Forex News
New Zealand Dollar (NZD) could rise further; overbought conditions could limit any gains to a test of 0.5785. In the longer run, for the time being, NZD is likely to trade in a range between 0.5720 and 0.5805, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
Overbought conditions might limit any gains to a test of 0.5785
24-HOUR VIEW: "NZD fell more than we expected last Friday. Yesterday, when NZD was at 0.5730, we pointed out that 'the combination of slowing downward momentum and oversold conditions suggests that NZD is likely to consolidate today, probably between 0.5715 and 0.5750'. However, instead of consolidating, NZD rose to a high of 0.5775. The advance has gathered momentum, and NZD could rise further today. That said, overbought conditions could limit any gains to a test of 0.5785. The major resistance at 0.5805 is not expected to come into view. Support is at 0.5775; a breach of 0.5740 would indicate that the current upward pressure has eased."
1-3 WEEKS VIEW: "Last Friday (09 Jan, spot at 0.5750), we highlighted that 'downward momentum has increased slightly, and NZD could edge lower toward 0.5715'. After NZD subsequently fell to a low of 0.5712, we highlighted yesterday (12 Jan, spot at 0.5730) that 'while downward momentum remains mild, NZD could continue to edge lower toward 0.5690'. We did not anticipate NZD to recover and break above our ‘strong resistance’ level at 0.5770 (high of 0.5775). The mild downward pressure has eased, and for the time being, we expect NZD to trade in a range, most likely between 0.5720 and 0.5805."
Speculation that Prime Minister Takaichi may call a snap election has pushed Japanese government bond yields higher and sent the yen weaker, driving USD/JPY back toward 159. With yen positioning reversing sharply and long-term JGB yields still climbing, markets remain highly volatile, but analysts see a potential opportunity to sell USD/JPY if the latest spike extends, Société Générale's FX analyst Kit Juckes reports.
USD/JPY surges as JPY longs unwind
"For years all an FX strategist needed, to forecast USD/JPY accurately, was to sit next to a brilliant forecaster of Treasury yields. Now it’s harder. This morning’s Japanese news, that PM Takaichi is said to be planning for a snap election, using a surge in popularity to cement the LDP’s grip on the Lower House of the Diet, has sent yields up and weakened the Japanese Yen (GBP)."
"In 2024, when the futures market built up a large net short JPY position, USD/JPY spiked above 160. The latest move has unwound the long yen position built up in the first few months of 2025, USD/JPY round-tripping from 159, to 140 and back up to 159. You would have to be very brave to be confident that we have seen the peak in either 30year JGB yields or in USD/JPY."
"Even with a majority in the House, the administration is unlikely to pursue aggressive fiscal expansion immediately' given debt sustainability concerns, while the lack of near-term issuance in the long end of the curve combined with a policy focus on regaining LDP seats in the Upper House, make a case for a ‘buy the dip’ strategy in long JGBs. The same is likely true for the yen. A spike in the coming days, may finally be an opportunity to go short USD/JPY."
Australian Dollar (AUD) is likely to trade in a range of 0.6685/0.6730. In the longer run, the current price movements are likely part of a range-trading phase between 0.6655 and 0.6745, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
Current price movements are likely part of a range-trading phase
24-HOUR VIEW: "We expected AUD to range-trade between 0.6670 and 0.6710 yesterday. However, AUD rose to a high of 0.6722, closing higher by 0.34% at 0.6710. The increase in upward momentum is not strong enough to suggest a continued rise. Today, AUD is more likely to trade in a higher range of 0.6685/0.6730."
1-3 WEEKS VIEW: "We continue to hold the same view as last Friday (09 Jan, spot at 0.6700). As highlighted, 'the current price movements are likely part of a range-trading phase between 0.6655 and 0.6745'."
- USD/JPY jumps to near 159.00 ahead of the US inflation data, the highest level seen in one-and-a-half years.
- The US headline CPI is expected to have grown steadily by 2.7% YoY.
- Growing concerns over Japan’s early snap election have been a major drag on the Japanese Yen.
The USD/JPY pair revisits its one-and-a-half-year high of 159.00 during the European trading session on Tuesday. The pair trades firmly due to continued underperformance from the Japanese Yen (JPY), following hopes of an early snap election by Japan’s Prime Minister (PM) Sanae Takaichi, which were recently propelled.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.28% | -0.52% | 0.44% | -0.22% | -0.25% | -0.56% | -0.30% | |
| EUR | 0.28% | -0.25% | 0.80% | 0.08% | 0.04% | -0.28% | -0.02% | |
| GBP | 0.52% | 0.25% | 1.05% | 0.34% | 0.28% | -0.04% | 0.23% | |
| JPY | -0.44% | -0.80% | -1.05% | -0.69% | -0.72% | -1.03% | -0.77% | |
| CAD | 0.22% | -0.08% | -0.34% | 0.69% | -0.05% | -0.34% | -0.09% | |
| AUD | 0.25% | -0.04% | -0.28% | 0.72% | 0.05% | -0.31% | -0.05% | |
| NZD | 0.56% | 0.28% | 0.04% | 1.03% | 0.34% | 0.31% | 0.25% | |
| CHF | 0.30% | 0.02% | -0.23% | 0.77% | 0.09% | 0.05% | -0.25% |
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).
