The Pound’s rise pushes GBP/JPY to 213.98 as concerns weaken the Japanese Yen
The GBP/JPY currency pair hit a weekly high of 213.98, reflecting a strong performance by the British Pound. This increase of over 1.10% this week stems from mixed economic data from the UK, while concerns about Japan’s fiscal policies have put pressure on the Yen. The pair now trades at 213.85, showing a weekly gain of 0.58%.
Technical analysis suggests a bullish trend for GBP/JPY. Resistance is expected at 214.29 and 215.00. If the price falls below support levels at 212.04 and 210.71, bearish signals may arise. A dip below the 20-day SMA at 212.04 could indicate possible weakness.
Australia’s preliminary PMI reading rises to 52.4 from 51.6, says S&P Global
Australia’s S&P Global Manufacturing PMI rose to 52.4 in January, up from 51.6. The Services PMI jumped to 56.0, up from 51.1, and the Composite PMI increased to 55.5 from 51.0.
During the trading day, the AUD/USD pair climbed by 1.13%, reaching 0.6837. Interest rates set by the Reserve Bank of Australia (RBA) are a key factor influencing the Australian Dollar.
Impact Of Resource Prices And Trade Relations
Australia’s resource-rich economy is closely linked to Iron Ore prices, which affect the AUD. The health of the Chinese economy, as Australia’s largest trading partner, also plays a significant role in shaping the Australian Dollar. When the RBA adjusts interest rates, it aims to keep inflation steady at 2-3%. This monetary policy can strengthen or weaken the AUD. A strong Chinese economy boosts demand for Australian exports, raising the AUD’s value. Higher Iron Ore prices typically result in a stronger AUD due to increased demand. The Trade Balance, which measures the difference between export earnings and import costs, also influences the Australian Dollar. A positive Trade Balance strengthens the AUD as foreign buyers increase demand. Recent PMI data for January shows promising signs in the Australian economy, exceeding expectations. The services index reaching 56.0 is particularly notable, indicating broad growth. Such economic strength could lead the RBA to adopt a more aggressive approach to interest rates. This domestic improvement coincides with positive news from China, which reported better-than-expected industrial output for December 2025. With China’s commitment to infrastructure projects, the outlook for Australian commodity exports is becoming more favorable in early 2026. This supports the value of the Australian dollar.Commodity Markets And Currency Strategies
The commodity markets reflect this optimism, with iron ore prices rising above $140 per tonne for the first time in months. Prices had softened during mid-2025’s economic uncertainty, but this rebound is a major boost for Australia’s trade balance and supports the currency. Throughout most of 2025, the RBA took a cautious approach, keeping rates steady while awaiting clear economic indicators. The new PMI figures could change the RBA’s stance, moving away from neutral or dovish predictions. The market is starting to eliminate the possibility of a rate cut this year. In light of this, we should consider taking bullish positions on the Australian dollar in the coming weeks. This could mean buying near-term AUD/USD call options to take advantage of upward momentum or going long on AUD futures contracts. With the improved economic foundation, selling out-of-the-money AUD puts could also be a solid strategy to gather premium. Create your live VT Markets account and start trading now.In the fourth quarter, New Zealand’s CPI inflation hit 3.1%, surpassing the 3.0% forecast.
New Zealand’s Consumer Price Index (CPI) rose by 3.1% year-on-year in the fourth quarter of 2025, surpassing the expected growth of 3.0%. This follows a 3.0% increase in the third quarter, according to Statistics New Zealand.
Quarterly CPI inflation fell to 0.6% in the fourth quarter from 1.0% in the third quarter, exceeding the market forecast of 0.5%. Meanwhile, the NZD/USD pair is currently up by 0.10%, trading at 0.5908.
Understanding GDP And Economic Growth
Gross Domestic Product (GDP) measures a country’s economic growth over time. It is usually compared to the previous quarter or the same period last year. A higher GDP can strengthen a nation’s currency, supporting exports and attracting foreign investment. Economic growth leads to increased spending, which raises inflation. This can prompt higher interest rates, making investments in gold less appealing compared to cash deposits. Consequently, gold prices often drop in a strong economy. Recent inflation figures for New Zealand show a higher-than-expected increase at the end of 2025. The 3.1% annual rise is just above the Reserve Bank of New Zealand’s (RBNZ) target range of 1-3%. This ongoing inflation makes it unlikely that the RBNZ will ease its policy anytime soon. With the Official Cash Rate currently at 5.50%, this information decreases the chances of rate cuts in the first half of the year. We now need to prepare for the possibility that the RBNZ may keep its tight policies in place longer than expected. Any market hopes for immediate rate cuts will likely diminish in the coming days.Implications For Derivative Traders
For derivative traders, this situation suggests a strategy to expect a stronger New Zealand dollar in the upcoming weeks. Purchasing NZD/USD call options set to expire in February or March could be a good way to benefit from a potential rise toward the 0.6000 level. This is because higher interest rate expectations attract foreign investment, bolstering the currency. However, weak GDP figures from the third quarter of 2025 showed a contracting economy. Despite this, the experiences of 2023 and 2024 indicate that central banks will prioritize fighting inflation, even at the cost of short-term growth. We expect the RBNZ to follow this approach. Create your live VT Markets account and start trading now.Australia’s Manufacturing PMI increased to 52.4 from 51.6
The S&P Global Manufacturing Purchasing Managers’ Index (PMI) for Australia increased to 52.4 in January, up from 51.6. This rise shows that the manufacturing sector is getting stronger, with steady demand for goods indicating continued growth.
