Forex News
- GBP/USD may face initial resistance at 1.3869, its highest level since September 2021.
- The 14-day Relative Strength Index holds at 61.75, above mid-line and below overbought territory.
- Immediate support is located at the nine-day EMA near 1.3678.
GBP/USD steadies after registering modest gains in the previous session, trading around 1.3700 during the Asian hours on Wednesday. The technical analysis of the daily chart points to a potential bearish reversal as the range narrows, indicating waning buyer momentum within a rising wedge pattern.
The nine-day Exponential Moving Average (EMA) at 1.3678 rises above the 50-day EMA at 1.3493, with price holding above both. Both averages slope higher, reinforcing trend strength. The momentum indicator 14-day Relative Strength Index (RSI) at 61.75 stays above the 50 mid-line without overbought readings, confirming bullish momentum.
The GBP/USD pair may find primary resistance at 1.3869, the highest since September 2021, reached on January 27, followed by the upper boundary of the rising wedge around 1.4010. A break above the wedge could open a fresh leg higher toward 1.4248, the highest since April 2018.
The immediate support is seen at the nine-day EMA of 1.3678, aligned with the lower rising wedge boundary. A break below the wedge would cause the emergence of a bearish bias and expose the 50-day EMA support at 1.3493, followed by the support reversal zone around 1.3350.
(The technical analysis of this story was written with the help of an AI tool.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
- Australian Dollar rose after the Composite PMI jumped to 55.7 in January, marking the strongest expansion in 45 months.
- The AUD gained as markets priced an 80% chance of a May hike and 40 basis points of further tightening.
- The US Dollar remains subdued for a second consecutive session.
The Australian Dollar (AUD) advances against the US Dollar (USD) on Wednesday after registering over 1% gains in the previous session. The AUD/USD pair holds ground after China's Services Purchasing Managers' Index (PMI) rose to 52.3 in January from 52.0 in December. This figure came in stronger than the expectations of 51.8. China is a key trading partner of Australia, so any changes in the Chinese economy could impact the AUD.
The AUD rose after the release of seasonally adjusted S&P Global Purchasing Managers’ Index (PMI) data, which showed Australia’s Composite PMI rising to 55.7 in January from 51.0 in December. The expansion was the strongest in 45 months. Meanwhile, Services PMI climbed to 56.3 from 51.1, marking its highest level since February 2022. The reading beat the flash estimate of 56.0 and remained above the 50.0 threshold, extending the run of expanding services activity to two years.
The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% on Tuesday, citing stronger-than-expected growth and a sticky inflation outlook. As the tightening cycle begins, markets have lifted the probability of a May hike to 80% and now price in roughly 40 bps of further tightening over the rest of the year.
RBA Governor Michele Bullock said during the post-meeting press conference that inflation pressures remain too strong, warning it will take longer to return to target and is no longer acceptable. She stressed the board will stay data-dependent and avoid forward guidance.
US Dollar moves little after registering recent losses
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, remains subdued for the second successive session and is trading near 97.40 at the time of writing.
- Monday’s data showed an unexpected rebound in US factory activity, underscoring economic resilience, as the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) rose to 52.6 from 47.9 in December, beating market expectations of 48.5.
- US President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) Chair. Markets interpreted Warsh’s appointment as signaling a more disciplined and cautious approach to monetary easing.
- The US Dollar gained traction as risk sentiment improved after the US Senate reached an agreement to advance a government funding package, thereby averting a shutdown, according to Politico.
- US producer-side inflation firmed, moving further away from the Federal Reserve’s 2% target and reinforcing the central bank’s policy stance. US PPI inflation holds steady at 3.0% year-over-year (YoY) in December, unchanged from November and above expectations for a moderation to 2.7%. Core PPI, excluding food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.
- St. Louis Fed President Alberto Musalem said additional rate cuts are not warranted at this stage, characterizing the current 3.50%–3.75% policy rate range as broadly neutral. Similarly, Atlanta Fed President Raphael Bostic urged patience, arguing that monetary policy should remain modestly restrictive.
- Australia’s RBA Trimmed Mean inflation increased to 0.2% month-over-month (MoM) and 3.3% year-over-year (YoY). The monthly CPI rose 1.0% in December, up from 0% previously and above the 0.7% forecast.
- Australia’s export prices rose 3.2% quarter-on-quarter (QoQ) in Q4 2025, rebounding from a 0.9% fall in Q3 and marking the first increase in three quarters, as well as the strongest gain in a year. Meanwhile, import prices climbed 0.9%, beating expectations for a 0.2% decline and reversing a 0.4% drop in Q3.
