Fundamental Overview for Forex Traders
US Dollar (USD)
The US Dollar has weakened broadly during the first half of the week, largely driven by escalating tensions over Greenland linked to President Trump’s recent remarks. The prevailing theme behind the dollar’s decline is a renewed focus on de-dollarisation amid aggressive and unpredictable US policies. However, the recent pullback may also reflect positioning adjustments after a period of USD strength triggered by slightly hawkish market repricing.
If tensions ease, expect a potential relief rally in the dollar, especially if upcoming economic data show improvements in the weeks and months ahead. Market participants should pay close attention to today’s events at the World Economic Forum in Davos, where President Trump will deliver a speech and engage with global leaders on Greenland and other issues. Headlines or social media updates, particularly from Truth Social, could have notable market impacts.
Japanese Yen (JPY)
Last week saw heavy verbal intervention from Japanese officials after the yen broke above a key high from 2025, which helped halt further yen depreciation. Despite this, the yen remains weak due to a lack of significant fundamental changes.
Japanese long-term bond yields are rising amid fiscal concerns, attracting close attention. US Treasury Secretary Janet Yellen (referred to as Bessent in error) stated that she has held talks with Japanese officials, who assured her they plan to stabilise the markets.
The Bank of Japan (BoJ) is expected to maintain interest rates on Friday but could signal a slower pace of bond tapering. Such a move could prompt a relief rally in the Japanese bond market while potentially placing pressure on the yen.
Looking ahead, the BoJ continues to emphasise wage growth in its policy framework. Reports also suggest that the weakening yen and its inflationary effects will increasingly influence future policy decisions.
USD/JPY Technical Analysis
Daily Timeframe
USD/JPY is currently consolidating below 158.87, as traders await new catalysts to drive price action either upward or downward. For buyers, the 154.50 support zone offers a favourable risk-to-reward level to enter long positions targeting new highs. Sellers should look for a break below this support to increase bearish exposure, possibly aiming for the major trendline near 152.00.
4-Hour Timeframe
An upward trendline is clearly defining bullish momentum on this timeframe. Buyers are using this trendline as support, with risk management focused just below it, pushing toward new highs. Sellers will wait for a trendline break to target the 154.50 support level.
1-Hour Timeframe
Price action has turned rangebound on this shorter timeframe. Buyers are likely to lean on the major trendline to continue pushing higher, with a break above the minor counter-trendline at approximately 158.20 potentially generating stronger upside momentum. Sellers should await a break below the major trendline to open the door for a decline toward the 154.50 support. The daily trading range is highlighted by red lines on the chart.
Upcoming Market Catalysts
Today’s key focus is Davos, where President Trump’s speech and subsequent discussions about Greenland could move markets. The Fed’s Christopher Waller will also testify at the US Supreme Court. Tomorrow, traders should watch the latest US Jobless Claims data. On Friday, watch for Japan’s Consumer Price Index release, the Bank of Japan policy decision, and the US Flash Purchasing Managers’ Index (PMI) reports, all of which may significantly influence currency moves.
Original Source: Giuseppe Dellamotta of investinglive.com
