USD/JPY trades below 155 as of writing, extending last week’s drop and marking a shift in short- to medium-term market dynamics. The pair dropped after failing to sustain momentum above levels that had anchored price action for months. The move followed a volatile and bearish January that saw USD/JPY swing between a low of 152.09 and a peak around 159.45. 

While price found support near long-term averages, momentum weakened, and traders began reassessing the durability of the yen-funded carry trade. Is the market preparing for a deeper reset?

Hawkish BoJ Signals Reshape Expectations

Yen demand strengthened as investors reacted to signs that the Bank of Japan may continue tightening policy. Preliminary PMI data pointed to improving momentum in manufacturing and services, supporting a firmer economic outlook. GDP upgrades reinforced expectations that inflation and growth may align with the BoJ’s projections. 

These developments raised bets on further rate hikes in 2026, narrowing the gap between Japanese and US yields. As rate spreads compressed, the appeal of holding leveraged dollar-long positions weakened. The Bank of Japan’s latest policy meeting on January 23, 2026, kept rates unchanged at 0.75%, with a dissenting vote for a hike, as policymakers viewed risks to the economic & price outlook as broadly balanced ahead of February’s snap election.

Source: MacroEdge Data Stream via X

Summary of Opinions Takes Center Stage

The BoJ’s Summary of Opinions, scheduled on February 2, has become a focal point for markets as traders looked for clarity on wage growth, tariff risks, and price stability. The Summary of Opinions from the January policy meeting pointed to a clearer sense of urgency around raising interest rates as policymakers track the inflationary impact of a weak yen. 

References to “a weak yen” and “foreign exchange” doubled from the prior meeting, signaling that currency depreciation now sits at the center of policy discussions. One board member said the bank should move to a rate hike without missing the right timing, citing rising prices as an urgent priority. 

The summary suggested growing support for tightening at a faster pace than the market’s expectation of roughly one hike every six months, reinforcing the view that yen weakness strengthens the case for earlier and more frequent policy action.

Election Uncertainty Adds Political Noise

Japan’s snap election on February 8th adds another layer of uncertainty. Prime Minister Sanae Takaichi seeks a stronger mandate to pursue fiscal spending plans. Earlier concerns over rising debt and issuance contributed to yen weakness during USD/JPY’s surge from October to January. 

A decisive election outcome could revive those fears. However, markets also recognize that fiscal expansion may pressure the BoJ to normalize policy faster, which could support the yen. This tension keeps volatility elevated and discourages one-directional trades.

U.S. Data and Fed Signals Guide the Dollar Side

On the US side, economic data and Federal Reserve communication continue to steer dollar demand. The ISM Services PMI and the February jobs report will shape expectations for rate cuts. Forecasts point to moderating service sector growth and slower wage gains. 

Such trends could cool inflation pressures and support a dovish shift later in 2026. FedWatch data already show declining odds of an early rate cut, yet markets still expect easing later in the year. This gradual repricing limits upside for the dollar against the yen.

Outlook: Volatility Remains High

USD/JPY now trades in a more fragile environment as policy signals, political risk, and yield dynamics intersect. Levels near 155 have shifted from support to resistance, while areas below 152 and toward 150 draw attention. Yen intervention rhetoric continues to cap sharp upside moves, even as occasional rebounds emerge. 

With multiple catalysts ahead, traders brace for continued volatility. Will narrowing rate spreads and BoJ guidance drive the next leg lower, or will dollar resilience delay the adjustment? The coming weeks may decide.

The GBPJPY pair continued forming bullish trading since Friday’s trading, taking advantage of the repeated positive stability above 210.40 support, achieving several gains by reaching 212.75 which forms an intraday obstacle against the bullish trend.

The contradiction between the main indicators makes us expect providing mixed trading until gathering extra positive momentum, to ease the mission of surpassing the current obstacle, to target extra gains by its rally towards 213.40 and surpassing it will confirm its stability within the main bullish channel’s levels, opening the way towards for strong chance of recording new gains that might extend towards 214.15 and 214.90.

