85% at the next RBA policy meeting.

    The Australian Dollar approaches the 0.6700 level, facing resistance near the nine-day EMA

    The AUD/USD pair trades near 0.6680 on Monday, with daily chart signals showing consolidation around the nine-day Exponential Moving Average (EMA), pointing to a near-term neutral outlook. The 14-day Relative Strength Index (RSI) stands at 52.78, remaining above the neutral level and indicating underlying upside momentum.

    A sustained move below the short-term moving average could bring the 50-day EMA at 0.6642 into focus as initial support. Deeper declines may extend toward 0.6414, the lowest level recorded since June 2025.

    Conversely, a decisive break above the nine-day EMA at 0.6690 would strengthen the bullish case, potentially opening the way for a move toward 0.6766, the highest level since October 2024.

    AUD/USD: Daily Chart

    Sources: Fxstreet

  • EUR/JPY rises above 183.50 as EU responds to Trump’s tariff threats

    • EUR/JPY moved higher as the euro drew support from EU efforts to push back against potential U.S. tariffs on European allies.
    • President Donald Trump said tariffs would be imposed on eight European countries that have opposed his proposal involving Greenland.
    • Meanwhile, Japan’s industrial production dropped 2.7% month-on-month in November, marking its sharpest fall since January 2024.

    EUR/JPY rebounded after three consecutive sessions of losses, trading near 183.60 during Asian hours on Monday. The cross found support as the euro was buoyed by reports that European Union ambassadors agreed on Sunday to intensify efforts to deter U.S. President Donald Trump from imposing tariffs on European allies, while also preparing retaliatory measures if the duties go ahead, according to diplomats.

    On Saturday, Trump said he would impose tariffs on eight European countries opposing his proposal for the United States to acquire Greenland. He said a 10% levy would be applied from Feb. 1 on goods from Denmark, Sweden, France, Germany, the Netherlands and Finland, as well as Britain and Norway, until Washington is allowed to purchase Greenland, Bloomberg reported.

    FILE – This July 31, 2012 file photo shows the euro sculpture in front of the headquarters of the European Central Bank, ECB, in Frankfurt, Germany. The eurozone economy has finally recouped all the ground lost in the recessions of the past eight years after official figures Friday April 29, 2016. showed that the 19-country single currency bloc expanded by a quarterly rate of 0.6 percent in the first three months of the year. (AP Photo/Michael Probst, File) ORG XMIT: LON101

    Japan’s industrial production fell 2.7% month-on-month in November 2025, slightly worse than the preliminary estimate of a 2.6% decline, reversing October’s 1.5% rise and marking the steepest contraction since January 2024.

    Gains in EUR/JPY could be limited as the yen finds support from expectations of Bank of Japan rate hikes and the prospect of increased fiscal spending under Prime Minister Sanae Takaichi. The BoJ is widely expected to keep its policy rate unchanged at 0.75% this week, although markets are watching for a potential move as early as June.

    Last week, BoJ Governor Kazuo Ueda reiterated that the central bank stands ready to tighten policy if economic and inflation trends develop in line with its projections.

    Meanwhile, Finance Minister Satsuki Katayama signaled the possibility of coordinated intervention with the United States, stressing on Friday that all options—including direct market action—remain on the table to address the yen’s recent weakness.

    Sources: Fxstreet

  • Asian FX traded flat amid tariff tensions sparked by Trump over Greenland, with investors eyeing China’s Q4 GDP

    Most Asian currencies were little changed on Monday as fresh U.S. tariff threats against Europe dampened risk appetite, while markets also absorbed China’s slightly better-than-expected growth figures.

    The U.S. Dollar Index slipped 0.2% from a seven-week peak during Asian trading, while Dollar Index futures were down 0.3% as of 03:58 GMT.

    Yuan rises to a 32-month peak following China’s Q4 GDP release

    China helped temper the broader risk-off sentiment after data showed the world’s second-largest economy expanded slightly faster than expected in the fourth quarter.

    The GDP reading enabled China to achieve its official 5% growth target for 2025, providing some comfort on regional economic momentum despite ongoing worries about subdued domestic demand and stress in the property sector. The onshore yuan pair USD/CNY slipped 0.1% to its weakest level since May 2023.

    Asia FX little changed as Trump renews Greenland tariff threats

    Risk appetite weakened after U.S. President Donald Trump said he would impose tariffs on eight European countries that have opposed his proposal to acquire Greenland.

    Trump said the duties would start at 10% from Feb. 1 and increase to 25% in June if no deal is reached, reigniting concerns about escalating transatlantic trade tensions and possible spillover effects on global markets.

    Media reports indicated the European Union is considering suspending progress on an EU-U.S. trade agreement and may revive a previously proposed 93 billion euro tariff package on U.S. goods.

    France has called on the bloc to consider deploying its anti-coercion instrument against the United States, a tool designed to respond to economic pressure from external partners.

    Asian currencies mostly moved sideways, with traders remaining cautious and refraining from bold bets.

    USD/KRW ticked up 0.1%, while USD/SGD slipped 0.2%. USD/INR was little changed. AUD/USD added 0.1%.

    Japanese snap elections come into focus

    The Japanese yen strengthened against the dollar, with USD/JPY slipping 0.2% to a 10-day low, supported by safe-haven demand amid global trade uncertainty. Domestic political developments also remained in focus after reports said Prime Minister Sanae Takaichi is weighing a snap election in the coming weeks to bolster her mandate.

    “For now, the yen continues to face headwinds from election-related uncertainty, and greater clarity is unlikely before February,” MUFG analysts said in a note.

    “Over the medium term, our global team still sees the yen as having been relatively weak, and we maintain a bias for USD/JPY to trend lower, subject to election outcomes,” they added.

    Sources: Investing

  • The Takaichi trade is under pressure from rising inflation, a weaker yen, and higher yields

    The recent rally in Japanese equities, sparked by Prime Minister Sanae Takaichi’s announcement of a snap election, could lose momentum if she ultimately achieves her political objectives, as increased fiscal spending risks stoking inflation and pushing up government borrowing costs.

    Japan’s Topix index jumped over 4% this week, marking its strongest advance since July, as investors revived the so-called “Takaichi trade,” betting on heavier government expenditure. Takaichi is seeking to strengthen her grip on power by expanding her party’s seat count, which would give her greater latitude to pursue expansionary economic policies.

    Market participants believe Takaichi could follow in the footsteps of her mentor, former Prime Minister Shinzo Abe, whose stimulus-driven Abenomics era propelled asset prices. She has identified sectors such as artificial intelligence, semiconductors, defense, space, and content industries as key targets for investment.

    Although Japanese equities are once again following a familiar pattern of rallying ahead of Lower House elections, sustained upside may hinge on the specifics of Takaichi’s fiscal agenda. Meanwhile, bond investors are demanding higher yields to compensate for holding Japanese government debt, even as global bond yields ease.

    “Rising break-even inflation rates suggest the market is pricing in looser, more inflationary policies after the election, with inflation staying above the Bank of Japan’s target for longer,” said Aninda Mitra, head of Asia macro and investment strategy at BNY Investments.

    Economists anticipate that Japan’s consumer inflation will ease to below 2.0% this year — falling under the Bank of Japan’s target for the first time in five years — helped in part by reductions in gasoline taxes and other regulated prices.

    However, the yen’s decline to a more than one-year low of 159.45 per dollar on Wednesday, and to its weakest level since 1992 on a trade-weighted basis, has reignited inflation worries. The currency’s weakness is also eroding its traditional support for exporter stocks. Pressure on the yen has intensified as Takaichi’s dovish stance on monetary policy is seen as constraining the BOJ’s ability to raise interest rates swiftly.

    “The yen is the biggest risk factor for Takaichi,” said Chisa Kobayashi, Japan equity strategist at UBS SuMi TRUST Wealth Management. “Further depreciation could push inflation higher, dampen consumer spending, and eventually weaken voter backing.”

    Neil Newman, head of strategy at Astris Advisory Japan, said a Takaichi election victory could drive another 5% rise in the Nikkei 225 Stock Average. “With the government planning targeted investments in strategic sectors, a surge in capital expenditure is likely,” he said.

    Despite Takaichi’s strong approval ratings, which have led many investors to expect a comfortable win, some analysts are growing more cautious after Komeito — previously a junior coalition partner of the Liberal Democratic Party — shifted toward cooperation with the main opposition party.

    As a result, the election outcome has become increasingly uncertain, said Shinichi Ichikawa, senior fellow at Pictet Asset Management Japan.

