The EURJPY pair suffered strong negative pressures, reaching below the bullish channel’s support at 183.45 level, to suffer intraday losses by targeting 182.80 level, which forms a key support level to take advantage of its rally towards 183.40.
The confinement between extra support at 182.80 and 183.60 level makes us expect extending the support of the broken bullish channel, to keep the neutrality until confirming the trend by surpassing one of these levels, note that the price rally above 183.60 will reinforce the chances of renewing the bullish attempts, to expect targeting 184.40 barrier, and surpassing it will form next target at 184.90 level in the bullish trading.
The expected trading range for today is between 182.80 and 183.60
In my view, bets on more BoJ rate hikes, threats of yen intervention, and expectations of Fed rate cuts suggest a negative price outlook. However, the BoJ neutral interest rate and incoming US economic data will be pivotal, given the focus on US-Japan rate differentials.
A higher neutral interest rate level would signal multiple BoJ rate hikes and a narrower US-Japan interest rate differential. A narrower rate differential would likely trigger a yen carry unwind, sending USD/JPY toward 140 over the longer term.
However, upside risks to the bearish outlook include:
Dovish BoJ rhetoric and neutral interest rate in the range of 1% and 1.25%.
Upbeat US economic indicators.
Hawkish Fed chatter.
These events would send USD/JPY higher. However, the threat of yen interventions is likely to cap the upside at the 158 level, based on the latest communication.
Read the full USD/JPY forecast, including chart setups and trade ideas.
Conclusion: Focus on the BoJ Neutral Rate
In summary, the USD/JPY trends will hinge on the BoJ’s neutral rate and the Fed rate path.
A neutral rate in the range of 1.5% to 2.5% would suggest a more hawkish BoJ rate path. Additionally, dovish Fed chatter would support expectations of narrower rate differentials, reinforcing the bearish outlook for USD/JPY.
Crucially, a sharply stronger yen could kickstart an unwinding of yen carry trades, which would likely push USD/JPY toward 140 over the longer 6-12 month time horizon.
For more in-depth analysis, review today’s USD/JPY trading setups in our latest reports and consult the economic calendar.
Pound sterling is on the offensive against the euro.
The pound to euro exchange rate (GBP/EUR) has broken above a key resistance level to register its highest level since October at 1.1490.
The new two-month peak follows the Christmas period of consolidation that saw GBP/EUR struggle to advance above the 100-day exponential moving average (EMA), presently located at 1.1470.
The 100-day EMA held the pound’s year-end advance, and we said last week that a break through this resistance barrier would open the door to 1.1520, which is the next major technical zone of interest.
That breakout now looks to be in train. The technical setup is constructive with the pair comfortably cocooned in a short-term uptrend, helped by constructive global market conditions.
Year-end was characterised by rising stock markets, with the UK’s FTSE 100 hitting a new record above 10K last Friday. With no domestic data to bother pound sterling, GBP/EUR drifted higher in tandem with the upbeat mood music.
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Should this continue to play out in the coming days, then GBP/EUR can achieve 1.1520 and perhaps go even higher.
It’s a quiet week data-wise in the UK, but the Eurozone will offer up some CPI inflation numbers.
Here, any strength would reinforce the notion that the European Central Bank (ECB) won’t cut interest rates any further while raising the odds that the next move will be a rate hike.
This should bolster short-term Eurozone bond yields, which are heavily influenced by the ECB’s base rate. Firm Eurozone bond yields, in turn, offer support to euro exchange rates.
The Eurozone CPI inflation release comes on Wednesday, and the consensus expects 2.4% y/y, confirming inflation is anchored above the ECB’s 2.0% target.
However, we would expect some market reaction to German CPI inflation, due on Tuesday, as the German data often gives a strong clue as to where the Eurozone’s figures will land the following day.
With ECB policy expectations deeply entrenched, we doubt the market reaction to the inflation data will be long-lived, meaning any GBP/EUR setbacks would be temporary.
Our bet is that global sentiment will stay in charge, and further gains in world stock markets will assist GBP/EUR higher.