The expected trading range for today is between 211.80 and 213.40

Trend forecast: Bullish

The EURJPY pair succeeded in resuming the bullish trend that depends on the main stability within the bullish channel’s levels, reaching 184.25 achieving the suggested target in the previous report.

In general, the main stability above the main bullish channel’s support at 182.60, the main indicators attempt to provide bullish momentum will increase the chances of surpassing the current obstacle to ease the mission of recording new gains that might begin at 184.85 and 185.45.

The expected trading range for today is between 183.40 and 184.85

Trend forecast: Bullish

– Written by


Frank Davies

STORY LINK Pound to Dollar Forecast 2026: USD Rebounds as Warsh Pick Halts GBP Rally

The Pound to Dollar exchange rate (GBP/USD) has retreated from 4-year highs after the dollar staged a rebound on speculation that Kevin Warsh will be nominated as the next Federal Reserve Chair, easing fears over political interference and triggering sharp position unwinds across FX and precious metals.

GBP/USD Forecasts: Retreat from 4-Year Highs

The dollar has been under strong pressure for much of the week, but staged a notable comeback on Friday.

The catalyst for the move was a report that President Trump would nominate Kevin Warsh as the next Fed Chair.

Warsh is in favour of lower interest rates and structural reform within the Fed, but he is seen as a guardian of independence and his nomination would lessen fears over political interference in Fed policy.

The dollar pared losses and there was a dramatic slide in precious metals after posting a series of record highs.

In this environment, the Pound to Dollar (GBP/USD) exchange rate dipped to lows at 1.3725 from 4-year highs above 1.3850 earlier in the week.

According to UoB; “if GBP breaks below 1.3710, it would mean that the advance that started last week has run its course.”

Position adjustment will be potentially important in the near term. According to ANZ head of Asia research Khoon Goh; “Any sensible market participant would not want to carry a big position into the weekend. So some of this could just be positioning lightening up. If you’re short dollars, you’ve done well, take your chips off the table.”

ING commented; “The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is likely to be announced as the new Federal Reserve Chair nominee today offers exactly that.”

The bank added; “Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss.”

According to ANZ head of Asia research Khoon Goh; “The appointment of Warsh, if it’s true, will be seen as someone who can, in a way, remain independent, and not someone seen as likely to be subservient to Trump’s wishes.”

MUFG took a similar line on credibility; “Warsh is a strong advocate of Fed independence so fears over independence being eroded should recede which is also dollar supportive.”

Nevertheless, the bank added that credibility could be a double-edge sword; “That stronger credibility means Warsh stands a much better chance of swaying the rest of the FOMC in the direction he advocates and hence an initial period of rate cuts should actually now be viewed as more likely.”

It added; “with rate cuts potentially more likely to be delivered under a Warsh FOMC we suspect this initial bounce for the dollar will fade.”

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US ISM Manufacturing and the Fed in Focus

Later on Monday, US economic indicators will fuel speculation about an H1 2026 Fed rate cut and demand for the US dollar.

Economists expect the ISM Manufacturing PMI to increase from 47.9 in December to 48.3 in January. A less marked contraction across the manufacturing sector would ease concerns about a sharp slowdown in US GDP growth, bolstering the US Dollar. However, traders should consider price and employment trends, considering the Fed’s dual mandate.

Softer prices and falling employment would likely overshadow a pickup in sector activity, and raise expectations of an H1 2026 Fed rate cut. A more dovish Fed policy stance would weaken the US dollar and send USD/JPY lower. Importantly, a more dovish Fed would support the bearish short- to medium-term outlook for USD/JPY.

Beyond the economic data, traders should closely monitor Fed speeches for insights into inflation, the economy, and the timeline for rate cuts.

