Forex News

• EUR/JPY trades slightly lower as the Japanese Yen benefits from persistent intervention concerns.
• Eurozone Industrial Production data beats expectations in November.
• Monetary policy outlooks remain cautious on both sides, limiting directional moves.

EUR/JPY trades around 184.40 on Thursday at the time of writing, down 0.15% on the day. The cross reflects a fragile balance between a Euro (EUR) supported by stronger-than-expected macroeconomic data and a Japanese Yen (JPY) that retains some defensive appeal amid political and monetary uncertainties in Japan.

On the Eurozone side, industrial activity shows signs of improvement. Industrial Production rises by 0.7% MoM in November, a pace above market expectations, while YoY growth reaches 2.5%. These figures published by Eurostat confirm a more resilient momentum in the manufacturing sector, helping to limit downside pressure on the single currency.

At the same time, investors believe the European Central Bank (ECB) is nearing the end of its monetary easing cycle. Markets do not expect an imminent rate cut, with some analysts pointing instead to a possible reduction later in 2026, given the still subdued inflation backdrop.

In Japan, the JPY finds relative support from rising intervention risks in the foreign exchange market. Authorities continue to issue verbal warnings against excessive currency moves, as elevated levels in several Japanese Yen crosses attract investor attention. Japan’s Finance Minister reiterated that all options remain on the table to counter what are seen as excessive fluctuations. This rhetoric helps cap Japanese Yen selling pressure, even though the currency remains weighed down by expectations of accommodative fiscal and monetary policies.

The Japanese political backdrop also adds another layer of uncertainty. Speculation about a snap election and the prospect of expansionary budget plans aimed at supporting growth are fueling expectations of looser fiscal policy. This limits the potential for a sustained JPY recovery, despite occasional safe-haven demand.

Overall, EUR/JPY remains sensitive to macroeconomic releases and central bank signals. Solid data from the Eurozone provide underlying support for the Euro, while intervention risks and political developments in Japan continue to shape Japanese Yen dynamics, keeping the cross in a cautious consolidation phase.

USD/KRW is forming the right shoulder of a potential Inverse Head and Shoulders, with the neckline near 1488. A breakout above this level could pave the way for gains toward 1497/1502 and 1525, Société Générale's FX analysts note.

Break above 1488 could trigger larger uptrend

"USD/KRW broke out from a multi-month base in September and gradually reclaimed the 200-DMA. 2024 peak of 1488 is an interim resistance. Interestingly, the pair appears to be forming the right shoulder of an Inverse Head and Shoulders."

"This pattern generally denotes upside potential. The neckline of the formation is near 1488. If USD/KRW breaks out above 1488, a larger uptrend may materialize. The next objectives could be located at projections of 1497/1502 and 1525. Recent pivot low of 1428 is a key support."

US Dollar (USD) remains neutral but is now expected to trade in a lower range of 6.9520/6.9900, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

USD/CNH is expected to trade in a lower range of 6.9520/6.9900

24-HOUR VIEW: "USD traded between 6.9676 and 6.9780 yesterday, narrower than our expected range of 6.9650/6.9800. The price movements still appear to be part of a range-trading phase. Today, we expect USD to trade between 6.9650 and 6.9770."

1-3 WEEKS VIEW: "We have held a neutral USD view since last week. In our latest narrative from two days ago (13 Jan, spot at 6.9710), we stated that USD 'remains neutral but is now expected to trade in a lower range of 6.9520/6.9900'. Our view remains unchanged."

EUR/CHF has established a higher trough near 0.9270 and is challenging the 200‑DMA and multi-year descending trendline. A successful break above 0.9400 could trigger further gains toward 0.9445–0.9485, Société Générale's FX analysts note.

Break above 0.9400 could unlock gains toward 0.9485

"EUR/CHF recently formed a higher trough near 0.9270 compared with the November low at 0.9170, indicating receding downward momentum. The pair is now challenging the 200‑DMA, which has capped several rebound attempts throughout 2025. It is also approaching a multi‑year descending trendline resistance near 0.9365/0.9400."