The Pound to US Dollar exchange rate (GBP/USD) eased back from recent highs on Monday as rising geopolitical tensions encouraged investors to favour traditional safe-haven assets.
At the time of writing, GBP/USD was trading near $1.3461, little changed from the start of the session.
The US Dollar (USD) found modest support at the beginning of the week as investor caution increased following developments in Venezuela over the weekend.
Reports of US military action in Caracas and the detention of Venezuelan President Nicolás Maduro and his wife, Cilia Flores, prompted a shift toward more defensive positioning in early trade.
While the immediate reaction across currency markets was relatively muted, investors remain alert to the risk of further escalation, which could drive volatility if broader geopolitical consequences begin to unfold.
There are also concerns that President Donald Trump’s hardline approach to regime change in Venezuela could set a wider precedent, potentially increasing instability elsewhere and reinforcing demand for safe-haven currencies such as the US Dollar.
That said, gains in USD were capped by ongoing expectations that the Federal Reserve will continue easing monetary policy through 2026.
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The Pound (GBP) held its ground on Monday, trading within a narrow range after comments from Prime Minister Keir Starmer hinted at a more conciliatory approach toward post-Brexit relations with the European Union.
In an interview with the BBC, Starmer suggested that closer alignment with the EU single market could be pursued where it benefits the UK, while stopping short of endorsing a full customs union.
Markets interpreted the remarks as signalling a more pragmatic trade strategy in the year ahead, with improved EU relations seen by many investors as a potential positive for UK growth and investment prospects.
GBP/USD Outlook: Geopolitical Risks to Keep Markets on Edge?
Looking ahead, movement in the Pound to US Dollar exchange rate is likely to remain uneven as investors continue to monitor developments in Latin America and assess the risk of further US intervention.
Speculation around possible escalation involving Venezuela — or indications of action in neighbouring countries — could sustain demand for the US Dollar via heightened risk aversion.
In the UK, attention will also turn to the final services PMI for December, due on Tuesday. A downward revision could weigh on Sterling, particularly if it mirrors last month’s disappointing manufacturing data and reinforces concerns over the UK’s growth outlook.
According to FX analysts at Scotiabank, “The pound is up a fractional 0.1% vs. the USD and outperforming all of the G10 currencies with the exception of JPY.
“Domestic releases have been limited to second-tier credit/lending data, suggesting that the pound’s resilience is likely being driven by flows related to geopolitics and reflects the market’s assessment of the strength of the US/UK relationship.
“Risk reversals are little changed, offering little in terms of sentiment-driven movement.
“We are neutral awaiting a break of the two week range roughly bound between 1.34 and the mid1.35s.”
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The US dollar pulled back on Monday as we continue to see a bit of consolidation.
US Dollar vs Japanese Yen
The US dollar did initially rally against the Japanese yen during trading on Monday, but has since fallen in what has been a little bit of lackluster performance by the dollar, more than anything else.
When you look at the technical analysis, this is a market that has been consolidating after a big move to the upside, and the recent pullback of the last couple of weeks makes sense because, at this juncture, it appears to me very obvious that the 158 level is an area that you are going to have to watch closely.
If we can break above 158, then there is a world where we start to see a lot of upward activity. At that juncture, I’m looking at a move to the 160 yen level pretty quickly. That being said, we did pull back during the trading session on Monday, and I think this just reiterates the idea of consolidation between the 158 level on the top and the 154.50 yen level on the bottom.
Interest Rate Differential and Carry Trade Dynamics
The fundamentals for this pair are driven by the carry trade, the interest rate differential, as per usual, as the Federal Reserve currently has a policy between 3.5% and 3.75% after a rate cut in December. Markets expect maybe one more cut in the first quarter, but the rate remains relatively high in comparison to Japan, which only has a 0.75% rate after a hike.
This is a 30-year high. Even with the BOJ hiking and the Federal Reserve cutting, the gap is still roughly 3%. So, investors will more likely than not continue to sell the yen to buy the dollar and pick up the differential. That being said, the US dollar has struggled a bit, so this may not be the first place traders are looking to short the yen by another currency.