According to the CME FedWatch Tool, the probability of a March Fed rate cut fell from 15.4% on January 23 to 13.4% on January 30, following a larger-than-expected rise in US producer prices. Meanwhile, the chances of a June cut rose from 60.7% to 61.8% last week. The modest increase in bets on a June cut underscored optimism that inflation will cool, enabling the Fed to lower rates.

Importantly, an H1 2026 Fed cut would support expectations of multiple rate cuts in 2026. Multiple Fed rate cuts would coincide with the BoJ’s hawkish policy outlook, signaling narrower US-Japan rate differentials. Narrowing rate differentials, favoring the yen, would weigh on USD/JPY.

Technical Outlook: Key Levels to Watch

For USD/JPY price trends, traders should assess technicals and monitor economic data, central bank chatter, and geopolitical headlines.

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

A break below the 200-day EMA would bring the 150 support level into play. If breached, October’s low of 146.585 would be the next key support level.

Importantly, a sustained fall through the EMAs would reaffirm the bearish trend reversal. These scenarios would reinforce the negative short- to medium-term price outlook.

I wrote on the 25^th January that the best trades for the week would be:

1. Long of the EUR/USD currency pair following a daily close above $1.1866. This gave a loss of 0.24%.
2. Long of Silver. This gave a loss of 18.62%.
3. Long of Gold following a daily close above $5,000. This gave a loss of 2.26%.

Overall, these trades gave a large loss of 21.12% (7.04% per asset). Despite the size of this loss, following my weekly forecasts over the past few weeks would still have been profitable, as the recent wins were enormous.

A summary of last week’s most important data in the market:

1. US Federal Reserve Policy Meeting – no surprises, rates were left unchanged.
2. US PPI – this was the major surprise of the week, as this inflation indicator came in much higher than expected, showing a monthly increase of 0.5% and a core monthly increase of 0.7%, when an increase of only 0.2% was expected for both. This is seen as a hawkish tilt for the Fed, and this news helped drive the US Dollar higher and accelerate the bursting of the Silver (and Gold) bubble. This has pushed back the expected timing of the second rate cut for 2026 to October and strengthened the US Dollar a bit.
3. Bank of Canada Policy Meeting – no surprises, rates were left unchanged.
4. Australia CPI (inflation) – this came in higher than expected, showing an annualized rate of 3.8% when 3.5% was expected, which strengthened the case a little for RBA rate hikes, boosting the Australian Dollar during the earlier part of last week.
5. Canadian GDP – just a tick lower than expected, showing no month-on-month growth.
6. US Unemployment Claims – as expected.

The PPI and Australian inflation data had some impact on markets last week, but there were two other events that probably had a stronger overall impact on the market:

1. President Trump finally nominated his choice for the next Chair of the Federal Reserve: Kevin Warsh, who is seen as a hawk, but who is expected to believe now that interest rates should be lower. His appointed helped burst the Silver bubble and boost the US Dollar somewhat.
2. The US continues its military build up near Iran, with tensions rising as a full-scale regional war looks increasingly likely. The prediction site Polymarket sees a US strike on Iran as likely to happen in March, with President Trump still talking about a potential deal with Iran in which it would commit to not building nuclear weapons. This is probably driving the price of crude oil higher, with WTI reaching a new 4-month high last week.

The US stock market’s broad S&P 500 Index briefly made a new record high above 7,000. The Index remains resilient, but it is showing very little upwards momentum. I see this as unlikely to change until the prospect of war between the USA and Iran is resolved one way or another.

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

1. US Average Hourly Average Earnings & Non-Farm Employment Change
2. Preliminary UoM Inflation Expectations
3. European Central Bank Main Refinancing Rate & Monetary Policy Statement
4. Bank of England Official Bank Rate, Votes, Monetary Policy Summary & Report
5. RBA Cash Rate, Rate Statement, and Monetary Policy Statement
6. US JOLTS Job Openings
7. Preliminary UoM Consumer Sentiment
8. US ISM Services PMI
9. US ISM Manufacturing PMI
10. US Unemployment Rate
11. New Zealand Unemployment Rate
12. Canada Unemployment Rate
13. US Unemployment Claims

It will be a busy week, with three major central banks holding policy meetings, so it could be an important week. Friday is a public holiday in New Zealand.