    “The one thing that’s clear is that both camps will be compelled to campaign on bold spending promises to attract voters,” he said.

    Sources: Bloomberg

  • No layoffs even as tariff-related cost pressures continue across Federal Reserve districts

    The Federal Reserve’s Beige Book released Wednesday indicated that “tariff-driven cost pressures were widespread across every district.” Out of the 12 Fed districts, only two saw mild price increases, while the remaining 10 experienced more intense price pressure. This suggests the Fed is unlikely to reduce benchmark interest rates at the upcoming FOMC meeting—unless signs of labor market weakness push them to cut rates again to support hiring.

    Meanwhile, a 5.1% increase in existing home sales in December could point to a potential recovery in the housing sector. The median price of homes sold last month was $405,400, a gain of just 0.4% year-over-year, indicating that home price appreciation remains limited.

    The Commerce Department reported that retail sales increased 0.6% in December, surpassing economists’ forecasts of a 0.5% gain. In addition, October’s retail sales were revised to a 0.1% decline, instead of the previously estimated 0.2% rise. Overall, 10 of the 13 retail categories posted higher sales in November, making this a strong performance that should continue to support solid GDP expansion.

    Meanwhile, three missile-capable ships and an aircraft carrier are being deployed to the Middle East in a show of force aimed at pressuring Iran’s government. Crude oil markets are pricing in the possibility that Iran’s oil exports could be removed from global supply, depriving the regime of revenue. This signals that President Trump may take further action beyond sanctions and a 25% tariff on nations that trade with Iran.

    Intense diplomatic efforts have been taking place between Iran and neighboring Arab countries. On Wednesday, President Trump said Iran had halted the killing of anti-government demonstrators and would not carry out death sentences against people accused of seeking to overthrow the regime. His comments suggested the U.S. might be stepping back from launching military strikes. Trump told reporters that the U.S. had received word Iran had “no plans to execute protesters.”He went on to say that new information indicated the deaths had ceased and the executions had been stopped, adding that many believed executions were scheduled for that day.

    Sources: Investing

  • Asian FX holds stable after upbeat U.S. numbers reduce chances of Fed easing; yen recovers from lows

    Most Asian currencies traded in narrow ranges on Friday, while the U.S. dollar held firm near a six-week high, supported by upbeat U.S. economic data and growing expectations that Federal Reserve rate cuts are not imminent.

    The US Dollar Index tarded largely flat during Asian hours after rising to its highest since early December overnight

    US Dollar Index Futures also traded flat as of 03:35 GMT.

    Strong U.S. data delays expectations of Fed rate cuts

    U.S. initial jobless claims unexpectedly declined to 198,000 last week, beating forecasts of 215,000 and underscoring ongoing resilience in the labor market.

    The figures strengthened expectations that the Federal Reserve will leave interest rates unchanged for a longer period, with traders now projecting the first rate reduction around the middle of the year. Remarks from multiple Fed officials overnight further contributed to the cautious sentiment.

    Policymakers indicated they may delay rate cuts at the upcoming meeting, pointing out that employment conditions remain firm while inflation pressures have yet to fully ease.

    Yen holds firm on government backing; won heads for weekly loss

    In Japan, the yen inched higher after hovering near 18-month lows, with USD/JPY slipping 0.3%. The currency gained some backing following verbal interventions from government officials aimed at curbing its rapid decline.

    “Recent headlines suggest the Bank of Japan is growing uneasy about the yen’s weakness, and BOJ policymakers now view the exchange rate as having a bigger impact on inflation,” MUFG analysts noted.

    The yen has faced persistent pressure amid rising speculation that Prime Minister Sanae Takaichi may call an early snap election as soon as next month. Markets view the prospect of a vote as negative for the currency, on expectations of looser fiscal policy and increased government spending.

    Across Asia, the South Korean won saw USD/KRW climb 0.2%, putting it on track for a gain of more than 1% this week, despite Thursday’s pullback. Brief support came earlier in the week after remarks from U.S. Treasury Secretary Scott Bessent helped bolster sentiment toward the currency.

    In China, the onshore yuan (USD/CNY) was steady, while the offshore rate (USD/CNH) inched 0.1% higher. The Indian rupee (USD/INR) and the Singapore dollar (USD/SGD) were little changed, while Australia’s AUD/USD pair added 0.1% on Friday.

    Sources: Investing

  • Economic Forecast for the United States – January 2026

    Powell’s concluding move

    Jerome Powell’s eight-year leadership at the Federal Reserve is ending amid significant challenges for the U.S. central bank and divided opinions among policymakers about the right approach to monetary policy. So, what might Powell’s last moves as Chair look like in this environment?

    The labor market is still slightly weaker than full employment. Private sector job growth has stalled recently, and although the unemployment rate dropped a bit in December, it remains above what most economists consider the long-term natural rate.

    On the inflation front, recent data are more promising. Core CPI inflation fell to 2.6% year-over-year in December from 3.1% in August. Some temporary shutdown effects may be lowering this figure by about 0.1 percentage points, and the Fed’s preferred inflation gauge, the PCE deflator, likely hasn’t improved as much. However, the overall trend for core inflation entering 2026 is clearly downward.

    Given this, the Federal Open Market Committee (FOMC) likely has room to continue guiding the federal funds rate toward a neutral level in the near term. The forecast remains two quarter-point rate cuts in March and June, with the rate then holding steady at 3.00%-3.25%.

    However, the opportunity for further rate reductions is narrowing. Fiscal stimulus from the recent One Big Beautiful Bill Act is expected to start boosting the economy by spring or summer. Additionally, tariff risks seem to be declining, which could also spur faster growth later in the year. The recent 75 basis points of rate cuts over the past three months will likely provide some support as well.

    If labor market and inflation indicators show signs of overheating in the coming months, Powell and the FOMC might opt to pause policy adjustments and leave things steady for the next Chair. This successor could face skepticism from a committee under pressure from the Trump administration. The expectation of stronger economic growth in spring and summer further supports holding rates steady.

    For now, the current forecast stands, but there is growing risk that rate cuts may be delayed or reduced compared to the baseline prediction.

    Download full US Economy Forecast report

    Sources: Wells Fargo

  • Kazaks warns that the ECB cannot afford to be complacent as pressure on the Fed increases risks

    ECB policymaker Martins Kazaks warned that the European Central Bank must remain vigilant as the U.S. administration’s criticism of the Federal Reserve introduces new risks to the global economic outlook. He was speaking after Fed Chair Jerome Powell was reportedly threatened with criminal charges over remarks about the renovation of the central bank’s headquarters, a move that has raised concerns about the independence of the world’s most influential monetary authority.

    Kazaks, who heads Latvia’s central bank and is a contender for the ECB’s vice presidency, said such attacks resembled the politics of emerging economies and added to growing uncertainties facing the ECB, alongside the potential for an AI-driven financial bubble and China’s assertive trade practices. He stressed that risks to both inflation and growth exist on both sides, leaving no room for complacency, and warned that weakening the Fed’s independence could ultimately hurt lower-income Americans through higher inflation and interest rates. On China, he criticized subsidies, rare-earth export limits, and exchange-rate policies that restrain the yuan’s rise, suggesting they may conflict with WTO rules, and called on Europe to respond through long-overdue reforms and, if necessary, targeted industrial policy.

    Kazaks said ECB interest rates remain appropriate, noting that euro zone inflation is showing positive signs, with even core inflation measures—excluding volatile items—moving closer to the ECB’s 2% target.

    Sources: Bloomberg

  • The US Dollar Could Gain Strength Following the Fed’s Turmoil

    Yesterday, the US CPI came in weaker than anticipated, supporting our prediction of a Fed rate cut in March. However, we expect the market to take a few more weeks before fully embracing this outlook. The US dollar could recover more than its recent losses, possibly driven by a hawkish stance following the Powell criminal investigation. In the meantime, we’ll continue to watch the Japanese yen closely today, along with developments in the Greenland discussions.

    USD: We Maintain a Short-Term Optimistic Outlook

    US inflation came in softer than consensus and well below our expected 0.4% month-on-month core reading. Yet, yesterday’s market reaction actually reinforced our short-term positive outlook on the dollar: despite the weak CPI data, Fed rate expectations barely shifted, and the dollar quickly regained strength.

    This may partly be due to market caution in over-interpreting the CPI figures amid ongoing shutdown-related distortions. It also indicates that concerns about the Fed’s independence are diminishing, helped by expectations that the criminal probe into Chair Powell may not advance much further and opposition from some GOP lawmakers. We believe there’s a fair chance the dollar will ultimately come out stronger from this situation, as Powell might adopt a more firmly hawkish stance to assert Fed independence.