- China's RatingDog Manufacturing Purchasing Managers' Index (PMI) rose to 50.3 in January from 50.1 in December. This figure came in line with the expectations. The latest reading indicated a slight expansion in factory activity, but the fastest growth since last October.
- Australia’s TD-MI Inflation Gauge rose 3.6% year-over-year (YoY) in January, up from 3.5% previously. The Monthly Inflation Gauge increased by 0.2%, slowing sharply from December’s two-year high of 1% and marking the weakest pace since August.
- ANZ Job Advertisements jumped 4.4% month-over-month (MoM) in December 2025, rebounding from a revised 0.8% decline and posting the first increase since July. The rise was also the strongest monthly gain since February 2022, signaling renewed momentum in hiring toward year-end.
Australian Dollar rebounds toward three-year highs near 0.7100
The AUD/USD pair is trading around 0.7030 on Wednesday. Daily chart analysis indicates that the pair remains within the ascending channel pattern, indicating a persistent bullish bias. The 14-day Relative Strength Index (RSI) is at 73.30; it typically signals bullish momentum, but stretching momentum.
The AUD/USD pair rebounded toward 0.7094, the highest level since February 2023, which was recorded on January 29. A break above this level would support the pair to test the upper ascending channel boundary around 0.7210. On the downside, the primary support lies at the nine-day Exponential Moving Average (EMA) of 0.6964, aligned with the lower boundary of the channel. Further declines would expose the 50-day EMA at 0.6759 support.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | -0.05% | 0.36% | 0.08% | 0.04% | 0.37% | 0.03% | |
| EUR | 0.02% | -0.03% | 0.39% | 0.09% | 0.06% | 0.39% | 0.05% | |
| GBP | 0.05% | 0.03% | 0.41% | 0.12% | 0.09% | 0.41% | 0.08% | |
| JPY | -0.36% | -0.39% | -0.41% | -0.27% | -0.30% | 0.02% | -0.31% | |
| CAD | -0.08% | -0.09% | -0.12% | 0.27% | -0.04% | 0.29% | -0.04% | |
| AUD | -0.04% | -0.06% | -0.09% | 0.30% | 0.04% | 0.33% | -0.01% | |
| NZD | -0.37% | -0.39% | -0.41% | -0.02% | -0.29% | -0.33% | -0.33% | |
| CHF | -0.03% | -0.05% | -0.08% | 0.31% | 0.04% | 0.01% | 0.33% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Economic Indicator
RatingDog Services PMI
The RatingDog Services Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s services sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.
Read more.Last release: Wed Feb 04, 2026 01:45
Frequency: Monthly
Actual: 52.3
Consensus: 51.8
Previous: 52
Source: IHS Markit
- Silver price jumps to near $87.60 in Wednesday’s Asian session.
- Shifting expectations for the Fed chairman might cap the upside for Silver.
- Traders seek safe-haven assets after reports that the US shot down an Iranian drone approaching an aircraft carrier.
Silver price (XAG/USD) climbs to around $87.60 during the Asian trading hours on Wednesday. The white metal rebounds after facing a historic correction last week as dip-buyers enter the market.
US President Donald Trump on Friday nominated Kevin Warsh to succeed Jerome Powell as the next Chairman of the US Federal Reserve (Fed). Warsh is expected to take over when Powell's term expires in May. Expectations that Trump’s pick to head the US central bank would favor maintaining elevated interest rates to curb inflation could lift the US Dollar (USD) broadly and drag the USD-denominated commodity price.
The sell-off in precious metals is pressured by the Chicago Mercantile Exchange Group (CME) margin hikes. The CME Group over the weekend raised margin requirements for gold and silver, forcing many leveraged traders to sell their positions immediately to cover costs.
On the other hand, traders seek safe-haven assets amid geopolitical risks and economic uncertainty, which could boost the Silver price. Reuters reported on Tuesday that the US military shot down an Iranian drone that "aggressively" approached the Abraham Lincoln aircraft carrier in the Arabian Sea.
Iran asked that negotiations with the US this week be held in Oman rather than Turkey and that the scope be limited to two-way conversations on the nuclear issue only. Trump warned that with US warships heading toward Iran, "bad things" would probably happen if a deal could not be reached.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- USD/CAD holds steady as the commodity-linked Canadian Dollar struggles amid lower Oil prices.
- WTI may extend gains as geopolitical tensions rose after the US downed an Iranian drone near a carrier.
- Traders await ISM Services PMI, seen easing to 53.5 in January from 54.4.