Currency Price Changes and Interest Rates

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

January 2026 Monthly Forecast Final Performance

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

Last week saw three crosses with excessive volatility, so I made the following weekly forecast then:

• Short NZD/JPY: this gave a loss of 0.57%.
• Short AUD/JPY: this gave a loss of 0.32%.
• Short NZD/CAD: this gave a loss of 0.39%.

The Swiss Franc and New Zealand Dollar were the strongest major currency last week, while the US Dollar was the weakest. Directional volatility fell significantly last week, with only 11% of all major pairs and crosses changing in value by more than 1%.

Next week’s volatility is likely to be notably higher.

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 fairly large bullish pin bar candlestick which rejected a new 4-year low. This is bullish by itself but we also have a long-term bearish trend with the price below its levels of both 13 and 26 weeks ago. This gives us a conflicted technical picture on the US Dollar.

The appointment of Kevin Warsh as Fed Chair helped strengthen the Dollar last week, but I see the outlook now as uncertain and the best market opportunities will probably not be US Dollar-dependent.

US Dollar Index Weekly Price Chart

The EUR/USD currency pair made a strong long-term bullish breakout a few days ago when the US Dollar started weakening at a faster pace and dropping a new 3.5-year low, but it quickly flopped right back down, finding very little support.

This suggest we have seen a spike, but I would not rule out a long-term bullish trend taking off – this pair does tend to trend reliably.

However, with the new Fed Chair and USD strength at the end of the week on higher inflation indicators, it makes sense to be cautious.

I will only take a long trade if we get a daily (New York) close above $1.2039.

EUR/USD Daily Price Chart

WTI Crude Oil has risen powerfully over recent days as the threat of a regional war centred on Iran has grown, with prediction markets currently seeing a US attack on Iran as likely to happen in March. This could seriously disrupt the supply of crude oil, so we have seen the price made a new 4-month high at the end of last week. A daily close above $66.25 would represent a new 6-month high.

Two notes of caution are necessary:

1. Although a daily close above $66.25 would usually trigger a long entry from trend-following funds, the moving averages do not support a long trade. Even if war breaks out, this could just be a spike which flops back rapidly with a speedy American victory, leading to a losing trade.
2. The Trump administration will move heaven and earth to bring down the price of crude oil, unlike recent Democratic administrations.

WTI Crude Oil Daily Price Chart

BTC/USD has finally made a very significant bearish breakdown below the long-term support level just above $81,000 and is now established below that level and reaching a new 9-month low. This is technically very significant in a bearish way.

While stocks and precious metals were rising strongly over recent months, Bitcoin fell from a record high a few months ago and continued to decline. It is clear the crypto sector is in decline, and that Bitcoin is in serious trouble. Bitcoin was meant to change the world, but outside of Africa, is just has not – you still can’t use it and it is unclear what value it really holds.

I do not like shorting assets, but Bitcoin looks weak and is well established within a bearish long-term trend. I certainly wouldn’t buy it now, and you might consider shorting it, but be very careful shorting is best done by experienced traders.

Bitcoin Daily Price Chart

Silver had a wild week, rising by well over 15% to reach a new all-time high and option target of $120, before making an epic crash on Thursday and Friday, mostly on Friday, on which day alone it declined by 28%.

I warned that this was prone to crashing, and that while it made sense to be long, a small position size should be used.

The size of the crash, despite the bullishness and mild resilience in the bounce at the weekly low, suggests we are not going to see a new high any time soon. This amazing trade is over, and we will probably now see wild consolidative swings with gradually declining volatility.