    Additionally, the key message from yesterday’s CPI report is the continued softness in goods prices, highlighting how limited the tariff effects on inflation have been. Several tariff-sensitive categories remained weak, including appliances (-4.3% MoM), furniture (-0.4%), new vehicles (0.0%), and video and audio equipment (-0.4%). This clear trend suggests US retailers are still squeezing their margins. Overall, this strengthens our confidence in a Fed rate cut in March, although it may take time for markets to fully accept this outlook.

    Today, focus shifts to November’s PPI, with core PPI expected to rise by 0.2% month-on-month, and retail sales, which are anticipated to remain fairly strong. A busy lineup of Fed speakers—including Paulson, Miran, Kashkari, Bostic, and Williams—will be closely watched for any subtle hawkish signals in support of Powell and the Fed’s independence.

    Additionally, the Supreme Court is expected to issue a ruling on tariffs today, likely unfavorable. If that happens, significant noise from the Trump administration is expected, though markets are unlikely to be caught off guard. Our baseline expectation is for a mildly positive reaction in the dollar.

    EUR: Greenland Discussions Likely to Have Limited Market Impact

    A US delegation, including JD Vance and Marco Rubio, is scheduled to meet today with officials from Denmark and Greenland. So far, US threats related to Greenland have had minimal impact on markets—limited mostly to some movements in EUR/DKK forwards—meaning there’s little risk premium to be unwound even if the talks lead to a cooperative outcome. Nevertheless, any progress could help eliminate a lingering geopolitical “black swan” risk for European currencies.

    There seems to be potential for an agreement, likely based on the US abandoning any claims of “ownership” over Greenland—a stance firmly rejected by both Denmark and Greenland—in exchange for enhanced economic partnerships and a greater US military presence.

    Positive headlines from the talks might ease the EUR/USD’s recent decline slightly, but we still expect the pair to approach 1.1600 in the near term.

    JPY: Approaching the 160 Level for a Key Test

    The USD/JPY rally shows no signs of slowing. Rising speculation about snap elections is bringing back a political risk premium, giving another push to test Japan’s currency tolerance band. Meanwhile, ongoing diplomatic tensions between Japan and China are adding more momentum to the move.

    On Monday, we viewed 160 as a key upside target. While intervention concerns may slow the rally near that level, it increasingly looks like 160 will eventually be tested. Recall that in July 2024, Japan allowed the pair to surpass 160 and only intervened when it neared 162. Pinpointing the exact intervention level is tricky, but since the BoJ hasn’t acted sooner, it’s reasonable to expect they’ll wait until the pair exceeds 160.

    For context, the first intervention on July 11, 2024, led to a 1.8% drop in USD/JPY. Interestingly, back then, CFTC net non-commercial positions on the yen were at -52% of open interest, whereas now they are 3% net-long, despite spot price action suggesting otherwise.

    The crucial question is whether FX interventions alone can sustain a USD/JPY recovery. Historically, they haven’t. In 2024, interventions curtailed short-term gains but the subsequent USD/JPY decline was driven mainly by a sharp 50bp drop in US 2-year swap rates over the next month. That scenario seems unlikely now, and with snap election risks ongoing, markets remain hesitant to price in a BoJ rate hike before summer.

    Sources: ING

  • China’s Trade Surplus Expands in December on Strong Export Growth

    China’s trade surplus widened in December, reaching CNY 808.80 billion, up from CNY 792.57 billion the previous month.

    Exports grew 5.2% year-over-year in December, slightly lower than November’s 5.7% increase. Meanwhile, imports rose 4.4% year-over-year, accelerating from the 1.7% growth recorded in November.

    In U.S. dollar terms, China’s trade surplus exceeded expectations, registering $114.10 billion compared to the forecasted $113.60 billion and $111.68 billion in the prior month. Exports increased 6.6% year-over-year, well above the 3.0% forecast and 5.9% last month. Imports also rose strongly by 5.7%, surpassing the anticipated 0.9% growth and previous 1.9% figure.

    Market Reaction to China’s Trade Balance Data

    AUD/USD continued its upward momentum, trading near 0.6692 shortly after the release of China’s trade data. The pair is currently up 0.16% on the day.

    This section was released on Wednesday at 00:52 GMT as a preview ahead of China’s Trade Balance report.

    China’s Trade Balance Overview

    The General Administration of Customs is scheduled to release December trade data on Wednesday at 03:00 GMT. Analysts expect the trade surplus to widen to $113.60 billion, up from $111.68 billion previously. Exports are forecasted to grow 3.0% year-over-year in December, while imports are projected to rise 0.9% over the same period.

    Given China’s significant influence on the global economy, this data release is anticipated to impact the Forex market.

    In what ways can China’s Trade Balance impact the AUD/USD exchange rate?

    AUD/USD is trading with modest gains ahead of China’s Trade Balance release. The pair dipped slightly as the U.S. dollar strengthened, supported by Consumer Price Index (CPI) inflation data that largely met economists’ expectations last month.

    Should the trade data exceed forecasts, it may boost the Australian dollar, with initial resistance seen at the January 12 high of 0.6722. Further upside targets include the January 6 high at 0.6742 and the January 7 peak at 0.6766.

    On the downside, the January 9 low of 0.6663 could provide support for buyers. A deeper decline might push the pair down to the December 4 low of 0.6614, followed by the 100-day exponential moving average near 0.6587.

    Sources: Fxstreet

  • USD/CHF falls to around 0.7950 amid safe-haven buying of Swiss Franc

    • USD/CHF declines as the Swiss franc benefits from increased safe-haven demand.
    • President Trump stated that Iran has expressed interest in negotiations following his military warnings, though he cautioned that action might occur prior to any talks.
    • Safe-haven demand intensifies amid growing concerns over the Federal Reserve’s independence.

    USD/CHF declined for the second consecutive day, trading near 0.7970 during Tuesday’s Asian session. The pair weakened as the Swiss Franc gained support from safe-haven demand driven by geopolitical tensions and worries over the Federal Reserve’s independence.

    On Sunday, U.S. President Donald Trump stated that Iran’s leadership had contacted him to seek negotiations following his military threats amid ongoing anti-government protests in the country. However, Trump cautioned that action might be taken before any formal meeting occurs.

    Safe-haven demand has risen amid growing concerns over the Federal Reserve’s independence after federal prosecutors threatened to indict Chair Jerome Powell regarding his congressional testimony on a building renovation—an action Powell called an attempt to undermine the central bank’s autonomy.

    However, downside pressure on the USD/CHF pair may be limited as the US Dollar maintains strength ahead of the December Consumer Price Index (CPI) release later in the day, which could provide new insights into the Fed’s policy direction.

    Markets currently expect two rate cuts from the Federal Reserve this year, beginning in June, though a stronger-than-expected inflation report could reduce the likelihood of easing. December’s Nonfarm Payrolls (NFP) came in below expectations, supporting a more dovish Fed stance. According to the CME Group’s FedWatch tool, there is a 95% chance that the Fed will keep interest rates unchanged at its January 27–28 meeting based on fed funds futures pricing.

    Sources: Fxstreet

  • Asia FX weakens amid caution over Trump tariff threats, Iran tensions, and questions surrounding the Fed’s autonomy

    Most Asian currencies weakened on Tuesday, with the Japanese yen falling to a one-year low, as higher oil prices fueled by unrest in Iran pressured the region. Meanwhile, new political and trade developments in the United States dampened investor sentiment.

    The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, rose 0.1% after a slight decline in the previous session. Dollar Index futures were also up 0.1% as of 03:36 GMT.

    Japan’s currency drops to a one-year low following news of a possible snap election

    The yen was the worst-performing currency, as USD/JPY climbed 0.4% to 158.76, its highest level since January 2025. The currency came under pressure after reports suggested that Prime Minister Sanae Takaichi could call a snap election as early as February. Investors speculated that a potential election win would strengthen her mandate for expansionary fiscal policies, further weighing on the yen.

    Markets focus on Trump’s tariff threat, unrest in Iran, and higher oil prices

    Risk appetite across Asia stayed cautious following U.S. President Donald Trump’s announcement of a 25% tariff on goods from countries “doing business” with Iran, though specifics on timing and coverage remain unclear.

    Meanwhile, oil prices rose further amid deadly anti-government protests in Iran, sparking concerns over potential supply disruptions. The unrest has also led to warnings of possible military intervention from Trump, heightening geopolitical risk premiums.

