Japanese Leading Economic Indicator in Focus

Later on Monday, Japanese economic indicators are likely to fuel speculation about an April Bank of Japan rate hike. According to the preliminary report, the Leading Economic Index (LEI) increased from 109.8 in October to 110.5 in November, suggesting a pickup in economic momentum.

An upward revision to the preliminary number would raise expectations of an April BoJ rate hike, boosting buying interest in the yen. The stronger yen would push USD/JPY lower.

Traders should pay close attention to LEI trends. A higher reading suggests improving business investment, rising employment, and higher wages. Importantly, stronger wage growth would increase households’ purchasing power, fueling spending and demand-driven inflation.

An upward trend in consumption and inflation would align with the BoJ’s upward revisions to inflation in its quarterly outlook report, supporting a more hawkish BoJ rate path.

Rising bets on BoJ rate hikes and Fed rate cuts reaffirm the bearish medium- to longer-term price projections.

US Durable Goods Orders and the Fed in Focus

While the yen gets government support, US economic data will influence the appetite for the US Dollar. Durable goods orders, the Chicago Fed National Activity Index, and the Dallas Fed Manufacturing Index will be in focus. However, durable goods order trends are likely to garner more attention, given that the Index gives insight into business and consumer spending.

Economists expect durable goods orders to rise 0.5% month-on-month in November after sliding 2.2% in October. A higher-than-expected reading would indicate a pickup in manufacturing sector activity, bolstering the US economy. However, the numbers may have limited influence on Fed rate-cut bets, given that the manufacturing sector accounts for just 20% of US GDP.

Traders should closely monitor FOMC members’ speeches, which will likely have more influence on sentiment toward an H1 2026 Fed rate cut and USD/JPY trends.

Technical Outlook: Key Levels to Watch

For USD/JPY price trends, traders should consider technicals and closely follow central bank and political headlines.

On the daily chart, USD/JPY trades below its 50-day Exponential Moving Average (EMA), but above the 200-day EMA. The EMAs signaled a near-term bearish trend reversal, aligning with the negative outlook for USD/JPY. Constructive yen fundamentals have aligned with the near-term technicals.

A sustained drop below the 155 support level would expose the 200-day EMA. If breached, 150 would be the next key support level.

Crucially, a sustained fall through the EMAs would reaffirm the bearish short- to medium-term price outlook.

I wrote on the 11^th January that the best trades for the week would be:

1. Long of the USD/JPY currency pair following a daily close above ¥158. This set up the next Monday, but produced a loss of 0.04% over the week.
2. Long of the S&P 500 Index. This produced a loss of 0.23% by the end of the week.
3. Long of Silver following a daily close above $81.25. This set up on Monday and produced a gain of 5.82% by the end of the week.
4. Long of Gold following a daily close above $4,533.21. This set up on Monday and produced a loss of 0.03% by the end of the week.
5. Long of Copper (CPER) following a daily close above $37.27. This set up on Wednesday and produced a loss of 4.16% by the end of the week.

Overall, these trades gave a gain of 1.36% (0.27% per asset).

A summary of last week’s most important data that caused any surprise or uncertainty in the market:

1. US Final GDP data came in a tick higher than expected, showing an annualized rate of 4.4% compared to 4.3%. However, although the broader US stock market (represented by the Russell 2000 Index) enjoyed a strong rise in January while the S&P 500 Index has traded mostly sideways, this data does not seem to have made much difference to the market.
2. The Bank of Japan held a policy meeting last Friday and left its Policy Rate at 0.75% as widely expected. The Japanese Yen continued to weaken quite strongly over the week, with the Bank of Japan effectively trapped by huge debt. However, later on Friday, the Japanese authorities called major banks and threatened intervention to prop up the Yen, and this alone was enough to send the Yen sharply higher over the final hours of the week’s trading session.
3. UK CPI (inflation) was expected to rise from 3.2% to 3.3%, it rose to 3.4%.
4. New Zealand CPI (inflation) was expected to fall from 1.0% to 0.5%, it came in slightly higher at 0.6%.