Silver Daily Price Chart

Everything I wrote above concerning Silver also applies to Gold. However, it can be added that the volatility here was somewhat less, and the resilience at the lows a bit stronger. It is likely that Gold will also trade sideways now for a while, but it is showing signs that it will recover more quickly to the upside than Silver will.

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 $1.2039.

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There is no change on GBPJPY pair’s track until this moment, due to its stability above 210.40 support, to notice forming bullish waves and settling near 212.10 barrier.

The attempts of the main indicators to provide bullish momentum will increase the chances of breaching the current obstacle, opening the way for recording new gains that might begin at 212.55, then pushing the resistance to reach 212.85, which represent the confirmation point of regaining the main bullish trend, while the decline below the mentioned support and holding below it will confirm its move to the negative trend, forcing it to suffer several losses by reaching 209.60 and 209.00.

The expected trading range for today is between 211.30 and 212.55

Trend forecast: Bullish

Created on February 01, 2026

The WTI Crude Oil $66 level is an area that seems to be offering quite a bit of resistance and now we find ourselves pulling back from there. I think there are a lot of questions out there as to whether or not we are going to see strikes against the Iranians over the weekend. That being said, supply and demand continue to be a major headwind for pricing, so I would not look for massive moves, and I do think fading rallies continue to be the case.

The British pound broke out above the 1.3750 level and have seen a lot of selling pressures to show signs of exhaustion. In fact, the weekly candlestick is a bit of a shooting star. It suggests that we might struggle to continue to the upside. A fall from here could find the British pound dropping to the 1.35 level, which of course is a large round psychologically significant figure. I think part of this is Kevin Warsh being named as the nominee for the new Federal Reserve Chairman, and he is quite a bit more hawkish than many others.

The Euro rallied rather significantly during the week but has been absolutely crushed after initially taking off to the upside. I do think that we are very likely to see the potential for more consolidation. In other words, that breakout might have been false. We will just have to wait and see how the market reacts to the new Federal Reserve Chairman nomination, but as things stand right now, this looks like a market that I think is struggling. The 1.16 level is an area that we could find ourselves reaching towards, but if we turn around and see buyers right away for the next week, then we could see this market really take off, perhaps even heading back towards the 1.20 level followed by the 1.23 level.

The German DAX has been negative most of the week but it is hanging onto the 24,500 level. This is an area that I have been talking about as being important for support as it was previous resistance. All things being equal, this is a market that I think continues to see plenty of interest as we had broken out above there and now it looks like we are perhaps trying to turn things around and rally to the upside. I think the DAX will be one of the better performers this year as the Germans will continue to throw a lot of money into the economy and that should help the DAX, so I am bullish still.

The silver market will be what everybody is talking about as in one week we see it reaches $122 or so and as we are closing out the day on Friday, there is an absolute bloodbath. Silver broke below the $90 level in one fell swoop on Friday and it looks like it is going to race towards the $80 level. Eventually gravity had to return, and I think that is what we are seeing here. The Federal Reserve Chairman being nominated was a little bit more hawkish than most people expected and silver of course is going to be extraordinarily volatile under the best of circumstances, and at this point, it is not the best of circumstances. Silver has become pretty much untouchable.

Gold markets find themselves equally as brutalized, but gold has the backing of central banks so I think that gold will more likely than not recover much quicker than silver will because quite frankly silver had gotten so far out of its own element that it had become something akin to one of these altcoins you see in the crypto markets. Gold on the other hand does have a lot of interest from central banks, but we may have just seen the highs. I think it is a little early to call that, but the way the markets are behaving on Friday, it is almost impossible to believe that there won’t be some type of follow-through. Quite frankly, considering that just two years ago gold was closer to the $1,700 level, it is not a huge surprise that there had to be a reckoning. Sooner or later, markets that are out of control see this type of behavior.

