US Consumer Sentiment Spotlights the Fed

While Japanese data and the upcoming election influence yen demand, US economic data will affect buying interest in the US dollar.

Later on Friday, US consumer sentiment numbers will take center stage, given the delay to the US jobs report. Economists forecast the Michigan Consumer Sentiment Index to fall from 56.4 in January to 55.0 in February. Waning consumer sentiment could signal a pullback in consumer spending and a softer inflation outlook. Cooling inflation would support a more dovish Fed rate path, weighing on US dollar demand.

A more dovish Fed policy stance and a more hawkish BoJ rate path would indicate a narrowing in US-Japan rate differentials. Narrowing rate differentials in favor of the yen would be bearish for USD/JPY.

According to the CME FedWatch Tool, the chances of a March Fed rate cut increased from 13.4% on January 29 to 24.3% on February 4. Meanwhile, the probability of a June cut jumped from 61.8% to 82.3%.

Technical Outlook: Key Levels to Watch

For USD/JPY price trends, traders should assess technical indicators, incoming economic data, central bank chatter, and political developments.

On the daily chart, USD/JPY remains above its 50-day and 200-day Exponential Moving Averages (EMAs). The EMA positions signal a bullish bias. However, positive yen fundamentals continue to offset technicals.

A break below the 50-day EMA would bring the 200-day EMA into play. If breached, 150 would be the next key support level.

Importantly, a sustained fall through the EMAs would indicate a bearish trend reversal and reaffirm the negative medium-term price outlook.

GBP/USD Falls to 1.36 Ahead of the BoE Rate Decision

The Bank of England will deliver its first monetary policy decision of 2026 at midday today. Expectations are that the central bank will leave interest rates unchanged at 3.75% after cutting rates by 25 basis points at the December meeting.

The December rate count was a narrow vote of five to four. Highlighting how finely balanced the debate about further rate cuts has become. The message from policymakers was still cautiously dovish, with a gradual downward path for rates, meaning that further cuts would be harder to justify as policy moves closer to neutral.

Growth momentum is showing signs of fading, with the economy expected to flatline in Q4. The central bank expects inflation to return to the 2% target by spring, despite rising to 3.4% in January.

There are signs, however, that the labour market is cooling, with the 5.1% percent. data from yesterday showed that the employment subcomponent fell sharply in January, continuing a trend that began in October 2024, marking the longest period of job shedding in the UK service sector in 16 years.

Further weakening in the jobs market would put downward pressure on wage growth and pull service sector inflation lower. Wage growth and service-sector inflation are currently too high for the Bank of England to be comfortable with further rate cuts, or to be consistent with inflation back at 2%.

The focus will be on the vote split, which is expected to be 7-2. A more dovish vote could put pressure on the pound. Bank of England Governor Andrew Bailey’s comments will be in focus, and dovish commentary would be pound-negative.

Meanwhile, the is rising as it nears a 2-week high amid market pricing in a slower pace and potential Federal Reserve rate cuts.

Federal Reserve governor Lisa Cook emphasised concerns over sticky inflation rather than the cooling labour market, suggesting that she was not supporting a rate cut until there are further signs of inflation easing.

Data yesterday showed the remained at 53.8 in January, aligning with the previous month’s figure and exceeding expectations from a client of 53.5. However, prices paid also increased to 66.6 from 65.1, signalling rising inflationary pressures. Attention will now turn to U.S. initial jobless claims, which are expected to rise modestly to 212K, up from 209 K.

GBP/USD Forecast – Technical Analysis

trended higher from 1.30 before running into resistance at 1.3870. GBP/USD rebounded lower from here and is testing support at the 1.36 zone, the round number, horizontal and trendline support.

A break below here exposes the 200 SMA at 1.3420. A break below 1.3350 creates a lower low, bringing 1.32 into focus.

Should the support hold, buyers will look to rise above 1.37. A rise above here brings 1.3870 back into play.

EUR/USD Steadies Around 1.18 Ahead of the ECB Rate Decision

has fallen back to 1.18 ahead of the ECB rare decision at 13:15 GMT where the central bank is widely expected to leave interest rates unchanged at 2% (deposit rate). The ECB last cut rates in June last year. However, inflation hovering around the 2% target led policymakers to consider monetary policy to be in a good place.

However, this meeting comes after data yesterday showed cooled by more than expected to 1.7% YoY in January, down from 1.9% in December and further from the ECB’s 2% target, reopening the debate over whether the ECB will cut again this year.

A stronger EUR, – EUR/USD rose to a 4-year high above 1.20 in late January, and cheap Chinese exports, which have flooded the eurozone, exert deflationary pressure and, if this persists, could amplify dovish calls within the ECB.

Given that no rate cut is expected, the focus will be on the tone of President Lagarde’s press conference as the near-term catalyst for the EUR.

A stronger USD and a slightly more dovish ECB could pull EUR/USD back towards 1.17.

EUR/USD Forecast – Technical Analysis

After recovering from the 200 SMA support and rising to a 4-year high of 1.2085, EUR/USD has fallen back and is testing the 1.18 support, the round number, the December high and the falling trendline support. The RSI is close to neutral.

Should buyers successfully defend this support, upside resistance is at 1.1870, with a rise above here bringing 1.20, the psychological level and 1.2085 back into focus.

Should sellers remove the 1.18 support, this would expose the 50 SMA and the 1.17 level. Below here, the 200 SMA at 1.16 comes into play, along with the 2026 low.

Original Post

The GBPJPY pair ended its bullish rally by reaching 214.90, forming a strong barrier against the bullish attempts, which pushes it to activate the bearish corrective track, to reach 213.5 attempting to press on the bullish channel’s support that appears in the above image.

Note that stochastic decline below 50 level, and attempt to form extra barrier at 214.15 level, these factors makes us wait for breaking the current support, to reinforce the chances to begin gathering gains, to expect targeting 212.90 level initially, where breaking this barrier might extend the trading towards 212.45 and 212.00, while holding above 214.15 will confirm the continuation of the bullish scenario, waiting to reach 215.00. 

The expected trading range for today is between 212.90 and 214.00

Trend forecast: Bearish

Created on February 05, 2026

The Euro has risen against the Japanese Yen during the trading session here on Wednesday as the interest rate differential continues to be a main driver of things. The ECB meets on Thursday, so be aware that volatility is almost certain to happen.

EURJPY

The Euro has risen against the Japanese Yen during the trading session here on Wednesday as we continue to just see a nice uptrend in a market that quite frankly has been a buy on the dip opportunity every time it falls. We are sitting above the 50-day EMA and of course the uptrend line.

We are hanging around the 185 Yen level and that of course is a large round psychologically significant figure that attracts a lot of attention. If we do pull back from here, I think that opens up the possibility of buyers getting involved on value.

Interest Rate Differentials and Policy Outlook

Keep in mind one problem we have is that the Thursday session has the ECB interest rate decision and that will come into the picture and cause a little bit of noise from everything I can see. With this being the case though, I think unless the ECB sounds suddenly very dovish, which I don’t think they will, you have a scenario where the interest rate differential will continue to favor the upside as the Bank of Japan really can’t do anything.

I suspect at this point we will eventually go looking toward the 190 Yen level, but that might take some time to get to. If we were to break down below the uptrend line and ostensibly the 50-day EMA, then I look for support at the 182 Yen level, possibly even down to the 180 Yen level. I have no interest in shorting this pair. I do not pay the swap and of course the trend is very well established here.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.