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Yen Under Pressure as BoJ Stands Pat, Aussie Rallies on Strong Data

BoJ Holds, Yen Weak Global FX markets traded with a clear Yen-focused tone as the Japanese currency remained under pressure following the Bank of Japan’s decision to keep policy settings unchanged. Steady interest rate differentials and cautious guidance from policymakers continued to weigh on the Yen, allowing Yen-crosses to hold firm while the US Dollar and European currencies traded with a measured, data-driven bias. AUD/USD Forecast Current Price and Context AUD/USD trades firmer near the 0.6650 region as strong Australian economic data reinforced expectations that the RBA may keep policy restrictive for longer. The pair remains supported despite a broadly steady US Dollar, reflecting renewed confidence in Australia’s domestic outlook. Key Drivers • Geopolitical Risks: Global geopolitical tensions remain contained, allowing risk-sensitive currencies like the Aussie to benefit from stable sentiment. • US Economic Data: Mixed US data has limited Dollar upside, preventing significant downside pressure on AUD/USD. • FOMC Outcome: The Fed’s cautious stance supports range-bound Dollar trading, indirectly aiding higher-yielding currencies. • Trade Policy: No immediate trade escalations have emerged, keeping commodity-linked currencies relatively insulated. • Monetary Policy: Strong Australian data has strengthened expectations that the RBA may delay rate cuts, supporting the Aussie. Technical Outlook • Trend: The short-term trend remains mildly bullish above key moving averages. • Resistance: Immediate resistance is seen near 0.6700. • Support: Initial support is located around 0.6600. • Forecast: AUD/USD is likely to remain supported with upside attempts capped unless US data weakens further. Sentiment and Catalysts • Market Sentiment: Sentiment toward the Aussie is constructive, supported by yield appeal and solid fundamentals. • Catalysts: Upcoming US macro releases and further signals from the RBA will guide near-term direction. USD/JPY Forecast Current Price and Context USD/JPY trades near 158.50 as the Yen remains under pressure following the Bank of Japan’s decision to maintain its accommodative stance. Wide yield differentials continue to favor the US Dollar, keeping downside attempts limited. Key Drivers • Geopolitical Risks: Stable global risk conditions reduce safe-haven demand for the Yen. • US Economic Data: Resilient US data supports Treasury yields, reinforcing USD/JPY strength. • FOMC Outcome: The Fed’s higher-for-longer narrative continues to underpin Dollar demand against low-yield currencies. • Trade Policy: Trade uncertainty remains in focus but has not materially boosted Yen demand. • Monetary Policy: The BoJ’s reluctance to tighten policy continues to weigh heavily on the Yen. Technical Outlook • Trend: The broader trend remains bullish while prices hold above key support levels. • Resistance: Resistance is located near 159.50. • Support: Initial support stands around 157.50. • Forecast: USD/JPY is expected to stay elevated, with risks skewed toward further upside on yield support. Sentiment and Catalysts • Market Sentiment: Yen sentiment remains fragile amid policy divergence. • Catalysts: BoJ communication and US yield movements will remain decisive. EUR/JPY Forecast Current Price and Context EUR/JPY holds above the 186.00 level as Euro strength combines with persistent Yen weakness. The pair continues to reflect strong carry trade demand amid diverging monetary policy paths. Key Drivers • Geopolitical Risks: Limited geopolitical escalation has allowed risk-positive cross flows to persist. • US Economic Data: Indirect impact via risk sentiment remains neutral for EUR/JPY. • FOMC Outcome: Stable Fed expectations support broader FX stability, favoring carry trades. • Trade Policy: Trade conditions remain stable, limiting downside volatility. • Monetary Policy: The ECB’s relatively firm stance contrasts sharply with the BoJ’s accommodative policy. Technical Outlook • Trend: The trend remains firmly bullish. • Resistance: Next resistance is seen near 187.50. • Support: Support is located around 185.00. • Forecast: EUR/JPY is likely to remain bid as long as the BoJ maintains its current policy stance. Sentiment and Catalysts • Market Sentiment: Carry trade sentiment remains favorable. • Catalysts: ECB rhetoric and BoJ policy signals will be closely monitored. GBP/JPY Forecast Current Price and Context GBP/JPY trades near multi-year highs around the 199.00 handle as strong Sterling demand combines with persistent Yen weakness. The pair reflects robust risk appetite and significant policy divergence. Key Drivers • Geopolitical Risks: Calm geopolitical conditions support risk-on positioning in high-beta Yen crosses. • US Economic Data: Limited direct impact, though broader risk tone remains supportive. • FOMC Outcome: Stable US policy expectations help sustain carry flows. • Trade Policy: No immediate trade disruptions are impacting Sterling-Yen dynamics.. • Monetary Policy: The BoE’s restrictive bias contrasts sharply with the BoJ’s accommodative stance. Technical Outlook • Trend: The trend remains strongly bullish. • Resistance: Psychological resistance lies near 200.00. • Support: Support is seen around 197.50. • Forecast: GBP/JPY is expected to remain elevated, though near-term consolidation is possible. Sentiment and Catalysts • Market Sentiment: Sentiment remains bullish but increasingly cautious at elevated levels. • Catalysts: UK data releases and BoJ communication remain key risks. USD/CAD Forecast Current Price and Context USD/CAD trades below the 1.3800 handle as the Canadian Dollar finds support from stabilizing oil prices that are paring recent losses. While the US Dollar remains broadly supported, firm commodity prices are limiting upside momentum in the pair. Key Drivers • Geopolitical Risks: Ongoing geopolitical uncertainties continue to influence energy markets, indirectly supporting the Canadian Dollar through oil price stability. • US Economic Data: Mixed US data has kept the Dollar supported but without strong directional conviction against the Loonie. • FOMC Outcome: The Fed’s cautious stance has helped cap aggressive USD buying, keeping USD/CAD range-bound. • Trade Policy: Persistent trade-related uncertainty adds to cautious positioning but has not triggered sharp risk-off flows. • Monetary Policy: The Bank of Canada’s cautious tone, combined with steady oil prices, supports CAD resilience in the near term. Technical Outlook • Trend: The short-term trend remains neutral to mildly bearish below 1.3800. • Resistance: Immediate resistance is located near 1.3850. • Support: Initial support is seen around 1.3720. • Forecast: USD/CAD is likely to remain capped below resistance, with downside risks emerging if oil prices extend gains. Sentiment and Catalysts • Market Sentiment: Sentiment remains cautious, with traders balancing oil price dynamics against broader USD strength. • Catalysts: Oil price movements, US macro data, and BoC-related commentary will be key near-term drivers. Wrap-Up Looking ahead, FX markets remain sensitive to central bank communication and incoming macro data, with the Yen likely to stay reactive to policy signals from Japanese officials. While broader risk sentiment remains stable, traders are expected to maintain a selective approach, focusing on yield dynamics and policy divergence as key drivers into the next trading sessions. Ready to trade global markets with confidence? Join Moneta Markets today and unlock 1000+ instruments, ultra-fast execution, ECN spreads from 0.0 pips, and more! Start now with Moneta Markets!

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Publication date:

2026-01-23 06:27:25 (GMT)

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