That being said, the Bank of Japan is still suggesting that it will raise rates if inflation targets are met. We’ll have to see. The slow and gradual rate hike situation in Tokyo is disappointing for those who are hoping for the yen to recover. The Federal Reserve is easing, but the US economy remains extraordinarily resilient, possibly even boosted by new fiscal spending and government bills mentioned in recent forecasts, preventing a dollar sell-off en masse.
We are getting pretty close to the 160 yen level, relatively speaking. In that scenario, the Japanese have, of course, defended. Geopolitics could drive money back into the yen as well. But all things being equal, I look at this as a bullish but cautious situation. The primary trend is up, fueled by the interest rate differential, but you also probably have somewhat limited upside at 160 yen.
The Bank of Japan has a meeting January 23. Any surprise hike could break this trend, but we’ll just have to see where this is. I remain more buy-on-the-dip here in a short-term back-and-forth type of environment.
The euro went back and forth on Monday, as traders continued to digest the news over the weekend out of Caracas. Risk sentiment is likely to be in flux at best.
EUR/USD
The euro was back and forth during the trading session on Monday as we initially tested the 50-day EMA. I think at this point in time, it is obvious that the buyers are still willing to stick with the euro despite the fact that it has not been able to break above a significant resistance barrier. That resistance barrier is the 1.18 level, which could extend all the way to the 1.19 level. I think it is going to take pretty hefty bullish pressure to finally break above there.
Policy Divergence and Growth Outlook
But there is a little bit of policy divergence here between these two central banks as the Federal Reserve is expected to cut rates further into 2026, and as a result, it is likely that the US dollar will face some pressure there. That being said, the ECB is expected to be less aggressive with its cuts, although cutting is still possible. At this point, the European growth is projected to be modest, somewhere right around 1.2%, but steady and supported by fiscal stimulus in Germany. The United States growth outlook is expected to slow in the beginning part of 2026 but then take off.
All things being equal, I think this is also a market that is trying to determine whether or not inflation is going to be sticky in America. If it is, that is dollar positive. Ultimately, I think this is a situation where traders look at this through the eyes of a consolidation range with more of a buy on the dip mentality. Breaking below the 1.14 level smashes this narrative to pieces, but right now, this has held steady for several months.
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 British pound has spent a lot of energy recovering from the initial selloff on Monday. Momentum is still strong here.
GBP/JPY
The British pound has spent most of the day on Monday bouncing from the initial selloff. Initially, when the market woke up, it started to look at the situation in Venezuela, and we did see a little risk-off type of behavior. That has since abated, and it looks like this pair is going to continue to find plenty of momentum. As I write this article, we are near the recent swing high, and there is no reason to think that anything has changed. The market is currently consolidating near its highs, showing no immediate signs of a reversal.
Carry Trade Remains Dominant
This market is defying what some people would think of as the fundamental logic of a strengthening Japanese yen due to the Bank of Japan’s rate hikes. But that being said, it is driven by the carry trade because even if the Bank of Japan starts to raise rates, the Bank of England still offers so much more interest that the carry trade is alive and well.
The market breaking out to the upside could open up a move to the 215 yen level, possibly higher than that. We will just have to wait and see. Just like the market breaking down below the 210 level opens up the possibility of a deeper correction toward the 50-day EMA near the 207 yen level. This is a market that I think will continue to see plenty of buy on the dip type of attitude. I do think there are plenty of people out there willing to take advantage of cheap British pounds in relation to the Japanese yen going forward. I have no interest whatsoever in shorting this pair as the momentum is obviously to the upside.
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 EURJPY pair suffered strong negative pressures, reaching below the bullish channel’s support at 183.45 level, to suffer intraday losses by targeting 182.80 level, which forms a key support level to take advantage of its rally towards 183.40.
The confinement between extra support at 182.80 and 183.60 level makes us expect extending the support of the broken bullish channel, to keep the neutrality until confirming the trend by surpassing one of these levels, note that the price rally above 183.60 will reinforce the chances of renewing the bullish attempts, to expect targeting 184.40 barrier, and surpassing it will form next target at 184.90 level in the bullish trading.