Last week’s data had very limited impact. It is likely that continuing geopolitical tensions between the USA and Iran, following the USA’s successful abduction of President Maduro of Venezuela, had more impact last week than any of the above items, excepting the Bank of Japan’s threat to intervene by buying Yen.

The USA has continued to send military assets towards Iran and build up what look like preparations for a war. The internet remains blocked in Iran, but limited information emerging from medical sources suggest that far more than the officially admitted 3,500 killings have taken place, and continue to take place, with some estimates placing the civilian death toll as high as 80,000. What does seem clear is that the regime is determined to survive and is willing to kill unarmed protestors in significant numbers to do so.

President Trump continues to hint at helping and protecting the protestors. Most neighboring countries are publicly opposed to any US military action in support of the protestors, and it remains unclear exactly what the US could do to improve the situation by military action. There is also concern that Iran could launch a pre-emptive strike, with reports that China has airlifted a significant amount of advanced military equipment to Iran in recent days.

In addition to Iran, we also saw President Trump continue to express a desire to acquire Greenland, severely straining ties between the USA and the EU. Although Trump ruled out using force, his behaviour towards the EU and by extension NATO is extremely disrespectful.

These factors have also shaken the US Dollar, whose sharp drop last week seems to have nothing to do with the Fed at all, even though the Fed will be holding a policy meeting this week.

On a final note, President Trump over the weekend began to threaten Canada with a new 100% tariff over its potential trade deal with China. If implemented, this could cause turbulence for the greenback and serious turbulence for the Canadian Dollar as well.

The coming week’s most important data points, in order of likely importance, are:

1. US Federal Reserve Policy Meeting
2. US PPI
3. Bank of Canada Policy Meeting
4. Australia CPI (inflation)
5. Canadian GDP
6. US Unemployment Claims

Although there are not a lot of data items, the first few are highly important for the Forex market, so it could be an important week. Monday is a public holiday in Australia.

Currency Price Changes and Interest Rates

For the month of January 2026, I forecasted that the USD/JPY currency pair would rise in value.

January 2026 Monthly Forecast Performance to Date

Two weeks ago, I made no forecast, as there were no recent excessive moves in currency crosses. However, last week saw three crosses with excessive volatility, so I made the following weekly forecast this week:

• Short NZD/JPY
• Short AUD/JPY
• Short NZD/CAD

The Australian and New Zealand Dollars were the strongest major currency last week, while the US Dollar was the weakest. Directional volatility rose significantly last week, with 67% of all major pairs and crosses changing in value by more than 1%. This is the most volatility we have seen in the Forex market since April 2025.

Next week’s volatility is likely to remain relatively high.

You can trade these forecasts in a real or demo Forex brokerage account.

Key Support and Resistance Levels

Last week, the US Dollar Index printed an unusually large bearish candlestick which closed right on its low. This was the largest bearish candlestick since April 2025, and lowest weekly close since June 2025. These are very bearish signs. The price action suggests a long-term bearish trend with the price below its levels of both 13 and 26 weeks ago. However, it is worth noting that the lows made last autumn and in the summer remain intact below the current price.

The slightly stronger than expected US economic data released last week helped firm up the Dollar, as it has given a slightly hawkish tilt against rate cut expectations in 2026, although two rate cuts of 0.25% are still widely seen as likely to happen.

I take a weakly bullish bias on the US Dollar right now and am comfortable being long of the greenback.

US Dollar Index Weekly Price Chart

The AUD/USD currency pair advanced very strongly last week, powering up with unusually high volatility to a new 15-month high.

The price closed very near its high, which is another bullish sign.

There is a long-term bullish trend here which has been in force for about 9 months.

There is also a fundamental reason for the Australian Dollar’s strength – it is practically the only major currency except the US Dollar where there is a credible belief that its central bank is going to raise interest rates soon.

This move high is probably a bit over-extended, but I think that after an orderly bearish pullback, we could see a good opportunity for a long swing trade on the bounce.

AUD/USD Weekly Price Chart

The EUR/USD currency pair has been range-bound, trading sideways on low volatility, for many months now. Last week, it suddenly jumped, as the US Dollar made its strongest fall in almost 9 months.

The price closed right on the high of the week’s range, which is a bullish sign.

