Forex News

• Japanese Yen attracts some follow-through selling amid growing concerns about Japan’s fiscal health.
• The BoJ's decision to leave rates unchanged and the hawkish outlook do little to inspire the JPY bulls.
• A modest USD uptick provides an additional boost to the USD/JPY pair despite intervention fears.

The Japanese Yen (JPY) continues with its relative underperformance through the early European session on Friday as domestic political uncertainty and fiscal concerns overshadow hawkish Bank of Japan (BoJ) outlook. As was widely anticipated, the BoJ decided to leave short term rate on hold, while raising its growth and inflation forecasts for the fiscal year 2026. This, however, does little to impress bulls amid expectations for more ambitious fiscally expansionary policies under Prime Minister Sanae Takaichi.

Meanwhile, geopolitical risks eased significantly following US President Donald Trump's U-turn on Greenland. This is seen as another factor undermining the JPY's safe-haven status and contributes to the decline despite speculations that authorities could intervene to stem further weakness in the domestic currency. The US Dollar (USD), on the other hand, recovers slightly from the vicinity of a two-week low, retested the previous day, and further pushes the USD/JPY pair back closer to the 159.00 mark.

Japanese Yen selling bias remains unabated despite BoJ's hawkish outlook

• As was widely expected, the Bank of Japan board members decided to maintain the short-term interest rate at 0.75%, following the conclusion of the two-day monetary policy review meeting on Friday.
• The central bank upgraded its growth outlook for fiscal 2025 and 2026, lifting median real GDP forecasts to 0.9% and 1.0% respectively, from 0.7% previously. The BoJ also revised its median core CPI forecast for fiscal 2026 to 1.9% from 1.8%, while the fiscal 2027 remained steady at 2.0%.
• Data released earlier today showed that Japan's National Consumer Price Index fell from the 2.9% YoY rate to 2.1% in December, while CPI excluding fresh food arrived at 2.4% compared to the 3.0% in November.
• Additional details revealed that the National CPI excluding fresh food and energy slowed to the 2.9% YoY rate in December from 3.0% in the previous month, though it remains well above the BoJ's 2% annual target.
• The data reaffirms market expectations of further BoJ policy tightening. Moreover, a private-sector survey showed that Japan's manufacturing activity expanded in January for the first time in seven months.
• In fact, the S&P Global flash Japan manufacturing PMI rose to 51.5 in January, or its highest level since August 2024. Adding to this, the gauge for the service sector also picked up and rose to 52.8 from 51.1.
• Japan's Prime Minister Sanae Takaichi will dissolve parliament on Friday ahead of a snap election on February 8, hoping for a stronger mandate to push through her ambitious fiscally expansionary policies.
• Investors, however, gave a thumbs down to Takaichi’s proposal to cut the 8% food consumption tax for two years, which led to the recent free fall in government bonds and continues to weigh on the JPY.
• Geopolitical tensions eased dramatically after US President Donald Trump announced on Wednesday a potential deal with NATO involving Greenland, further undermining the JPY's safe-haven status.
• Meanwhile, hawkish BoJ expectations mark a significant divergence in comparison to the growing acceptance that the US Federal Reserve will lower borrowing costs at least two more times this year.
• Apart from this, the broader de-dollarization trend offsets Thursday's upbeat US data and dragged the US Dollar back closer to a two-week low, which might further contribute to capping the USD/JPY pair.

USD/JPY bulls await breakout through ascending channel resistance, near 159.00

The 100-hour Simple Moving Average (SMA) edges higher at 158.16, and the USD/JPY pair holds above it, keeping the near-term tone bullish. The Moving Average Convergence Divergence (MACD) line sits marginally below the Signal line around the zero mark, with a small negative histogram that reinforces a cautious momentum backdrop. The Relative Strength Index (RSI) prints 56, slightly above the midline, suggesting steady buying interest. The ascending channel from 157.35 supports the uptrend, with resistance near 158.91. A decisive break could extend gains.

Price action respects the ascending structure, while the 100-period SMA continues to rise at 158.16 and acts as nearby support. The MACD remains below the Signal line and just under the zero level, while the negative histogram contracts, suggesting fading bearish pressure that could give way to renewed upside if momentum improves. RSI improves toward 56 from the mid-40s, aligning with stabilizing buying interest. Initial support stands near the lower channel boundary at 157.96. A failure to hold the channel floor would shift attention to downside risks.

(The technical analysis of this story was written with the help of an AI tool.)

The United Kingdom (UK) Retail Sales rose 0.4% month-over-month (MoM) in December after falling 0.1% in November, according to the latest data published by the Office for National Statistics (ONS) on Friday.