The expected trading range for today is between 182.80 and 183.60
The GBP/JPY pair posts a fresh multi-year high at 212.15 during the Asian trading session on Tuesday. The pair trades firmly as the Japanese Yen (JPY) underperforms across the board, even as Bank of Japan (BoJ) Governor Kazuo Ueda has signaled that there will be more interest rate hikes in the near term.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the New Zealand Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.06%
-0.05%
0.05%
0.02%
-0.17%
-0.18%
-0.03%
EUR
0.06%
0.02%
0.09%
0.08%
-0.10%
-0.12%
0.03%
GBP
0.05%
-0.02%
0.08%
0.07%
-0.12%
-0.13%
0.01%
JPY
-0.05%
-0.09%
-0.08%
-0.03%
-0.21%
-0.23%
-0.08%
CAD
-0.02%
-0.08%
-0.07%
0.03%
-0.18%
-0.20%
-0.05%
AUD
0.17%
0.10%
0.12%
0.21%
0.18%
-0.01%
0.13%
NZD
0.18%
0.12%
0.13%
0.23%
0.20%
0.01%
0.14%
CHF
0.03%
-0.03%
-0.01%
0.08%
0.05%
-0.13%
-0.14%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
“BoJ expected to continue raising interest rates if economy and prices move in line with our forecast,” Governor Ueda said on Monday, and added that adjusting the degree of monetary support will help achieve “sustained growth and stable inflation”.
This week, investors will focus on the Overall Household Spending data for November, which will be published on Friday. The data is expected to have declined at a moderate pace of 1% against a 3% contraction in October.
Meanwhile, the Pound Sterling (GBP) trades higher against its peers, except antipodeans, as the market sentiment turns positive after the risks of a United States (US)-Venezuela clash subsiding. The British currency is expected to be majorly driven by market expectations for the Bank of England’s (BoE)monetary policy outlook amid a light United Kingdom (UK) economic calendar week.
GBP/JPY technical analysis
In the daily chart, GBP/JPY trades at 211.92 as of writing. The 20-day Exponential Moving Average (EMA) rises and provides support at 210.04. Price holds above this rising gauge, preserving the bullish bias.
The 14-day Relative Strength Index (RSI) at 70.84 is positive but carries risks of stretched momentum.
As long as the pair remains above the ascending 20-day EMA, the trend is positive and could extend towards 215.00. While a close below 210.04 could invite a corrective pullback towards the December 19 low of 208.00.
(The technical analysis of this story was written with the help of an AI tool.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
The EUR/USD pair attracts fresh buyers near the 1.1710 area during the Asian session on Tuesday and builds on the previous day’s solid bounce from the 1.1660 area, or a nearly four-week low. Spot prices currently trade around the 1.1735 region, up 0.10% for the day, and seem poised to climb further amid a supportive fundamental backdrop.
The US Dollar (USD) drifts lower for the second straight day and moves further away from its highest level since December 10, touched on Monday, amid dovish US Federal Reserve (Fed) expectations. Furthermore, bets that the European Central Bank (ECB) is done cutting rates seem to support the shared currency and act as a tailwind for the EUR/USD pair.
An intraday strength beyond the 1.1735 confluence – comprising the 100-hour Simple Moving Average (SMA) and the 50% Fibonacci retracement level of the 1.1808-1.1660 fall – validates the positive outlook. Moreover, the Moving Average Convergence Divergence (MACD) has turned positive and edges higher, hinting at improving upside momentum.
Adding to this, the Relative Strength Index (RSI) at 59 supports further gains, with the 61.8% Fibo. retracement level, around mid-1.1700s, forming the next resistance. A push through these barriers would strengthen the corrective tone, whereas failure to clear them would leave EUR/USD vulnerable to renewed consolidation within the recent range.
(The technical analysis of this story was written with the help of an AI tool)
EUR/USD 1-hour chart
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day.
EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy.
The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control.
Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency.
A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall.
Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period.
If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