USD/CAD moves little after registering modest losses in the previous session, trading around 1.3640 during the Asian hours on Wednesday. The pair inches higher as the commodity-linked Canadian Dollar (CAD) struggles amid lower Oil prices, reflecting Canada’s role as the largest crude exporter to the United States (US).
West Texas Intermediate (WTI) Oil price trades lower near $63.50 per barrel at the time of writing. However, Oil prices may build on previous gains as geopolitical tensions resurfaced after the US downed an Iranian drone near a US aircraft carrier in the Arabian Sea. However, President Trump said diplomatic channels remain open, with the White House confirming US-Iran talks are still scheduled for Friday.
Markets will focus later in the day on the Institute for Supply Management’s (ISM) Services Purchasing Managers Index (PMI), which is expected to ease to 53.5 in January from 54.4 in December.
The Bureau of Labor Statistics (BLS) will not publish the January employment report on Friday as scheduled because of the partial government shutdown that began last weekend. The shutdown ended late Tuesday after US President Donald Trump signed a funding deal negotiated with Senate Democrats, despite ongoing tensions over his immigration crackdown.
The US Dollar (USD) could gain support as expectations shift around Federal Reserve (Fed) leadership following Trump’s nomination of former Fed Governor Kevin Warsh as the next Fed Chair. Markets anticipate a slower pace of rate cuts and greater emphasis on balance sheet reduction under Warsh.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- NZD/USD edges lower following the release of mixed employment data from New Zealand.
- The cautious mood supports the safe-haven USD and also weighs on the risk-sensitive Kiwi.
- The technical setup favors bulls and warrants caution before positioning for deeper losses.
The NZD/USD pair struggles to capitalize on the previous day's move higher and attracts some sellers during the Asian session on Wednesday in reaction to mixed employment details from New Zealand. Furthermore, the cautious market mood offers some support to the safe-haven US Dollar (USD) and turns out to be another factor undermining the risk-sensitive Kiwi.
The downside for the New Zealand Dollar (NZD), however, seems limited on the back of the Reserve Bank of New Zealand's (RBNZ) more hawkish outlook on the future policy path. This marks a significant divergence in comparison to bets that the US Federal Reserve (Fed) will cut rates two more times in 2026, which keeps the USD on the defensive and should act as a tailwind for the NZD/USD pair.
Spot prices currently trade around the 0.6040-0.6035 region, down nearly 0.30% for the day. That said, the recent breakout above a technically significant 200-day Simple Moving Average (SMA) and this week's resilience below the 0.6000 mark warrant some caution for the NZD/USD bears. Moreover, the SMA’s gradual upturn supports the broader uptrend, and staying above this gauge keeps the topside favored.
The Moving Average Convergence Divergence (MACD) remains in positive territory with the MACD line above the Signal line, while a contracting positive histogram hints at moderating upside momentum. The Relative Strength Index stands at 68 (bullish), just below overbought. A renewed expansion in MACD would open the door to further gains, with dips expected to draw buyers ahead of the rising 200-day SMA.
(The technical analysis of this story was written with the help of an AI tool.)
NZD/USD daily chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- Japanese Yen remains depressed, as fiscal concerns and political uncertainty offset the upbeat data.
- Intervention fears and the BoJ’s hawkish tilt might hold back the JPY bears from placing fresh bets.
- Expectations for more Fed easing act as a headwind for the USD and should cap the USD/JPY pair.
The Japanese Yen (JPY) continues with its relative underperformance on Wednesday amid concerns about Japan's fiscal health under Prime Minister Sanae Takaichi's expansionary spending policy. Apart from this, domestic political uncertainty ahead of the snap election on February 8 turns out to be another factor undermining the JPY. This, along with a modest US Dollar (USD) uptick, lifts the USD/JPY pair above the 156.00 mark, or a nearly two-week high, during the Asian session.
Meanwhile, traders remain on high alert amid the possibility of a coordinated Japan-US intervention to stem the JPY's decline. Moreover, the Bank of Japan's (BoJ) gradual policy tightening narrative might hold back the JPY bears from placing aggressive bets. Apart from this, bets that the US Federal Reserve (Fed) will lower borrowing costs two more times keep the USD bulls on the defensive and should contribute to capping the USD/JPY pair ahead of the US macro data, due later today.
Japanese Yen continues to be weighed down by worries about Japan’s fiscal health under PM Takaichi
- Japan’s services sector growth accelerated at the start of 2026, with business activity expanding for the tenth consecutive month and at its fastest pace in almost a year. In fact, the Jibun Bank Services PMI climbed to 53.7 compared to 51.6 in December and consensus estimates for a reading of 53.4.