    MUFG analysts noted that Asian currencies may have been negatively affected by recent rises in oil prices, driven by events in both Venezuela and Iran.

    They added that, aside from China, countries like Turkey, the United Arab Emirates, and to a lesser extent Russia and India, maintain some trade connections with Iran.

    In Asia, the South Korean won (USD/KRW) rose 0.4%, marking its seventh consecutive gain. The Indian rupee (USD/INR) increased slightly by 0.1%, while the Singapore dollar (USD/SGD) remained stable. In China, the onshore yuan (USD/CNY) showed little movement, whereas the offshore yuan (USD/CNH) edged up 0.1%. The Australian dollar (AUD/USD) traded mostly flat.

    Concerns over Fed independence trigger risk-averse sentiment

    The Trump administration has launched a criminal probe into Federal Reserve Chair Jerome Powell regarding his testimony about renovation activities at the central bank’s headquarters, raising concerns about the Fed’s independence.

    In response, Powell issued a statement affirming the Fed’s autonomy and assuring that policy decisions will remain based solely on economic data and the central bank’s mandate. Several former Fed chairs and senior officials have publicly expressed their support for Powell.

    “It’s a wait-and-see situation as markets attempt to gauge the actual impact of these developments,” noted analysts from ING in a recent report.

    Despite a softer U.S. dollar, Asian currencies found it difficult to gain, as investors remained focused on broader U.S. political risks, trade uncertainties, and rising oil prices.

    Focus is also shifting to upcoming U.S. economic reports and any indications from the Federal Reserve, as market participants reevaluate interest rate forecasts amid increased political scrutiny of the central bank.

    Sources: Investing

  • Upcoming Economic Week: Inflation and Retail Sales to Shape Fed Policy Outlook

    If economists were meteorologists, this week’s forecast would predict a data blizzard. However, clarity is expected to improve as markets receive highly anticipated reports on inflation, retail sales, and industrial production ahead of the Federal Reserve’s policy meeting on January 28.

    Few economists expect Fed Chair Jerome Powell and the Federal Open Market Committee (FOMC) to ease monetary policy again later this month—and neither do we. This week’s data could either confirm or challenge that view, starting with the December consumer price index report on Tuesday.

    The Fed drama intensified last week after President Donald Trump instructed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds—an action typically undertaken by the Fed itself. Many saw this move as an attempt to restart quantitative easing. Meanwhile, Fed Governor Stephen Miran told Bloomberg he anticipates 150 basis points of rate cuts this year.

    What’s still missing, however, is significantly lower inflation and a recession that would justify such aggressive easing. This week will also feature speeches from several Fed officials, which could provide insight into the central bank’s thinking. The lineup starts with New York Fed President John Williams on Monday, followed by Governors Miran (Wednesday), Michael Barr (Thursday), Michelle Bowman (Friday), and Vice Chair Philip Jefferson (Friday).

    Here’s a rundown of this week’s key data releases likely to influence the timing and scale of any future Fed rate cuts:

    Inflation

    Since the 43-day government shutdown in October and November, investors have struggled to gauge inflation accurately. The 2.7% year-over-year CPI rise in November, a slight dip from October’s 3.0%, was met with caution, as the shutdown likely disrupted the Bureau of Labor Statistics’ data gathering.

    This increases the importance of the upcoming CPI and PPI reports, which will be key indicators before the FOMC’s January 28 interest rate decision.

    The upcoming CPI report on Tuesday is expected to show a modest easing in inflation, with the Cleveland Fed’s model forecasting a 0.2% monthly increase and 2.6% year-over-year growth. The November PPI report, due Wednesday, is considered less impactful, while import and export price data for November will be released on Thursday.

    Retail sales

    Retail sales (Wednesday) are expected to show a slight increase in November after remaining flat in October (see chart). Overall, we believe consumer spending remains resilient despite rising living costs and soft employment figures. Additional important demand indicators this week include December existing home sales (Wednesday) and mortgage applications for the week ending January 9 (Wednesday).

    Jobless claims

    We anticipate layoffs will stay minimal, which has been the key insight from recent initial unemployment claims data (Thursday) (see chart). While demand for labor may be slowing in certain sectors, the feared AI-driven collapse in the job market has not materialized yet.

    Composite economic indicators & business surveys

    The composite cyclical indicators for December, due Thursday, are expected to show the coincident index holding at a record high, while the (mis)leading index continues its decline. Additionally, given delays in official hard data, the National Federation of Independent Business’ Small Business Optimism Index for December (Tuesday) should provide valuable insights, following its rise to 99 in November. Later in the week, the Federal Reserve banks of New York and Philadelphia will release their January business surveys (Thursday).

    Our preferred coincident indicator is the S&P 500 forward earnings per share, which has accelerated in recent weeks and hit record highs (see chart).

    Sources: Investing

  • Australian Dollar Gains as US Dollar Weakens Amid Fed Probe

    • The Australian Dollar ended its three-day slide on Monday.
    • ANZ reported a 0.5% decline in job advertisements for December, following a revised 1.5% drop in the previous month.
    • Meanwhile, the US Dollar weakened after federal prosecutors launched a criminal investigation into Federal Reserve Chair Jerome Powell.

    The Australian Dollar (AUD) gained ground against the US Dollar (USD) on Monday, reversing a three-day losing streak. The AUD/USD pair rose as the Greenback weakened, partly due to growing concerns about the Federal Reserve.

    Federal prosecutors have launched a criminal investigation into Fed Chair Jerome Powell, focusing on the central bank’s renovation of its Washington headquarters and allegations that Powell may have misled Congress about the project’s details, according to a New York Times report on Sunday.

    ANZ Job Advertisements fell by 0.5% in December, following a revised 1.5% decline in November. Meanwhile, household spending rose 1.0% month-on-month in November 2025, slowing from a revised 1.4% increase in October, reflecting consumer caution amid high interest rates and ongoing inflation.

    Australia’s mixed Consumer Price Index (CPI) report for November has left the Reserve Bank of Australia’s (RBA) policy direction uncertain. However, RBA Deputy Governor Andrew Hauser stated that the inflation data largely met expectations and indicated that interest rate cuts are unlikely in the near term. Attention now turns to the quarterly CPI report due later this month for clearer insight into the RBA’s upcoming policy decisions.

    US Dollar Slides Amid Federal Reserve Uncertainty

    The US Dollar Index (DXY), which tracks the Dollar against six major currencies, is weakening and trading near 98.90 amid expectations of a dovish Federal Reserve. Slower-than-anticipated US job growth in December suggests the Fed may keep interest rates steady at its upcoming January meeting.

    US Nonfarm Payrolls increased by 50,000 in December, below November’s revised 56,000 and the expected 60,000. Meanwhile, the unemployment rate fell to 4.4% from 4.6%, and average hourly earnings rose to 3.8% year-over-year from 3.6%.

    CME Group’s FedWatch tool shows about a 95% chance that the Fed will hold rates steady on January 27–28. Richmond Fed President Tom Barkin welcomed the unemployment drop, describing job growth as modest but steady. He noted hiring remains limited outside healthcare and AI sectors and expressed uncertainty about whether the labor market will see more hiring or layoffs going forward.

    US Treasury Secretary Scott Bessent told CNBC on Thursday that the Federal Reserve should continue cutting interest rates, emphasizing that lower rates are the “only ingredient missing” for stronger economic growth and urging the Fed not to delay.

    The US Department of Labor reported that Initial Jobless Claims rose slightly to 208,000 for the week ending January 3, just below expectations of 210,000 but above the previous week’s revised 200,000. Continuing claims increased to 1.914 million from 1.858 million, signaling a gradual rise in those receiving unemployment benefits.

    The Institute for Supply Management (ISM) revealed that the US Services PMI climbed to 54.4 in December from 52.6 in November, surpassing expectations of 52.3.

    ADP data showed a gain of 41,000 jobs in December, improving from a revised 29,000 job loss in November, though slightly below the expected 47,000. Meanwhile, JOLTS job openings dropped to 7.146 million in November from a revised 7.449 million in October, missing forecasts of 7.6 million.

    China’s Consumer Price Index (CPI) increased by 0.8% year-over-year in December, up from 0.7% in November but slightly below the 0.9% forecast. On a monthly basis, CPI rose 0.2%, reversing November’s 0.1% decline. Meanwhile, China’s Producer Price Index (PPI) fell 1.9% year-over-year in December, improving from a 2.2% drop the previous month and slightly beating expectations of a 2.0% decline.

