Created on January 06, 2026

• 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.

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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 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

Trend forecast: Neutral

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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Created on January 05, 2026

The US dollar initially jumped against the yen on Friday, but it is worth noting that the markets are still paying you to hold this pair to the long side.

USD/JPY

The US dollar initially did rally a bit during the trading session here on Friday, but we have given some of that back. It isn’t a huge surprise, nor do I think it really matters because, quite frankly, Friday is essentially a throwaway day as most traders won’t even be bothered trading until Monday at the earliest.

That being said, we are in the middle of consolidation, so the fact that we went up early and then turned around later in the same session really doesn’t surprise me. This is a market that continues to see the 158 yen level above offer resistance while 155 yen starts the floor. We have the 50-day EMA sitting right there as well, but I think the floor is a little thick here and therefore short-term dips almost certainly offer opportunities.

Market Sentiment and Outlook

If we can break above 158 yen, and I do expect that to happen eventually, we go looking to the 160 yen level. On a breakdown below the 50-day EMA, then the 153 yen level could be targeted for support.

I do expect to see a lot of choppy and erratic behavior, but over the longer term, this is a market that I think continues to be bullish mainly due to the fact that the Bank of Japan cannot tighten monetary policy seriously, and you will continue to get paid to hold onto this pair to the long side at the end of every session.

Granted, that interest rate differential might shrink a bit, and it takes away some of the momentum, but as things stand right now, I don’t see any reason to get short, at least not unless there’s some type of external shock that really throws a monkey wrench into risk appetite.

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Created on January 05, 2026

The EUR/USD pair ended the week in the red last week as many investors remained in a holiday mood. It was trading at 1.1720, down slightly from last year’s high of 1.1910 ahead of key events this week.

US Non-Farm Payrolls Data

The EUR/USD exchange rate will likely be volatile this week as investors react to the upcoming US Non-Farm Payrolls (NFP) data, which are scheduled on Friday.

The report is expected to show that the American economy added over 55k jobs in December after adding 64k in the previous month. Most notably, the report is expected to show that manufacturing jobs continued falling, mostly because of Donald Trump’s tariffs.

Economists expect the upcoming report to show that the unemployment rate dropped to 4.5% in December from the previous 4.6%. The unemployment rate has jumped in the past few months because of Donald Trump’s policy to purge thousands of government workers.

The upcoming jobs report comes a week after the Federal Reserve published minutes of the last monetary policy meeting. These minutes showed that most officials hinted that they were supportive of interest rate cuts if the country’s inflation continues falling.

The EUR/USD pair will also react mildly to the weekend events in which Donald Trump invaded Venezuela, took its leader, and charged him in a New York court. While Venezuela has vast oil resources, the amount of oil it ships to other countries is relatively lower than other countries.

The other major catalysts for the EUR/USD pair will be the upcoming macro data from Europe and the United States. For example, the ISM will publish the latest manufacturing PMI numbers, which will provide more data on the state of the sector.

Also, Eurostat will release the latest consumer price index (CPI) data on Wednesday, which will provide more information about the state of inflation and hints on what to expect from the European Central Bank.

EUR/USD Technical Analysis

The weekly chart shows that the EUR/USD pair has remained in a tight range in the past few weeks. It was trading at 1.1720 on Friday, down slightly from last month’s high of 1.1806.

The pair has remained slightly above the 50-week and 25-week Exponential Moving Averages (EMA), a sign that the bullish trend will continue. It has also remained above the Supertrend indicator.

However, a closer look shows that it has formed a double-top pattern at 1.1800 and a neckline at 1.1466. It also remains at the ultimate resistance level of the Murrey Math Lines tool.

Therefore, there is a likelihood that the pair will retreat this week as investors price in geopolitical risks. If this happens, it may drop to the key support level at 1.1600. A move above the resistance at 1.1800 will invalidate the bearish outlook.

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