- The data signaled a more durable recovery in the services sector, which accounts for roughly 70% of Japan’s GDP. The market reaction, however, turns out to be muted amid nervousness over Japan’s fiscal outlook, fueled by Prime Minister Sanae Takaichi’s aggressive spending and tax cut plans.
- In fact, Takaichi has pledged to suspend the 8% consumption tax on food for two years as part of her campaign ahead of a snap lower house election on February 8. This puts the spotlight back on Japan's already strained public finances, which continue to undermine the Japanese Yen on Wednesday.
- The unusual rate check by the New York Federal Reserve recently was seen as the strongest signal to date that Japanese and US authorities were working together to stem the JPY's decline. This lowers the threshold for intervention and could limit JPY losses amid hawkish Bank of Japan bets.
- The Summary of Opinions from the BoJ's January meeting, released on Monday, showed that policymakers debated mounting price pressures from a weak JPY. Moreover, board members judged that further rate increases were appropriate over time, which could lend support to the JPY.
- The US Dollar, on the other hand, struggles to build on last week's recovery from a four-year low, bolstered by the nomination of Kevin Warsh as the next Fed chair. Even the passage of the government funding package to end a partial shutdown does little to provide any impetus to the USD.
- Traders now look forward to the release of the US ADP report on private-sector employment and the US ISM Services PMI. Apart from this, comments from influential FOMC members might influence the USD demand amid bets for two more rate cuts in 2026 and drive the USD/JPY pair.
USD/JPY might struggle to make it through 156.50-156.55 confluence resistance
Wednesday's move beyond the 156.00 mark comes on top of the overnight breakout through the 50% retracement level of the 159.13-152.06 downfall and favors the USD/JPY bulls. The Relative Strength Index (14) sits at 66.9, below overbought, aligning with a firm but maturing advance.
However, the Moving Average Convergence Divergence (MACD) histogram remains positive but is contracting, suggesting fading bullish momentum. The MACD line stands above the Signal line, and both hover around the zero line, reinforcing a cautious, transitional tone.
Hence, any subsequent move up is more likely to confront stiff resistance near the 156.51 confluence – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement level. A sustained break above the said barrier is needed to shift the near-term tone to the upside.
A clearance would open the 78.6% retracement at 157.62, while failure to overcome that barrier would leave the recovery vulnerable to renewed pullbacks. Meanwhile, the USD/JPY pair holds beneath the downward sloping 100-period SMA, suggesting that the move higher is likely to remain capped.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- WTI price gains ground to near $63.75 in Wednesday’s Asian session.
- The US military said it shot down an Iranian drone that ‘aggressively approached’ an aircraft carrier.
- US crude oil inventories fell the most since August 2023.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $63.75 during the Asian trading hours on Wednesday. The WTI price edges higher amid fears of rising tensions between the United States (US) and Iran. Traders brace for the release of the US Energy Information Administration (EIA) crude oil stockpiles report on Wednesday.
CNBC reported on Tuesday that the US military shot down an Iranian drone that "aggressively" approached the USS Abraham Lincoln aircraft carrier in the Arabian Sea. This event took place at a time when tensions in the Middle East are high, with US President Donald Trump considering military attacks against Iran.
Additionally, Iran demanded that talks with the US this week take place in Oman rather than Turkey and that the scope be limited to two-way conversations on the nuclear issue only, complicating an already delicate diplomatic effort. Any signs of escalating tensions between the US and Iran, OPEC’s fourth-largest crude oil producer, could boost the WTI price in the near term.
According to the American Petroleum Institute (API) weekly report, crude oil stockpiles in the US for the week ending January 30 fell by 11.1 million barrels, compared to a decline of 250,000 barrels in the previous week. The market consensus was for an increase of 700,000 barrels. The significant drop in crude inventories could provide some support to the WTI price.
On the other hand, a renewed US Dollar (USD) demand might cap the upside for the USD-denominated commodity price. US President Donald Trump nominated Governor Kevin Warsh to serve as the next Chairman of the US Federal Reserve (Fed). Traders anticipate a slower pace of interest rate cuts under his tenure and a focus on shrinking the Fed's balance sheet.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
China's Services Purchasing Managers' Index (PMI) climbed to 52.3 in January from 52.0 in December, the latest data published by RatingDog showed on Wednesday. This figure came in stronger than the expectations of 51.8.
AUD/USD reaction to China’s Services PMI
The Chinese proxy, the Australian Dollar (AUD), edges slightly higher following the upbeat Chinese data, with AUD/USD gaining 0.14% on the day to 0.7031, as of writing.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
On Wednesday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.9533 compared to the previous day's fix of 6.9608 and 6.9385 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
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