    Australia’s trade surplus narrowed to 2.936 billion AUD in November, down from a revised 4.353 billion AUD in October. Exports declined 2.9% month-on-month in November, following a revised 2.8% increase the previous month. Imports edged up 0.2% in November, slowing from a revised 2.4% gain in October.

    AUD rebounds, testing upper boundary of rising channel around 0.6700

    On Monday, AUD/USD trades near 0.6700 as the pair attempts a rebound toward an ascending channel, indicating a renewed bullish outlook. The 14-day RSI at 58.33 remains above the neutral midpoint, supporting upward momentum.

    A sustained move back into the channel would reinforce the bullish trend, potentially pushing the pair toward 0.6766—the highest level since October 2024. Further upside could target the channel’s upper resistance near 0.6860.

    Immediate support is found at the nine-day EMA around 0.6700, followed by the 50-day EMA at 0.6631. A break below these levels could open the path to 0.6414, the lowest point since June 2025.

    Sources: Fxstreet

  • GBP/USD Faces Near-Term Resistance Around 1.3450 Level

    • GBP/USD inched up to around 1.3430 during Monday’s early European session.
    • The market remains cautious as federal prosecutors launch a criminal investigation into Fed Chair Powell.
    • With the RSI lingering near the midline, further consolidation is possible in the short term.
    • Key support to watch is at 1.3358, while immediate resistance is seen near 1.3458.

    The GBP/USD pair found some buying interest around 1.3430 during Monday’s early European trading session. The US Dollar weakened against the British Pound following Federal Reserve Chair Jerome Powell’s revelation that President Donald Trump threatened him with a criminal indictment, sparking concerns about the Fed’s independence.

    The US Justice Department issued subpoenas and threatened criminal charges linked to Powell’s Senate testimony regarding renovations at Federal Reserve buildings. Powell described the investigation as “unprecedented” and suggested it was motivated by Trump’s frustration over his refusal to lower interest rates despite the president’s repeated public pressure.

    Ray Attrill, head of currency strategy at National Australia Bank, commented, “This open conflict between the Fed and the U.S. administration clearly doesn’t bode well for the U.S. dollar.”

    Traders will be paying close attention to UK jobs data due Tuesday, as the results could provide insights into market expectations for the Bank of England’s monetary policy. Weaker-than-expected figures might put short-term pressure on the British Pound (Cable).

    GBP/USD Technical Analysis

    On the daily chart, the 100-day EMA is trending upward, offering support at 1.3358, with the price maintaining above this key moving average to sustain the broader bullish outlook. The RSI at 51.90 is neutral but trending slightly higher, indicating momentum is stabilizing following a recent pullback. Holding above the EMA could set the stage for a retest of resistance at 1.3458, preserving the recovery trend.

    The price currently trades just below the Bollinger Bands’ middle line at 1.3458, with the bands narrowing, signaling lower volatility and a consolidation phase. The RSI near 52 confirms a range-bound environment. A decisive move above the mid-band would increase upward momentum, potentially targeting the upper band at 1.3552. Conversely, a drop toward 1.3365 would bring the lower band into focus, risking a deeper correction.

    Sources: Fxstreet

  • USD/CAD Targets Support at 50% Fibonacci Retracement Level of 1.3890

    • USD/CAD pulls back toward 1.3890 following an unsuccessful attempt to continue its nine-day rally.
    • Criminal indictment threats against Fed Chair Powell have put pressure on the US Dollar.
    • An increasing unemployment rate in Canada is expected to weigh on the Canadian Dollar.

    The USD/CAD pair declined on Monday, ending its nine-day winning streak, and corrected to around 1.3890 as the US Dollar retraced following criminal charges against Federal Reserve Chair Jerome Powell.

    At the time of reporting, the US Dollar Index (DXY), which measures the Greenback against six major currencies, was down 0.22% to approximately 98.90, retreating from a fresh monthly high of about 99.26 reached last Friday.

    On Friday, the U.S. Department of Justice issued a subpoena to the Federal Reserve concerning Chair Jerome Powell’s Senate testimony last June, which involved a multiyear renovation project of historic buildings with an estimated cost of $2.5 billion.

    Powell responded by stating that the charges are not related to his testimony or the renovation project, but rather serve as a pretext.

    Meanwhile, the Canadian Dollar (CAD) remains under pressure as the unemployment rate rose to 6.8%, exceeding estimates of 6.6% and the previous 6.5% reading. The higher jobless rate may increase expectations that the Bank of Canada (BoC) will soon resume monetary easing.

    USD/CAD technical analysis

    USD/CAD is trading lower around 1.3890 on Monday. The 20-day Exponential Moving Average (EMA) has started to rise, currently at 1.3806, with the price holding above this level, supporting a short-term recovery outlook.

    The 14-day Relative Strength Index (RSI) stands at 61, indicating solid positive momentum after bouncing back from oversold levels.

    Measured from the recent high of 1.4140 to the low at 1.3643, the 50% Fibonacci retracement at 1.3891 serves as immediate resistance. Above this, the 61.8% retracement near 1.3950 may cap further upward movement. If the pair fails to break through these resistance levels, the recovery could remain limited, with pullbacks likely to find initial support at the rising 20-day EMA around 1.3806.

    Sources: Fxstreet

  • Asian currencies remain muted as the dollar falls amid US investigation into Fed Chair Powell

    Asian currencies remained largely steady on Monday, while the U.S. dollar weakened following the announcement of a criminal investigation involving Federal Reserve Chair Jerome Powell, casting uncertainty over the central bank’s independence.

    The U.S. Dollar Index, which tracks the greenback against a basket of major currencies, declined 0.2% from its one-month peak. Meanwhile, U.S. Dollar Index futures were also down 0.2% as of 04:27 GMT.

    Fed Chair Powell faces threat of indictment

    Investor confidence was rattled after Powell revealed that the administration had threatened the Federal Reserve with a potential criminal indictment related to his Senate testimony about cost overruns in the Fed’s headquarters renovation.

    This development weakened trust in U.S. institutions and prompted a cautious mood across global markets, dampening risk appetite in Asia.

    In this environment, most regional currencies showed little movement.

    The Japanese yen’s USD/JPY pair edged up 0.2%, while the Singapore dollar’s USD/SGD remained flat.

    The South Korean won stood out, rising 0.7% on Monday.

    In China, the onshore yuan’s USD/CNY pair was mostly unchanged, whereas the offshore yuan’s USD/CNH dipped slightly by 0.1%.

    The Indian rupee’s USD/INR pair saw minimal change.

    Meanwhile, the Australian dollar’s AUD/USD pair rose modestly by 0.2%.

    US jobs data bolster expectations for Fed rate cuts

    Investor sentiment was also shaped by U.S. economic data released last Friday, which revealed that nonfarm payroll growth in December slowed more than anticipated.

    The weaker-than-expected hiring numbers have heightened expectations that the Federal Reserve may implement interest rate cuts later this year.

    Market pricing now factors in at least one additional Fed rate cut in 2026, with some traders anticipating two reductions.

    Attention is now turning to the U.S. consumer price index for December, due Tuesday, a key economic indicator ahead of the Fed’s upcoming policy meeting later this month.

    Sources: Investing

  • Morning Update: Powell’s Response Shakes Markets

    Ankur Banerjee provides a preview of the day ahead in European and global markets. Investors remain focused on the escalating conflict between U.S. President Donald Trump and Federal Reserve Chair Jerome Powell, who is pushing back against attempts to exert political control over the Fed and its interest rate decisions.

    Meanwhile, growing turmoil in Iran—where over 500 people have reportedly been killed, according to human rights groups—adds to the geopolitical uncertainties shaping market sentiment at the start of 2026, supporting demand for safe-haven assets.

    Markets opened Monday with shocking news that the Trump administration had threatened to indict Powell over his Congressional testimony last summer concerning a Fed building renovation. Powell described this as a “pretext” aimed at increasing political influence over monetary policy.

    “This issue centers on whether the Fed can continue setting interest rates based on data and economic realities, or if monetary policy will instead be shaped by political pressure and intimidation,” Powell stated.

    The initial market reaction saw the dollar weaken and stock futures decline, although the impact on interest rate policy remains unclear. Gold prices surged past $4,600 per ounce as investors sought refuge.

    Despite the unsettling news, market responses were measured, with no signs of panic selling as investors await further clarity on the Fed’s independence and the future path of interest rates.

