Created on January 05, 2026

• Short-term pullbacks are buying opportunities as we wait for value to appear in this pair.

AUDJPY

The Australian dollar spent the first part of the session on Friday rallying against the Japanese yen and even piercing the 105 yen level yet again. That being said, this is a market that continues to see a lot of noise above there, and it should be no surprise that we have, in fact, turned right back around after that move.

All things being equal, this is a market that I still believe in the upside, and it is worth noting that you get paid to hold onto it at the end of every session. We’ve been in an uptrend for a while, and despite the fact that we have flipped the calendar into 2026, I don’t think anything has truly changed.

Market Outlook and Key Support Levels

Short-term pullbacks are buying opportunities as we wait for some type of value. Keep in mind that the Japanese yen is considered to be a safety currency, and the Australian dollar, of course, is considered to be more of a risk-on commodity type of currency.

The 104 yen level should continue to be support and with that being said, I think we have a buy on the dip scenario. The 50-day EMA is all the way down at the 102.26 yen level and rising, so I think that is also dynamic support.

To the upside, if we can finally clear the 105 yen level, it’s likely that we go much higher, perhaps looking to the 107 yen level based on a measured move of the recent consolidation. Keep in mind that the Bank of Japan did recently raise rates, but they can only tighten monetary policy so much as the debt level in Japan is dire, to say the least. With that being the case, I look at this as a market that should continue to pay you over time if you hold it to the long side. I’ve got no interest in getting short, unless of course we get some type of external factor.

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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.

The interest rate differential between the two currencies is negligible at best now, so we’re not even playing along those lines. We’re just trying to figure out whether or not the Bank of England is going to start a larger rate-cutting cycle or not. We already know that the Federal Reserve is likely to cut rates again once or twice, but there are also a lot of questions as to when.

I think you’ve got a lot of concern here playing out, but the British pound has outperformed most of its contemporaries against the US dollar for some time now, be it up or down. It seems to be either stronger or less bad than other currencies, so I expect the dollar to have more of a fight here than it will against other currencies.

EUR/GBP Technical Analysis

The Euro has fallen pretty significantly against the British pound early in the session as we look like we are rolling over at a major resistance barrier. At this point, I think you have to look at this through the prism of a market that is just simply reflecting the reality that the Euro is a lot weaker than the pound against most currencies. So, when you match the two together, this trade makes perfect sense.

We have smashed through a short-term trendline and we’ve smashed through significant support. At this point, I anticipate that this market will continue to go lower, probably down to the 0.86 level initially, and then possibly even lower than that. We’ll just have to wait and see, but this is a pair that I am most certainly interested in shorting, and as a result, I think you have to look at this as an opportunity.

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Created on January 05, 2026

• The British pound rallied a bit on Friday but cannot seem to hang onto gains against the USD.

GBP/USD

The British pound rallied a bit during the early hours on Friday to test the 1.35 level yet again. This is an area that has been important multiple times, and I think it is worth watching very closely.

The market is likely to continue to see a lot of noise in this general vicinity with the possibility of breaking out to the upside. Breaking out to the upside opens up a move to the 1.37 level.

A breakdown from here, breaking below the hammer from the Wednesday session, could open up a test of the 50-day EMA, possibly even the 200-day EMA underneath there. All things being equal, I think this is a market that is trying to find the momentum to break out, but it just can’t seem to get over this 1.35 level.

Market Outlook and Volatility

We will probably make a more profound statement sometime later next week, but in the meantime, I think you have got a lot of choppy short-term back-and-forth trading ahead. I don’t like the idea of getting too heavily involved in the market at the moment, mainly due to the fact that liquidity and volume are still issues, and of course, we don’t really have momentum to deal with.

By the end of next week, though, I do anticipate that we probably have a real shot at some type of movement. I do think that the end of next week, with the jobs numbers coming out of the United States, could give you a little bit of momentum in this pair.

Between now and then, we are probably going to be very jittery and choppy, and with that, I look to short-term charts more as a range-bound trader as it continues to offer short-term opportunities, perhaps on something like the 15.

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