Markets projected a decrease of 0.1% in the reported month.

The core Retail Sales, stripping the auto motor fuel sales, increased 0.3% MoM in December, compared with the previous decline of 0.4% (revised from -0.2%). This figure came in above the market consensus of a 0.2% drop. 

The annual Retail Sales in the UK climbed 2.5% in December versus 1.8% prior (revised from 0.6%), above the consensus of 1.0%. The annual core Retail Sales jumped 3.1% in the same month versus a 2.6% rise prior (revised from 1.2%). This reading came in better than the market expectations of 1.4%.

Market reaction to the UK Retail Sales report

The upbeat UK Retail Sales report fails to boost the Pound Sterling. The GBP/USD pair is trading 0.06% lower on the day at 1.3488 as of writing.

This section below was published on January 23 at 5:11 GMT as a preview of the UK Retail Sales report.

The UK Retail Sales Overview

The United Kingdom (UK) docket has the Retail Sales data for December to be released by the Office for National Statistics (ONS) on Friday, later this session at 07:00 GMT.

UK Retail Sales are expected to decline by 0.1% month-over-month (MoM) in December, following a 0.1% decline seen in November. On an annualized basis, Retail Sales are seen rising 1% during the reported month, inching higher from the previous increase of 0.6%.

Core Retail Sales, stripping the basket of motor fuel sales, are expected to fall 0.2% MoM, matching the prior decline, while YoY growth may rise to 1.4% from 1.2% in November.

How could the UK Retail Sales affect GBP/USD?

GBP/USD pair may remain silent even if UK Retail Sales data for December come stronger-than-expected, as the Bank of England (BoE) is widely expected to stay put on a gradual easing path, even as price pressures accelerated in December. Focus will be shifted toward the preliminary S&P Global Purchasing Managers’ Index (PMI) data for January from the United Kingdom (UK) and the United States (US) due later in the day.

The GBP/USD pair may regain its ground as the US Dollar (USD) struggles with increased risk aversion, which could be attributed to the geopolitical tensions. US President Donald Trump initially threatened tariffs against European countries opposing his Greenland plan, but later backed down after securing a NATO framework agreement for a potential deal.

Technically, the GBP/USD pair remains steady after gaining more than 0.5% in the previous session, trading around 1.3500 at the time of writing. The pair may target the three-month high of 1.3562 as the next barrier. The immediate support lies at the nine-day Exponential Moving Average (EMA) of 1.3451, followed by the 50-day EMA at 1.3398.

• Australian Dollar hits a 15-month-high of 0.6854 on Friday.
• Australia’s S&P Global Manufacturing PMI hit 52.4, while Services PMI rose to 56.0 in January.
• The US economy expanded 4.4% in Q3, beating estimates, supported by stronger exports and a smaller inventory drag.

The Australian Dollar inches higher against the US Dollar (USD) on Friday, remaining in the positive territory for the second consecutive day. The AUD/USD pair holds ground following the preliminary reading of Australia's S&P Global Manufacturing Purchasing Managers Index (PMI), which came in at 52.4 in January versus 51.6 prior. Services PMI climbed to 56.0 in January from the previous reading of 51.1, while the Composite PMI climbed to 55.5 in January versus 51.0 prior.

The strong PMI data reinforced the likelihood of a tighter monetary policy from the Reserve Bank of Australia (RBA), supported by Thursday’s Australian employment data. Employment Change, which arrived at 65.2K in December, swung from 28.7K job losses (revised from 21.3K job losses in November, compared with the consensus forecast of 30K. Meanwhile, the Unemployment Rate declined to 4.1% from 4.3% prior, against the market consensus of 4.4%.

The AUD/USD pair also strengthened as the US Dollar weakened on increased risk aversion, which could be attributed to US-Greenland tensions. However, the sentiment improves slightly after US President Donald Trump reversed his stance after reaching a framework agreement with NATO for a possible future deal on Greenland.