    WASHINGTON, DC – DECEMBER 13: U.S. Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the headquarters of the Federal Reserve on December 13, 2023 in Washington, DC. The Federal Reserve announced today that interest rates will remain unchanged. (Photo by Win McNamee/Getty Images)

    Markets may now generally anticipate that the Federal Reserve will yield to Trump’s influence and ease interest rates freely once a new Fed chair takes over after Powell’s term ends in May. Futures pricing currently reflects expectations of two rate cuts this year.

    With Japanese markets closed on Monday, no cash trading occurred in Treasuries during Asian hours. Attention will shift to the Treasury market when London trading begins.

    Key events that could impact markets on Monday include: Germany’s November current account balance and the euro zone Sentix investor confidence index for January.

    Sources: Reuters

  • Iran threatens to target U.S. bases if Washington launches an attack

    Tehran has declared it will attack Israel and U.S. military bases in the region if Washington intervenes militarily to support protesters in Iran.

    Speaking before the Iranian Parliament today, Speaker Mohammad Baqer Qalibaf accused the U.S. and Israel of “supporting recent riots and causing unrest” across Iran. He warned that Israel and U.S. military bases in the region would be considered “legitimate targets” if the U.S. launches any attacks against Iran.

    According to Reuters, Israeli authorities are currently on high alert due to the possibility of U.S. intervention to back the protest movement in Iran.

    The New York Times quoted knowledgeable U.S. officials saying that in recent days, President Donald Trump has received reports on potential military interventions in Iran as he considers acting on his threats to attack the country over accusations of “suppressing protesters.”

    While Trump has not made a final decision, officials indicate he is seriously weighing the possibility of launching strikes in response to Iran’s crackdown on demonstrations. Various options have been presented to the president, including attacks on non-military sites in Tehran.

    According to sources, U.S. Secretary of State Marco Rubio spoke by phone with Israeli Prime Minister Benjamin Netanyahu on January 10 to discuss the protests in Iran, the situation in Syria, and the peace agreement in Gaza. Earlier that day, Rubio posted on social media expressing U.S. support for “the brave people of Iran.”

    When asked about the New York Times report, the White House referred to President Trump’s recent public statements and social media posts.

    “Perhaps Iran is closer to freedom than ever before. America is ready to help,” Trump wrote on social media on January 10.

    The day before, he warned of “very strong” retaliation if Iran causes protester deaths as in previous incidents. He noted the demonstrators in Iran face “extreme danger” and said the U.S. will closely monitor developments.

    “Iran better not start shooting because if they do, we will shoot back,” Trump said, but emphasized this did not mean American troops would directly deploy to Iran.

    The protests, which began on December 28, 2025, sparked by small traders upset over the economic situation and the falling rial, have spread in Tehran and other cities in recent days. Iranian officials accuse “terrorist agents” from Israel and the U.S. of inciting the protests and escalating violence, claims denied by the U.S. State Department, which says Tehran is “distracting attention from internal problems.”

    International organizations citing local sources report that the Iranian government has blocked nationwide information flow, cut Internet access, and limited international communications, making it difficult to assess the full scope of the protests. Some human rights groups abroad report over 100 protesters have died and more than 2,000 have been arrested since late December 2025.

    Iran’s Supreme Leader Ali Khamenei declared that the government will not back down before the protests, claiming that the past two weeks of unrest are caused by agitators aiming to please the U.S. leadership. He mocked Trump’s intervention warnings, urging the U.S. president to focus on domestic issues.

    Iranian Judiciary Chief Gholamhossein Mohseni Ejei warned of “severe, maximum, and merciless” punishment for rioters, while the intelligence branch of the Islamic Revolutionary Guard Corps (IRGC) vowed not to allow the protests to continue.

    Sources: Vnexpress

  • Looking Back at the First 25 Years of the 21st Century

    Reflecting on the start of this century, the first striking observation is our national shortsightedness. After surviving Y2K and the dot-com crash in 2000, our leaders assumed the path ahead would be smooth sailing from year one onward.

    However, reality proved otherwise, beginning with a series of black swan events, notably the attacks on the World Trade Center and Pentagon on September 11. While such events are inherently unpredictable, it’s remarkable that the Congressional Budget Office (CBO) economists confidently forecasted in 2001 a future of continuous budget surpluses, anticipating the complete elimination of national debt by 2011.

    For reasons unknown, the CBO issues 10-year federal spending and revenue projections, despite having no solid factual or practical foundation to accurately forecast beyond a year or two—akin to trying to predict the weather a year in advance.

    The January 2001 CBO report highlights this myopia. Their projections simply extended current trends indefinitely without grounding in reality. Under this unrealistic mandate, the CBO projected a cumulative surplus of $5.6 trillion for 2002–2011.

    In reality, deficits over that decade totaled $6.1 trillion—a swing of $11.7 trillion. It would have been much simpler to just flip a plus sign to a minus. The projections failed to account for the soaring costs of Bush’s “War on Terror” post-9/11, which led to prolonged wars in Afghanistan and Iraq, the bursting of the real estate bubble, and massive TARP bailouts to rescue large banks.

    In short, this is a summary of CBO’s flawed foresight:

    The first takeaway from this bleak forecast is that the CBO economists assumed deficits would increase in a smooth, predictable fashion—almost as if they were drawing a straight line with minor fluctuations, rather than reflecting the unpredictable realities of economic growth.

    A second point is that the 2003 Bush tax cuts were not the main driver of the deficits. In fact, annual deficits dropped significantly—from $413 billion in fiscal year 2004 (which began October 1, 2003) to just $161 billion in fiscal year 2007. This means the deficit shrank by more than half during the four years following the tax cuts and before the 2007 real estate crash.

    While much of this now feels like distant history, the ongoing wars and the Federal Reserve’s drastic response to the 2008 financial crisis—keeping interest rates near zero for eight years, essentially through the entire Obama administration—contributed to massive deficits that have persisted through to today, especially in the five years following the COVID-19 pandemic.

    Since 2001, U.S. federal deficits have averaged about $1 billion annually, but that figure has surged to over $2 trillion per year since 2020, according to the U.S. Treasury.

    Today, the total federal deficit stands at $38 trillion, which amounts to roughly $110,000 owed per American—far from the anticipated surpluses once projected.

    Following a Challenging 2000–2009, Markets Surged in the First Quarter

    What about the markets? After nearly a “lost decade” lasting nine years from March 2000 to March 2009, all major market indexes have experienced remarkable growth—particularly gold relative to the U.S. dollar.

    By March 9, 2009, three of the four major indexes—the S&P 500, NASDAQ, and Russell 2000—had fallen by 50% since the decade began (while the Dow was down 40%), but they bounced back strongly from 2009 through 2025:

    Over the same 25-year period, the Consumer Price Index (CPI) increased by 83%, which means the real market gains were somewhat diminished.

    The U.S. dollar performed even worse, losing about 10% in value overall (and 8% against the euro), while gold and silver surged more than 15 times in value:

    The first-quarter returns were decent, but the strong performance of gold and silver signals that the dollar—and the CBO’s deficit forecasts—cannot be relied on in the long run. In fact, President Trump has set a goal for 2026 to deliberately weaken the dollar against the Chinese yuan to “help” exporters boost overseas sales. Much of the talk about the dominance of the “King Dollar” is just rhetoric. In reality, many politicians aim to devalue their currencies to encourage trade, turning paper money into a “race to the bottom,” while gold quietly holds its value, watching from the sidelines.

    This brings us to the 2025 summary—a major victory for precious metals as the dollar dropped by 10%.

    2025 Brought Massive Gains for Precious Metals

    The year 2025 exemplified the key trends seen over the past 25 years—while the stock market continued to climb, gold and silver surged even faster. Although inflation is easing, gold today serves less as an inflation hedge and more as a safeguard against crises, a hedge against the dollar, and increasingly, a hedge against cryptocurrency volatility.

    In 2025, the U.S. Dollar Index (DXY) dropped by 10%, allowing major global currencies to gain between 5% and 15%. Meanwhile, the poorest-performing investments of 2025 brought good news for consumers through lower food and energy prices:

    So, if 2026 mirrors the gains of 2025, it will surely be a rewarding year for most investors.

    Sources: Investing

  • GBP/CAD Holds Steady Amid Mixed Canadian Employment Data

    GBP/CAD is trading close to one-month highs as investors react to mixed employment data from Canada. Higher unemployment rates and weaker wage growth have capped gains for the Canadian dollar. Attention now turns to the upcoming UK employment and GDP reports scheduled for next week.