Despite these bullish signs, a few months ago there was a strong inflection point which closed at $1.1866, and this has not yet been tested. I would like to see bulls overcome this price level before going long.

This currency pair has a good propensity to trend, but with deep and frequent retracements.

So, I think this pair is worth keeping an eye on with a potential long trade entry, but I am not ready to enter just yet.

I will take a long trade if we get a daily (New York) close above $1.1866.

EUR/USD Daily Price Chart

Silver is still showing very high volatility, and it rose like crazy over the week, reaching and breaching the magic round number at $100. This is a very big deal. It closed right on its high, and its sister precious metal Gold also rose strongly. These are very bullish signs. Just look at the weekly price chart below!

I had thought that we would see major profit-taking at $100 but this does not seem to have happened at all.

If you are not long already, you might have missed the party, but there is no reason why this metal won’t go substantially higher, possibly even to $125.

I think it makes sense to think about getting long here, but with a smaller than usual position size.

Silver Weekly Price Chart

Gold saw a strong rise last week, as did all other precious metals, notably Silver. Gold ended the week right on its high after making its strongest weekly gain in many months. Although these seem to be bullish factors, there might be some fear that this large candlestick could be a pre-exhaustion peak. My suspicion here is enhanced by the fact that the price stopped just short of the huge round number at $5,000.

Still, we are seeing record high prices in Gold, Silver, and Platinum, and extremely powerful bullish momentum, especially here in Silver.

I am prepared to enter another long trade if we do get a new record high daily (New York) closing price above $5,000.

Gold Daily Price Chart

I see the best trades this week as:

1. Long of the EUR/USD currency pair following a daily close above $1.1866.
2. Long of Silver.
3. Long of Gold following a daily close above $5,000.

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• The GBP/USD weekly forecast turns strongly bullish as the dollar loses traction amid geopolitics.
• The upbeat UK CPI, retail sales, and PMI data provided adequate support to the pair.
• Markets await the FOMC rate decision and press conference next week.

GBPUSD ended last week with sterling fundamentals improving, but price action still leaned heavily on USD headline risk and US rate expectations.

In the UK, inflation re-accelerated as CPI rose 3.4% YoY in December (from 3.2%), which typically reduces the market’s confidence in rapid BoE easing and helped GBP on the day by lifting front-end UK yields. Activity and demand data also surprised positively: UK retail sales rose 0.4% MoM in December (versus expectations for a fall), adding to signs of a pickup and supporting sterling sentiment, even if the FX follow-through was at times modest.

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The UK flash PMI set added to the constructive tone by signalling continued expansion in private-sector activity, reinforcing the idea that the UK economy is not rolling over into the BoE’s subsequent decisions.

On the US side, “good” data didn’t translate into a stronger dollar because geopolitics dominated. The US economy’s momentum was confirmed as Q3 2025 GDP was revised up to a 4.4% annualized pace, and business surveys stayed expansionary with the S&P Global flash PMIs showing manufacturing at 51.9 and composite at 52.8 in January.

At the same time, tensions between the US and Europe over Greenland added to volatility in the risk premium. Trump said he would impose 10% tariffs on eight European countries under pressure from Greenland. Later, he also said that a “framework” had been talked about after meeting with NATO Secretary General Mark Rutte. Denmark and Greenland both stated that their sovereignty is not negotiable. That mix made the markets jumpy and hurt steady demand for the USD.

In the next week, there won’t be any big UK releases, so the tape will lead. So, GBPUSD should mostly trade like a Fed-week USD cross, reacting to changes in US yield expectations and any new geopolitical or tariff news.

If the Fed is hawkish, the USD can be stronger than the improving data pulse of the GBP. Conversely, if the Fed stays balanced and yields fall, the GBP can hold up better than its peers, given last week’s hotter CPI and stronger activity signals.

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GBP/USD Weekly Technical Forecast: Bullish Above 1.3565

The GBPUSD daily chart shows a strong bullish candle piercing the 1.3565 resistance level, followed by the 1.3600 psychological mark. However, the RSI approaching the overbought region indicates a potential pullback to the 1.3565 area before an upside continuation.