US Dollar weakens ahead of PMI data

• The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is holding ground and hovering around 98.30 at the time of writing. Traders await the preliminary reading of the US S&P Global Purchasing Managers Index (PMI), which will be released later on Friday.
• The US Gross Domestic Product Annualized grew at 4.4% in the third quarter of 2025, slightly more than expected and the previous reading of 4.3%. Additionally, the Initial Jobless Claims came in at 200K last week, below the market consensus of 212K.
• US Personal Consumption Expenditures (PCE) Price Index rose to 2.8% year-over-year in November from 2.7% in October. On a monthly basis, the PCE Price Index rose by 0.2%. The annual core PCE Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose by 2.8% in November, following the 2.7% increase recorded in October and matching the market expectation.
• US President Donald Trump said he would step back from imposing tariffs on goods from European nations opposing his effort to take possession of Greenland. He said earlier there is “no going back” on his ambitions regarding Greenland, alongside earlier threats to impose new 10% tariffs on eight European Union (EU) countries.
• President Trump also said that the United States and the North Atlantic Treaty Organization (NATO) had “formed the framework of a future deal regarding Greenland.” However, he did not outline the parameters of the so-called framework, and it remained unclear what the agreement would entail.
• Fed officials have signaled little urgency to ease policy further until there is clearer evidence that inflation is sustainably moving toward the 2% target. Morgan Stanley analysts revised their 2026 outlook, now forecasting one rate cut in June followed by another in September, compared with their previous expectation of cuts in January and April.
• The People’s Bank of China (PBOC), China's central bank, announced on Tuesday that it would leave its Loan Prime Rates (LPRs) unchanged. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively. It is essential to note that any changes in the Chinese economy could impact the Australian Dollar, as both countries are close trading partners.
• The International Monetary Fund (IMF) has urged the RBA to remain cautious, highlighting that inflation has stayed above the Bank’s 2%–3% target band for a prolonged period, even though headline CPI eased more quickly than anticipated in November.
• Australia’s TD-MI Inflation Gauge, released on Monday, rose to 3.5% year-over-year (YoY) in December, up from 3.2% previously. On a monthly basis, inflation surged 1.0% month-over-month (MoM) in December 2025, the fastest pace since December 2023 and a sharp acceleration from 0.3% in the prior two months.
• RBA policymakers acknowledged that inflation has eased significantly from its 2022 peak, though recent data suggests renewed upward momentum. Headline CPI slowed to 3.4% YoY in November, the lowest reading since August, but remains above the RBA’s 2–3% target band. Meanwhile, trimmed mean CPI edged down to 3.2% from October’s eight-month high of 3.3%.

Australian Dollar rises to near 0.6850 barrier above upper ascending channel boundary

The AUD/USD pair is trading around 0.6850 on Friday. Daily chart analysis indicates that the pair is rising above the ascending channel pattern, indicating a persistent bullish bias. Moreover, the nine-day Exponential Moving Average (EMA) rises above the 50-day EMA, with the spot price holding above both and reinforcing a bullish tone. This alignment keeps upside pressure in place. The 14-day Relative Strength Index (RSI) at 74.96 is overbought, signaling stretched momentum.

The daily close above the channel would lead the AUD/USD pair to approach 0.6942, the highest level since February 2023. On the downside, the primary support lies at the nine-day EMA at 0.6762. A break below the short-term average would weaken the price momentum and target the lower ascending channel boundary at 0.6680, followed by the 50-day EMA of 0.6664.

• Silver price reached a fresh high of $99.39 on Friday
• XAG/USD stays above the rising nine-day EMA, with the advancing 50-day EMA supporting the medium-term trend.
• The 14-day Relative Strength Index at 74.66 suggests stretched momentum and potential consolidation.

Silver price (XAG/USD) extends its gains for the second successive session, trading around $99.10 per troy ounce during the Asian hours on Friday. The XAG/USD pair hit a fresh high of $99.39 amid persistent bullish bias, indicated by the technical analysis of the daily chart timeframe, as the price of the precious metal rises to near the upper boundary of the ascending channel pattern.

Silver price holds above the rising nine-day EMA, while the 50-day EMA continues to advance and underpins the medium-term trend. Trend strength is confirmed by the widening gap between the 9-day EMA and 50-day EMA, keeping bulls in control.

The 14-day Relative Strength Index (RSI) at 74.66 (overbought) flags stretched momentum that could precede consolidation. Overbought conditions could trigger a pause, but the uptrend remains intact while above the short-term average. A defended dip would keep the topside bias intact and open scope for extension above the upper ascending channel boundary around $99.80, followed by the psychological level of $100.00.

Should price pull back, initial demand could emerge near the nine-day EMA at $92.42. A daily close below the short-term average would risk a correction toward the lower boundary of the ascending channel around $82.00. Further declines would put downward pressure on the Silver price to navigate the region around the 50-day EMA at $73.14.

(The technical analysis of this story was written with the help of an AI tool.)

Bank of Japan (BoJ) Governor Kazuo Ueda is addressing the press conference, explaining the reason behind leaving the key interest rate unchanged at 0.75% in the January policy meeting.

BoJ press conference key highlights

Japan's economy is recovering moderately.