    The Canadian Dollar (CAD) remained largely unchanged against the British Pound (GBP) on Friday, with GBP/CAD showing little directional movement as the market reacted modestly to Canada’s latest employment data. At the time of writing, the pair is trading around 1.8636, close to a one-month high.

    Statistics Canada reported that employment increased by 8,200 jobs in December, surpassing expectations of a 5,000 job decline but significantly lower than November’s 53,600 gain. Meanwhile, the unemployment rate rose to 6.8% from 6.5%, higher than the anticipated 6.6%.

    Wage growth showed signs of slowing, with average hourly wages rising 3.7% year-over-year in December, down from 4.0% previously.

    From a monetary policy standpoint, the mixed employment report is unlikely to significantly change short-term expectations for the Bank of Canada (BoC). The market largely anticipates that the central bank will keep interest rates steady throughout most of 2026.

    While some analysts had speculated about a possible rate hike later in the year, the recent labor data—characterized by rising unemployment and slower wage growth—weighs against that possibility and supports a cautious, wait-and-see approach.

    At its December meeting, the BoC held its policy rate at 2.25%, describing it as “about the right level.” Market participants are now focused on upcoming Canadian inflation figures expected later this month, which could influence near-term monetary policy forecasts.

    In the UK, attention is shifting to key economic releases next week, including labor market data on Tuesday and the November GDP report on Thursday.

    On a broader scale, the interest rate gap between the BoC and the Bank of England (BoE) continues to favor the British Pound, maintaining upward momentum for GBP/CAD.

    Additionally, the Canadian Dollar remains sensitive to developments in the oil market. Increased U.S. regulation of Venezuelan oil supplies has raised expectations of greater global output, heightening concerns over oversupply that could pressure oil prices and weigh on the Loonie, given Canada’s role as a major energy exporter.

    Sources: Fxstreet

  • EUR/USD Weekly Forecast: U.S. Dominates Global Market Direction at the Start of 2026

    U.S. employment figures reinforce the Federal Reserve’s cautious stance on monetary policy. Meanwhile, Europe’s economic growth remains sluggish, but policymakers appear comfortable with the current pace. As demand for the U.S. Dollar stays strong, the EUR/USD pair has potential to continue its downward move toward the 1.1470 level.

    The EUR/USD pair opened the year on a weak note, declining for the second week in a row to hover near 1.1640, marking its lowest level in a month. The US Dollar gained strength across the foreign exchange market, supported by geopolitical tensions and robust US employment figures.

    Geopolitical Unrest Drives Financial Markets Early in 2026

    On Saturday morning, the world learned that U.S. President Donald Trump had executed a precise military operation in Venezuela, capturing then-President Nicolás Maduro and his wife, Cilia Flores, and transporting them to the United States to face charges related to narco-terrorism. Delcy Rodriguez, Maduro’s Vice-President, has now taken control of Venezuela. Although there was initial criticism of Trump’s actions, Rodriguez quickly shifted her stance and expressed willingness to cooperate with the U.S.

    President Donald Trump did not hide his motives for the U.S. military action in Venezuela. At a press conference following the operation that removed Nicolás Maduro from power, Trump said the United States would exercise control over Venezuela and its oil resources and warned of further measures if the Venezuelan government resisted. He described a future “transition” for the country’s governance, but did not outline specific plans for democracy or civilian rule.

    In the days after the raid, international tensions gradually eased, but the situation remained unresolved. One clear strategic factor behind the U.S. intervention was limiting Venezuela’s oil ties with major global powers, including Russia and China — a goal linked to broader geopolitical rivalry.

    Meanwhile, Russia carried out a significant missile strike on Ukraine early on Friday, shortly after Ukraine and its European partners agreed on elements of postwar security guarantees. The attack was widely interpreted as Russian President Vladimir Putin challenging Western support for Kyiv and signaling that sanctions, including restrictions on Russian oil, would not deter Moscow’s military actions.

    In addition, Trump reignited controversy with comments about Greenland, an autonomous territory of Denmark. He argued that the U.S. needs Greenland for national security reasons and suggested Washington might pursue control of the island — a stance that drew criticism from European leaders and sparked fears of future U.S. territorial ambitions.

    Europe Maintains Ongoing Stability

    News from Europe has had little impact on the Euro (EUR), which is understandable given the Eurozone’s fragile yet steady stability, with ongoing growth, manageable inflation, and no significant employment concerns.

    Eurostat reported that the seasonally adjusted unemployment rate in the Euro area stood at 6.3% in November, slightly down from 6.4% in October 2025 but up from 6.2% in November 2024. The broader EU unemployment rate remained stable at 6.0% in November 2025 compared to October, though it rose from 5.8% a year earlier.

    The Hamburg Commercial Bank (HCOB) released the final December figures for the Eurozone’s Services and Composite Purchasing Managers’ Indexes (PMIs). The data showed a twelfth consecutive monthly increase in private sector activity, with the Composite PMI at 51.5, down from 52.8 in November. Services output also declined to 52.4 from 53.6, marking three-month lows for both indicators.

    Regarding inflation, Germany’s preliminary December Harmonized Index of Consumer Prices (HICP) increased 2% year-over-year, lower than November’s 2.6% and below the 2.2% forecast. Monthly inflation rose by 0.2%, half the expected 0.4%. The Eurozone’s overall HICP inflation matched expectations at 2% annually, with a 0.2% monthly rise following November’s 0.2% decline.

    Germany reported mixed figures for November, with retail sales falling 0.6% while industrial production saw a modest 0.8% increase.

    On monetary policy, European Central Bank (ECB) Vice President Luis de Guindos told Bloomberg that current interest rates are appropriate as inflation targets have been met, though uncertainty remains high. This aligns with the ECB’s current stance: pausing rate changes while maintaining vigilance.

    U.S. Employment and Economic Growth Update

    The U.S. macroeconomic calendar was busy with key data mostly signaling progress. The Institute for Supply Management (ISM) reported December Manufacturing PMIs, showing a contraction in manufacturing output as the index fell to 47.9 from 48.2 in November, below expectations of 48.3. However, the Employment Index improved slightly to 44.9 from 44, while the Prices Paid Index remained steady at 58.5. Meanwhile, the Services PMI rose to 54.4 from 52.6, with the employment sub-index increasing to 52 from 48.9 and the Prices Paid Index easing to 64.3 from 65.4.

    The trade deficit narrowed sharply to $59.1 billion in October, down from $78.3 billion, reflecting the impact of Trump’s policies.

    Employment data was mostly positive. The ADP report showed private sector job growth of 41,000 in December, a bit below the expected 47,000 but an improvement over November’s revised -29,000. The JOLTS report recorded 7.146 million job openings at November’s end, down from 7.449 million in October. Job cuts announced in December dropped 50% from November to 35,553, the lowest monthly total since July 2024.

    The December Nonfarm Payrolls (NFP) report showed 50,000 new jobs added, below the 60,000 forecast, while the unemployment rate fell to 4.4%, better than the anticipated 4.5%. November’s payrolls were revised down to 56,000 from 64,000. This data put some short-term pressure on the USD but did not alter the Federal Reserve’s cautious monetary policy.

    The Fed cut interest rates by 25 basis points in December as expected, signaling the possibility of one more cut in 2026—less than markets hope but consistent with a cautious stance focused on employment. Market watchers anticipate at least two rate cuts this year, especially with Chairman Jerome Powell’s term ending in May and a likely replacement aligned with Trump’s preference for more aggressive easing. Still, no immediate Fed action is expected in the first meeting of 2026.

    What’s coming up next on the agenda?

    In the days ahead, attention will turn to U.S. inflation data, with the December Consumer Price Index (CPI) scheduled for release on Tuesday, followed by the Producer Price Index (PPI) for October and November on Wednesday. November Retail Sales data will also be published on Wednesday. These reports are expected to influence the Federal Reserve’s future policy decisions and, consequently, the direction of the U.S. Dollar.

    EUR/USD technical analysis

    From a technical standpoint, the daily chart shows a bearish outlook for EUR/USD with potential for further decline. The 20-day Simple Moving Average (SMA) is trending downward but still sits above the 100- and 200-day SMAs, indicating weakening short-term momentum. The price remains below the 20-day and 100-day SMAs at 1.1733 and 1.1666 respectively, while the rising 200-day SMA at 1.1571 acts as support. The Momentum indicator has dropped below its midpoint, maintaining strong bearish momentum, and the Relative Strength Index (RSI) is falling toward 36, suggesting lower prices ahead. A close above the 100-day SMA at 1.1666 could relieve some selling pressure and target the 20-day SMA at 1.1733, but failure to break this resistance leaves the pair vulnerable to test the 200-day SMA support at 1.1571.