The US dollar plunged against the Japanese yen during the trading week but has seen a massive turnaround and it now looks as if the markets are starting to realize a potential mistake in shorting the dollar the way they have. That being said, this is a market also featuring a massive interest rate differential between the two currencies, so this is essentially how I would have expected the market to behave all along. We bounced from the 50-week EMA, and it looks like if we can break back above the 155 yen level then we could go looking to the 158 yen level.

The US dollar has fallen rather significantly against the Swiss franc and tested the 0.76 level. The 0.76 level is an area that I don’t know is particularly important by itself, but we also have to worry about the idea of the Swiss National Bank coming in and intervening if the Swiss franc gets a little too strong. I still think that is a threat, but the fact that we are forming a hammer after a breakdown like this and, more importantly, we are seeing the US dollar turn things around globally, I think this one might be ripe for a bounce as well.

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• The GBP/USD weekly forecast remains slightly subdued as the markets pared partial weekly gains amid dollar recovery and profit-taking.
• Fed’s data dependency and resilient UK economy continue to balance the GBP/USD.
• Market participants eye the US NFP and the BoE interest rate decision to gauge further directional bias.

The GBP/USD price closed its second consecutive week in gains as markets anticipated a cautious Bank of England following resilient UK economic data. Meanwhile, the US dollar slipped to four-year lows amid concerns about geopolitics and the Fed’s independence before finding a mild footing.

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The pair marked fresh highs since October 2021 near 1.3860 before correcting down below mid-1.3700. The downtick triggered on Thursday and Friday was attributed to the deal struck between President Trump and the US Senate to avoid a US government shutdown. Moreover, Trump nominated Kevin Warsh as the next Chair of the Federal Reserve, which further weakened the dollar.

On the data front, the UK economic calendar was light with no major releases, while the US FOMC meeting was the highlight of the week. As broadly expected, the central bank held rates unchanged, while Fed Chair Powell’s press conference brought no clarity to the markets, reiterating a data-dependent approach.

The US PPI data on Friday beat the forecast with monthly Core PPI and PPI coming at 0.7% and 0.5%, respectively. This shows a sticky inflation, further cementing the odds of late cuts.

Meanwhile, geopolitical developments surrounding Iran and the Russia-Ukraine conflict continue to deteriorate the risk sentiment, making the upside path for GBP/USD bumpy.

GBP/USD Major Events Next Week:

Moving ahead, the following major events could significantly impact the pair’s volatility:

• Bank of England Policy Rate and Statement
• US ISM Manufacturing/Services PMI
• JOLTs Job Openings
• ADP Non-Farm Employment Change
• Average Hourly Earnings m/m
• Unemployment Rate
• Prelim Uom Consumer Sentiment
• Prelim Uom Inflation Expectations

With several high-impact events on the list, market participants will be keen to watch the BoE’s policy rate, which is widely expected to remain on hold. However, the MPC vote split could be decisive in gauging sentiment regarding the next rate cut.

On the other hand, the US labor market data remains a vital factor for the Fed to shape up its monetary policy. The NFP numbers are expected to jump from 50k to 75k, while the unemployment rate could remain at 4.4%. Any significant deviation from these forecasts could trigger a sharp move.

GBP/USD Weekly Technical Forecast: Correction Amid Profit-Taking

The GBP/USD daily chart shows a corrective downside after briefly breaking the supply zone above 1.3850. The pair lost more than 100 pips, with the RSI retreating below 50.0, suggesting further losses on the card. However, the 1.3700 level could pause the downside ahead of the next support at 1.3600 (round number) and then supply-tuned demand zone near 1.3500.

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On the upside, the key resistance lies at 1.3800, ahead of the monthly top at 1.3860, and then at 1.3925. The odds of testing 1.4000 are thin for now, as profit-taking has put pressure on the pair. However, the pair could gather buying traction around the major support zones to rally to fresh highs as the broad upside trend remains intact while staying well above the key MAs.

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