Japan's economy is likely to continue moderate growth.

Government economic package boosted economic outlook.

Underlying inflation will keep rising moderately.

Takata and Tamura proposed revisions to the outlook report.

Will keep raising rates if the economic outlook is realized.

Lending rates linked to BoJ rate are already rising. 

Conditions remain accommodative after December hike.

FX is affected by various factors.

Will refrain from commenting on Yen level.

I will keep watching FX closely.

Bond yields are rising very rapidly.

BoJ to conduct bond operations nimbly in exceptional cases.

We may conduct operations to encourage stable yield formation. 

Underlying inflation getting closer to 2%.

It's possiblethe Yen is impacting prices more.

We need to give more attention to FX.

Long yields affected by end of fiscal year factor.

April price behavior is a factor to mull over rate hike.

The section below was published on January 23 at 3:35 GMT to cover the Bank of Japan's monetary policy announcements and the initial market reaction.

The Bank of Japan (BoJ) board members decided to maintain the short-term interest rate at 0.75%, following the conclusion of the two-day monetary policy review meeting on Friday. This decision was widely anticipated.

That leaves borrowing costs at the highest level in three decades.

Takeaways from the BoJ’s policy statement 

Japan's economy likely to continue recovering moderately.

Consumer inflation likely to gradually accelerate.

Mechanism in which wages, inflation rise in tandem to be sustained.

Output gap likely to improve as trend, expand moderately.

Medium-, long-term inflation expectations likely to continue rising moderately.

No big imbalance seen in japan's financial activity.

Japan's financial system stable as a whole.

Moves to reflect wages in selling prices could strengthen to a greater extent than expected.

Recent rise in food prices, such as rice prices, largely reflects temporary supply-side factors.

Uncertainties remain over the outlook for the global economy, such as the impact of trade policies, which could lead to a rise in import prices from the supply side.

Trade policies announced so far could push down the global economy.

With regard to the US Economy, attention is warranted on factors such as the impact of tariffs on employment and income formation through deterioration in corporate profit.

There remain high uncertainties over Chinese economy surrounding the future pace of growth.

If import prices were to rise significantly, households' defensive attitude toward spending could strengthen further.

Trade policies announced so far could trigger a change in the trend of globalisation.

Board's real GDP fiscal 2025 median forecast at +0.9% vs +0.7% in Oct.

Board's real GDP fiscal 2026 median forecast at +1.0% vs +0.7% in Oct.

Board's real GDP fiscal 2027 median forecast at +0.8% vs +1.0% in Oct.

BoJ’s quarterly Outlook Report

Board's core consumer price index fiscal 2025 median forecast at plus 2.7 percent compared with plus 2.7 percent in October.

Board's real GDP fiscal 2025 median forecast at plus 0.9 percent versus plus 0.7 percent in October.

Real interest rates are at significantly low levels.

Risks to economic outlook roughly balanced.

Impact of FX volatility on prices has increased compared to past as firms have become more active in raising prices and wages.

Core consumer inflation likely to slow to below 2% throughout first half of this year.

Actions to reflect wages in selling prices could strengthen more than expected.

Japan economy likely to continue recovering moderately.

Market reaction to the BoJ policy announcements

USD/JPY extends gains toward 158.60 in an immediate reaction to the Bank of Japan's (BoJ) rates on hold decision, adding 0.11% on the day. 

This section below was published on January 22 at 23:00 GMT as a preview of the Bank of Japan Interest Rate Decision.

• The Bank of Japan is widely expected to keep interest rates unchanged at 0.75% on Friday
• The central bank will wait to assess the impact of December’s rate hike before further tightening.
• February’s general elections add a layer of uncertainty to the bank’s monetary policy.

The Bank of Japan (BoJ) is expected to leave its benchmark interest rate unchanged at 0.75% after concluding its two-day monetary policy meeting next Friday.

The Japanese central bank hiked rates to its highest level in three decades in December, and will likely stand pat on Friday to better assess the economic consequences of previous rate hikes.

BoJ Governor Kazuo Ueda is expected to reiterate the bank’s commitment to further monetary policy normalisation. In that sense, investors will analyze Ueda’s press conference with particular attention for further insight into the timing and the scope of the bank’s tightening cycle.

What to expect from the BoJ interest rate decision?

The BoJ is widely expected to keep interest rates unchanged in January and hint at further monetary policy tightening if the economy evolves in line with the bank’s projections.

In December, the bank’s monetary policy committee approved a 25 basis points rate hike to the current 0.75% level, and the minutes of the meeting revealed that some policymakers see the need for further monetary tightening, as real interest rates remain deeply negative, taking inflation into account.