    On a broader scale, the weekly chart also points to continued bearishness. The pair trades beneath the flattened 20-week SMA near 1.1665, with upside limited by this level. The 100- and 200-week SMAs are rising at 1.1085 and 1.0856 but remain far below the current price, so they are less relevant short term. The Momentum indicator on the weekly chart has turned downward but stays within neutral territory, while the RSI is declining around 52.

    If the pair falls below the key 1.1600 level, the next significant support lies near 1.1470, a major long-term pivot. Overall, bears will maintain control as long as EUR/USD stays below the 1.1740-1.1750 resistance zone.

    Sources: Fxstreet

  • NFP Outlook: Is There Real Upside in Job Growth?

    Leading indicators suggest this month’s NFP report could exceed expectations, with headline job growth potentially landing in the 80–120K range. Read on for a deeper breakdown.

    NFP Highlights

    • Consensus forecast: +66K jobs, earnings up +0.3% m/m, unemployment rate at 4.5%.
    • Outlook: Forward-looking data point to a stronger-than-expected result, with payroll gains possibly reaching between 80K and 120K.
    • Market impact: A positive surprise could allow AUD/USD to continue its rebound toward the mid-0.6600s, or even retest former resistance now acting as support near 0.6600.

    Release timing

    The December NFP report is scheduled for Friday, January 9, at 8:30 a.m. ET.

    NFP Report Expectations

    Market participants anticipate the NFP report will show the U.S. economy added around 66K jobs, with average hourly earnings increasing 0.3% month-on-month (3.6% year-on-year) and the U-3 unemployment rate edging lower to 4.5%.

    NFP Overview

    Economic data releases are gradually normalizing after the U.S. government shutdown disrupted—and in some cases eliminated—Q4 statistics. Ahead of the latest labor market update, economists expect conditions in December to reflect a continued “low hiring, low firing” environment.

    As illustrated in the graphic below, traders are largely confident that the Federal Reserve will hold off on further rate cuts this month. Only a significant downturn in the labor market—such as a clear drop in job numbers or unemployment climbing above 4.7%—would likely undermine this confidence.

    Consequently, market reactions to the NFP release may be muted, particularly since the anticipated Supreme Court ruling on President Trump’s “emergency” tariffs—due about 90 minutes later—is likely to dominate attention.

    Another factor dampening trader response is the long-term decline in survey response rates for the NFP. As the chart below illustrates, the Bureau of Labor Statistics (BLS) has experienced a significant drop in response rates over the past decade, increasing uncertainty around the accuracy of the jobs data compared to previous years.

    Looking ahead into 2026 and beyond, readers are advised to approach all survey-based economic data with greater skepticism and to rely on a diverse range of data sources when drawing robust conclusions about the U.S. economy.

    Nonfarm Payrolls Outlook

    As our regular readers know, we rely on four historically dependable leading indicators to assess each month’s NFP report:

    • The ISM Services Employment subindex rose to 52.0 from 48.9 last month.
    • The ISM Manufacturing Employment subindex increased slightly to 44.9 from 44.0.
    • The ADP Employment report showed 41K jobs added, improving from last month’s -29K but still below economists’ forecast of 49K.
    • The 4-week moving average of initial unemployment claims dropped to 212K from 217K last month.

    Considering these data points and our internal models, the indicators suggest that this month’s NFP report could exceed expectations, with job gains potentially in the 80–120K range. However, a wide margin of uncertainty remains due to declining survey response rates.

    That said, month-to-month variations in the NFP report are notoriously unpredictable, so it’s wise not to place too much confidence in any forecast—even ours. As always, other components of the release, such as the closely monitored average hourly earnings and the unemployment rate, will also influence market reactions.

    Possible Market Response to NFP

    From a technical perspective, the US dollar is trading close to one-month highs against several major currencies but remains near the midpoint of its three-month range, resulting in a balanced risk outlook ahead of the release.

    Technical Overview of the US Dollar: AUD/USD Daily Chart

    From a technical standpoint, AUD/USD finds itself in a notable position ahead of the jobs report. Earlier this week, the pair reached a 15-month high near 0.6800 but then formed a “Dark Cloud Cover” pattern on Wednesday, indicating an intraday shift from buying to selling pressure. This reversal is further supported by a triple bearish divergence on the 14-day RSI, suggesting waning bullish momentum and reinforcing the possibility of a near-term peak.

    Should the jobs data surpass expectations, it may diminish the likelihood of a January Fed rate cut and raise doubts about March, thereby strengthening the US dollar. In that case, AUD/USD could continue its decline toward the mid-0.6600s or revisit the former resistance level, now acting as support, near 0.6600. Conversely, a strong report pushing the pair back above the 78.6% Fibonacci retracement at 0.6725 would negate the near-term bearish outlook.

    Sources: Investing @ Forex

  • EUR/USD Price Outlook: Holds around 1.1650 as momentum weakens

    • EUR/USD is trading below the nine-day and 50-day EMAs, which stand at 1.1680 and 1.1696, respectively.
    • The 14-day Relative Strength Index (RSI) is at 39, signaling weakening momentum and a bearish outlook.
    • The pair could potentially decline further toward the six-week low of 1.1589.

    EUR/USD steadies near 1.1650 during Asian trading on Friday, following a five-day losing streak. The 14-day Relative Strength Index (RSI) sits at 39, indicating bearish momentum that is weakening rather than signaling oversold levels.

    Technical analysis of the daily chart reveals the pair trading below both the nine- and 50-day Exponential Moving Averages (EMAs), with the short-term EMA rolling over at 1.1696 and the 50-day EMA flattening around 1.1680. While the crossover pattern remains positive, the lack of support from the moving averages leaves the short-term outlook vulnerable.

    The EUR/USD pair may test the area near the six-week low of 1.1589, established on December 1. A daily close below this initial support could open the way to the next key level at 1.1468, the lowest point since August 2025.

    On the upside, immediate resistance is found at the crossover of the medium- and short-term moving averages around 1.1680 and 1.1696, respectively. A daily close above these levels would likely restore momentum, pushing EUR/USD toward the three-month high of 1.1808 reached on December 24, and potentially further to 1.1918, the highest level since June 2021.

    EUR/USD: Daily Chart

    Sources: Fxstreet

  • Frequently Asked Questions (FAQ) From Speculators (Traders) and Investors

    Are there any scams in the financial market?

    Yes, scams exist in every market, including traditional ones. This happens because scammers see opportunities to make illegal money by exploiting market demand.

    What scamming cases are common in this market?

    Case 1: Following a signal provider’s instructions to open large positions with a small account, resulting in quick losses.

    Case 2: Leading investors to invest in assets that are not available or do not exist in the market.

    Case 3: Convincing people to deposit funds with a broker or financial institution that lacks a financial services license.

    Case 4: Forging company’s financial documents and records to deceive investors.

    How to avoid scam in this market?

    Suggestion 1: Verify the financial service license of the broker or financial institution.

    Suggestion 2: Verify the educational background of the signal provider.

    Suggestion 3: Verify which company provides the asset and confirm its legal business activities.

    Suggestion 4: Contact to The Eternal Sovereign to support further

    What knowledge is needed to speculate (trade) or invest in the financial market?

    Once you have a foundation, the knowledge you need to focus on is fundamental and technical analysis to trade or invest effectively.

    1. Fundamental knowledge helps you forecast the market’s future direction and protect your funds effectively.
    2. Technical knowledge helps you execute positions more precisely.

    For a complete understanding, please refer to the Knowledge section.

    Does having knowledge mean I can speculate (trade) or invest effectively?

    No, having knowledge without practice makes it difficult to speculate and invest effectively. You will need a team or advisor to help you make informed decisions through market analysis and practical education.

    Therefore, you can see that from small to large financial institutions, they always have teams or advisors to support decision-making.

    What are the benefits of news and analysis (opinions and analysis) in the financial market?

    1. Stay Informed: Keeps you updated on market events, trends, and economic changes.
    2. Better Decision-Making: Helps you understand market sentiment and potential impacts on assets.
    3. Identify Opportunities: Spot emerging trends or risks early through expert insights.
    4. Diversify Perspectives: Gain different viewpoints to avoid biased decisions.
    5. Improve Timing: News and analysis can guide when to enter or exit positions.

    If I have many other questions, requests, or issues that need to be addressed, what should I do?

    You can contact us anytime to resolve your issues. Our advice and consulting services are free of charge. Please don’t hesitate to reach out.