"It will be important to observe whether EUR/CHF can establish itself above this resistance zone. A breakout beyond 0.9400 could lead to an extended rebound towards the August 2025 peak of 0.9445 and projections near 0.9485. Defence of the recent trough at 0.9270 is crucial for persistence in bounce."

US Dollar (USD) is likely to consolidate between 157.90 and 159.00. In the longer run, strong USD rally has scope to extend, potentially breaking above 160.00, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Strong USD rally has scope to extend

24-HOUR VIEW: "Subsequent to the strong surge in USD two days ago, we highlighted the following yesterday: 'Strong momentum indicates further USD strength, but the deeply overbought conditions suggest a slower pace of advance, and the significant resistance at 160.00 is likely out of reach for now. Note that there is a minor resistance at 159.60'. USD subsequently rose to 159.45 before staging a sharp retreat to a low of 158.08. The immediate upward pressure has eased, and today, we expect USD to consolidate, most likely between 157.90 and 159.00."

1-3 WEEKS VIEW: "We turned positive on USD early this week. Tracking the subsequent strong rise, we indicated yesterday (14 Jan, spot at 159.15) that 'despite the deeply overbought short-term conditions, the strong USD rally has scope to extend, potentially breaking above the round-number resistance of 160.00'. USD then rose to a high of 159.45 and pulled back sharply. Conditions remain deeply overbought, and upward momentum is starting to slow with the pullback. However, only a breach of 157.70 (no change in ‘strong support’ level from yesterday) would indicate that 160.00 is out of reach. Meanwhile, the overbought conditions suggest USD could consolidate for a couple of days."

Silver has rallied more than 25% since the start of 2026, extending the powerful uptrend that began in mid-2025. While the medium-term narrative remains firmly constructive, underpinned by persistent supply deficits, resilient industrial demand (solar PV, EVs, grid modernization, etc.), and spillover demand from Gold, the velocity of the recent move warrants some near-term caution, OCBC's FX analysts Sim Moh Siong and Christopher Wong note.

Gold-Silver ratio tumbles as Silver outperforms sharply

"The Gold-Silver cross fell sharply from last year’s highs near 105 toward the low-50s, reflecting Silver’s sharp outperformance versus Gold. While it is not extreme versus historical lows (30 levels in 2011), the speed of decline adds to the sense of tactical stretch. From a position point of view, the rally in Silver does not appear to have been driven by an ETF or speculative leverage chase. Known ETF Silver holdings peaked in late-December before easing ~2–3% into mid-January, and the 6 January CFTC report showed non-commercial net longs at 29,271 contracts (down from ~45k in mid-Dec) despite greater than 40% surge in prices of Silver over the same period."

"Positioning therefore remains far from crowded, which reinforces the medium-term bullish case and suggests the market is not at a high risk of a classic leveraged washout. Meanwhile, Silver lease rates also remain subdued, with near term forward curves in contango indicating the recent rally was not driven by acute physical tightness."

"Taken together, the backdrop signals some caution after an exceptionally rapid extension, though the broader structural bull case remains intact and under-owned. Silver last seen at 91.23 levels. Bullish momentum on daily chart intact while RSI enters overbought conditions. Resistance at 98.70 (138.2% fibo projection from the low of Oct to Dec peak), 103.20 (150% fibo). Support at 84, 75 levels (21 DMA). Bias remains to buy dips."

The New York Times (NYT) reported during European trading hours on Thursday that the United States (US) is pressing Mexico to allow its military forces to fight against drug cartels.

Additional remarks

The US wants US military to dismantle fentanyl labs in Mexico.

US is pressing Mexico to allow US forces to fight cartels.

Market reaction

The Mexican Peso (MXN) faces selling pressure after the US unveils plans for military action in Mexico. USD/MXN gains sharply to near 17.81 as of writing.