The upside target for the pair lies at 1.3700, ahead of 1.3750. On the downside, if the price breaks and stays below the 1.3565 level could gather further selling pressure and drag towards 1.3500.

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Created on January 23, 2026

• The US dollar rallied against the Japanese yen on Thursday, but it should be known that the Bank of Japan meeting will keep things quiet until the statement and press conference on Friday.

The US dollar rallied against the Japanese yen on Thursday as we continue to see a lot of back-and-forth trading, but focus on the interest rate differential. We did give back some of the gains, and that makes a certain amount of sense as well, due to the fact that Friday is possibly going to be a volatile session as the Bank of Japan continues to see a lot of questions asked about its interest rate policy.

It will, in fact, give its latest update on its interest rate policy. The change is expected to be nothing, but the statement will be where people pay the most attention to. If they sound particularly dovish, that could send the US dollar much higher against the Japanese yen, and I think we would tag the 160 yen level.

Support and Volatility

A pullback at this point in time probably sees support near the 156.20 level, where the 50-day EMA is hanging around. I do expect a lot of volatility, and I do think dips will offer buying opportunities unless, of course, the Bank of Japan does something completely unexpected like hike aggressively.

I don’t think that’s going to be the case; quite frankly, they have too much debt to do that. Expect volatility, a lot of noisy behavior, and at this point, be cautious about selling into negativity.

I think that negativity, if you are patient enough, will offer a nice opportunity to continue to add to a position that, quite frankly, has paid you quite well since the middle of April. Of course, you get paid at the end of every day, right along with that.

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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.

– Written by


Ben Hughes

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Tests Upper Ranges

The Pound-to-Dollar exchange rate (GBP/USD) has pushed to 1.3535, as foreign exchange analysts at ING and MUFG argue that confidence in US policymaking has not fully recovered, keeping the risk of renewed “Sell America” flows alive despite calmer headlines.

GBP/USD Forecasts: Tight Ranges

The Pound to Dollar (GBP/USD) exchange rate has been held in relatively narrow ranges and trading around 1.3440 after again finding support near 1.34 with Pound support from a boost to risk appetite offset by a firmer dollar.

According to UoB; “we continue to expect range-trading today, most likely between 1.3400 and 1.3460.”

Given major global pressure points, it is dangerous to assume that narrow ranges will prevail.

According to ING; “Some downside risks for the dollar persist: more volatility in JGBs spilling into Treasuries, scrutiny on upcoming US tech earnings, reignition in geopolitical/tariff risk. But the macro picture should favour a bit more dollar strength in the coming days, in our view.”

Risk appetite secured an initial boost on Wednesday following President Trump’s comments that he would not use force to secure a deal on Greenland.

There was a further boost to confidence after the European close after Trump stated that a deal on Greenland had been reached with NATO Secretary-General Rutte and that the threatened tariffs on eight European countries from February 1st would not go ahead.

Markets were concerned that US threats would trigger selling in US bonds and equities which would hurt the dollar. With the immediate threat easing, there was a rebound in the dollar.

Commerzbank forex strategist Volkmar Baur commented; “From a European perspective, it is too early to rejoice.”

He added; “However, the most likely outcome is still that the next wave of excitement will pass us by after a brief period of volatility and that the market will refocus on central banks and interest rate differentials.”

ING considers that attention will turn towards the Federal Reserve policy decision next week.

According to the bank; “We discussed last week how Powell’s fierce response to the criminal investigation signalled upside risks to the dollar, as he and other members could have turned more hawkish in a meeting without any rate change to reinforce the independence message.”

The Supreme Court also held a hearing on the US Administration case to dismiss Fed Governor Cook. The initial signs are that the court is not mindful to back Trump due to the threat to Fed independence.

MUFG still sees dollar risks, but added; “The loss of confidence in US policymaking is likely to remain a headwind for the US dollar as we have seen at the start of this year. However, the risk of a sharper US dollar sell-off has diminished after President Trump’s quick climb down over Greenland, and early indications from the Supreme Court overnight that they are likely to rule against President Trump’s decision to fire Fed Governor Lisa Cook.”

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