On Friday, Japan Innovation Party leader Hirofumi Yoshimura told public broadcaster NHK that he met with PM Takaichi and felt her view on the timing of an election had shifted to a new stage.
Earlier in the day, Japan's economy minister, Minoru Kiuchi, said that the government needs to aim for early parliamentary passage of the fiscal budget 2026.
Market experts are of the view that Tokyo aims for a big spending budget to boost the economy, a scenario that could stall the Bank of Japan’s policy-normalization stance in the near term.
Meanwhile, the US Dollar (USD) trades marginally higher ahead of the United States (US) Consumer Price Index (CPI) data for December, which will be published at 13:30 GMT. The impact of the US inflation data is expected to be limited on the Federal Reserve’s (Fed) monetary policy expectations as policymakers remain more concerned about employment risks.
The US core inflation – which excludes volatile food and energy items – is expected to have risen at a faster pace to 2.7% YoY from 2.6% in November, with headline figures growing steadily by 2.7%. Month-on-month, both headline and the core CPI are estimated to have risen by 0.3%.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
European Natural Gas prices surged, with TTF rising 6.6% to above €30/MWh as colder weather boosted heating demand and unrest in Iran raised concerns over LNG and pipeline supplies, ING's commodity experts Ewa Manthey and Warren Patterson note.
LNG supply concerns lift European Gas market
"European Natural Gas prices surged yesterday, with TTF settling 6.6% higher, returning to above EUR30/MWh. Colder weather across large parts of Europe increases heating demand, while unrest in Iran is a concern for Gas markets."
"First, there are potential risks to LNG flows from the Persian Gulf. Second, there’s the potential for disruptions to Iranian Gas flows to Turkey. Given the large TTF fund short, it wouldn’t take much to move the market as funds run in to cover shorts."
Sharp rebound has scope to test 1.3495 before a pullback can be expected; 1.3520 is not expected to come under threat. In the longer run, GBP is likely in a range-trading phase between 1.3390 and 1.3520, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
Sharp rebound has scope to test 1.3495
24-HOUR VIEW: "GBP fell to a low of 1.3393 last Friday. When GBP was at 1.3405 in the early Asian session yesterday, we stated that 'even without a significant increase in downward momentum, GBP may yet test the major support at 1.3370'. We added, 'a clear break below this level appears unlikely'. Our assessments were incorrect, as GBP rebounded sharply to a high of 1.3486. The advance has scope to test 1.3495 before a pullback can be expected. The major resistance at 1.3520 is not expected to come under threat. On the downside, support levels are at 1.3445 and 1.3420."
1-3 WEEKS VIEW: "We revised our GBP view to negative yesterday (12 Jan, spot at 1.3405). We were of the view that GBP 'could decline to 1.3370, potentially reaching 1.3340'. Our view was invalidated quickly as GBP rose and broke above our ‘strong resistance’ level at 1.3475 (high of 1.3486). The price action suggests that GBP is likely in a range-trading phase, probably between 1.3390 and 1.3520."
Oil prices rallied for a third consecutive day yesterday, with ICE Brent trading close to US$64/bbl. The prompt ICE Brent timepsread has also strengthened through January amid growing supply risks, ING's commodity experts Ewa Manthey and Warren Patterson note.
Iran unrest and Kazakh outages lift oil prices
"The price increase comes amid intensifying protests in Iran, raising the possibility of some form of intervention by the US. There have been suggestions of the potential for US military action. Up until now, President Trump has said the US will impose a 25% tariff on any country “doing business” with Iran. China is a key buyer of Iranian Oil. Whether this secondary tariff threat is sufficient to push China away from Iranian Oil remains to be seen."
"Previously, the threat of secondary tariffs from buying Venezuelan and Russian Oil was not enough to persuade China to halt purchases of Oil from these countries. In addition, with the US and China having come to a trade truce, we question whether the US would want to rock the boat once again with additional tariffs on China."
"Exports of Kazakh Oil from the CPC terminal will come under significant pressure this month. Shipments are expected to come in between 800-900k b/d, around 45% below initial expectations, according to Bloomberg. The drop is due to maintenance and damage caused by Ukrainian drones, while weather has also been an issue."
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