A back-to-back rate hike, however, is completely discarded by the market. More so after Prime Minister Sanae Takaichi’s unexpected call for snap elections earlier this week and her plans to suspend taxes on food and beverages for two years, aiming to help households coping wth the rising inflationary trends.

It is still unclear what impact these actions will have on the central bank’s monetary policy, but the BoJ plans to gradually normalize its monetary policy and remove the monetary stimulus measures without damaging economic growth. Against this backdrop, the bank will opt to wait until the political scenario clarifies and the consequences of previous rate hikes manifest before tightening its monetary policy further.

The Yen, on the other hand, has been depreciating steadily since market speculation about a snap election arose. It will be interesting to see whether JPY weakness has prompted the central bank to adopt a less ambivalent stance towards monetary tightening.

How could the Bank of Japan's monetary policy decision affect USD/JPY?

Investors are fully pricing a BoJ rate pause on Friday, but the bank will need to make a clear commitment towards a further monetary tightening cycle to stem the current Yen depreciation. 

Yen bears have taken a breather over the last few days, favoured by broad-based US Dollar weakness, amid the European Union (EU)-US trade rift after President Donald Trump’s threats to annex Greenland. USD/JPY, however, remains about 0.7% up on the year and relatively close to the 18-month high near 159.50 hit last week.

Investors fear that Prime Minister Takaichi might gain a stronger parliamentary support after the elections to expand her policy of big spending and lower taxes, adding pressure on the country’s strained public finances. This has sent the Yen tumbling and long-term Japanese yields rallying to record highs, amid fears of an upcoming fiscal crisis.

Recent comments by BoJ Governor Ueda have reaffirmed the bank’s gradual monetary-tightening rhetoric, indicating that Japan is moving toward a more durable inflation regime, with a mechanism in place for wages and prices to rise in tandem. The Yen will need clear signs of rate hikes ahead to extend a hitherto fragile recovery.

From a technical perspective, Guillermo Alcalá, analyst at FXStreet, sees the  USD/JPY pair on a bearish correction, with key support above the 157.40 area: “The pair has retreated from highs, but Yen bulls would need to break the support area between 157.40 and 157,60, to cancel the near-term bullish structure and aim for the early January lows, around 156.20.”

A hesitant BoJ message would disappoint markets and undermine support for the Yen. In that case, Alcalá sees the pair reaching fresh long.-term highs: “Technical indicators are turning positive. The 4-Hour RGI has bounced up from the 50 line, highlighting a stronger bullish momentum. The pair is testing resistance at  158.70 (January 16 high) at the time of writing, which is the last barrier before the 18-month high near 159.50.”

• US Dollar Index moves little after losing 0.5% in the previous session.
• Traders await the preliminary US S&P Global PMI reading due later on Friday.
• US GDP annualized expanded 4.4% in Q3 2025, slightly above expectations and the prior 4.3% reading.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding ground after registering 0.5% losses in the previous session. The DXY is hovering around 98.30 during the Asian hours on Friday. Traders await the preliminary reading of the US S&P Global Purchasing Managers Index (PMI), which will be released later on Friday.

On the data front, the US Gross Domestic Product Annualized grew at 4.4% in the third quarter of 2025, slightly more than expected and the previous reading of 4.3%. Additionally, the Initial Jobless Claims came in at 200K last week, below the market consensus of 212K.

US Personal Consumption Expenditures (PCE) Price Index rose to 2.8% year-over-year in November from 2.7% in October. On a monthly basis, the PCE Price Index rose by 0.2%. The annual core PCE Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, rose by 2.8% in November, following the 2.7% increase recorded in October and matching the market expectation.

The Greenback faces challenges due to ongoing geopolitical and trade tensions between the United States (US) and Europe. US President Donald Trump first warned several European nations opposing his Greenland takeover plan of fresh tariffs, but later reversed his stance after reaching a framework agreement with NATO for a possible future deal.

However, the US-NATO deal remains unclear, with markets speculating it may include mineral rights and missile deployments. Meanwhile, market analysts warn that Europe could use its large holdings of US assets as leverage, after a Danish pension fund said it would divest from US Treasuries, heightening market uncertainty.

On the policy front, the Federal Reserve is widely expected to maintain interest rates next week. According to the CME FedWatch Tool, markets are now pricing in an 95% chance of a rate hold on Wednesday.

(This story was corrected on January 23 at 10:27 GMT to say that markets are pricing in an 95% chance of a rate hold on Wednesday, not a rate cut.)