Manufacturers are responding positively to this demand, resulting in increased production and new orders. These developments highlight the resilience of the Australian economy, even amidst tough global conditions.
Impact on Monetary Policy
Traders and analysts are keeping a close eye on how this data could affect monetary policy. As the Reserve Bank of Australia weighs its options, there may be discussions about adjusting interest rates and future economic plans. The upbeat trend in Australia’s manufacturing sector suggests potential growth in the coming months. With the Australian manufacturing PMI rising to 52.4, we see a clear sign of strengthening economic momentum. This unexpected strength indicates that demand remains strong, leading traders to consider optimistic positions. In the short term, buying call options on the ASX 200 index (XJO) could be an effective way to take advantage of this positive outlook. This data adds complexity to the Reserve Bank of Australia’s plans, which has kept the cash rate steady at 4.35% throughout 2025 while monitoring inflation. With quarterly inflation closing last year stubbornly above 3%, this robust activity report makes a near-term interest rate cut unlikely. Traders should adjust their interest rate futures positions to account for the low probability of cuts in the first half of the year.Australian Dollar and Commodities
The Australian dollar should also be a major focus, as it looks for a catalyst to rise. In the last quarter of 2025, the AUD/USD was mostly trading sideways around the 0.67 level. This PMI report, hinting at a hawkish stance from the RBA, could help push the currency higher. Thus, buying AUD call options or AUD/USD futures could be a smart strategy. This manufacturing strength is closely tied to the demand for raw materials, which boosts the outlook for major commodity producers. We’ve observed the solid performance of iron ore prices, which have remained above $130 per tonne lately. Therefore, we believe that buying call options on major resource companies could be a good way to gain targeted exposure to this ongoing economic strength. Create your live VT Markets account and start trading now.In January, the Australian S&P Global Composite PMI rose from 51 to 55.5.
The Australian S&P Global Composite PMI rose from 51 to 55.5 in January. This increase indicates that the Australian economy is growing, meaning more business activity and greater confidence among companies.
Both the manufacturing and services sectors are showing growth, suggesting that the economy is recovering.
Strengthening Demand
This trend points to rising demand and improved consumer confidence. Analysts will keep an eye on future economic data to evaluate the economy’s health and its effects on monetary policy. The jump in the January Composite PMI to 55.5 is a strong positive sign for the Australian economy. This robust data suggests that corporate earnings will likely exceed expectations in the coming months. We believe this presents an opportunity to buy call options on the ASX 200 index, anticipating an upward movement. This economic strength makes the outlook more complex for the Reserve Bank of Australia (RBA), which plans to maintain its cash rate at 4.35% through the second half of 2025. With last year’s quarterly inflation figures still around 3.5%, this PMI reading increases the chance of a more aggressive stance from the RBA. Therefore, we are considering strategies that benefit from rising yields, like buying puts on Australian 10-year bond futures.Market Expectations
If the RBA adopts a more hawkish approach, the Australian dollar is likely to strengthen. The AUD has been trading in a narrow range against the US dollar, but this data could trigger a breakout. As a result, we are preparing for Aussie dollar strength by purchasing AUD/USD call options that expire in the next one to two months. We witnessed a similar trend in 2022 when strong economic data quickly changed market expectations, prompting the RBA to tighten its stance. The market reacted swiftly then, penalizing those who were slow to adapt. While this expansion is a good sign, it raises inflation concerns we thought were easing last year. Create your live VT Markets account and start trading now.In January, Australia’s S&P Global Services PMI increased to 56, up from 51.1.
Australia’s S&P Global Services PMI increased to 56 in January, up from 51.1 the previous month. This rise signals stronger growth in the services sector.
The Japanese yen is under pressure due to fiscal worries ahead of the Bank of Japan’s upcoming rate decision. In December, Japan’s national CPI rose by 2.1% compared to last year, with core CPI also rising as expected.
USD Gains Against Yen
The USD/JPY pair saw slight gains, approaching 158.50 before the Bank of Japan’s rate announcement. The Bank of Japan is likely to keep its benchmark interest rate at 0.75%, following a rate increase in December. Gold prices continue to rise, now over $4,950 amid geopolitical uncertainties. The expectation of further policy easing by the Federal Reserve is fueling this rally. In the forex market, EUR/USD is steady around 1.1750, while GBP/USD is nearing 1.3500 due to selling pressure on the USD. Ripple (XRP) is holding strong above $1.90, showing positive technical signals for two days in a row.Investment Caution Recommended
It’s important to do thorough research before making any investment decisions. The information provided here is for informational purposes only and should not be seen as a recommendation to buy or sell assets. The rise in Australia’s services PMI to 56 is a clear growth sign for the economy. This is the highest reading in nearly two years, reminiscent of the post-pandemic rebound in 2024. It suggests that the Reserve Bank of Australia may need to keep interest rates higher for longer. Considering this data, call options on the Australian dollar could be worthwhile, indicating its continued strength against other major currencies. The persistent selling of the US dollar is tied to expectations of the Federal Reserve easing monetary policy. After core inflation dipped below 3% in late 2025, the market now thinks there’s a 75% chance of at least one rate cut before July 2026. This scenario makes bearish dollar strategies, like buying puts on the dollar index (DXY), appear more appealing in the coming weeks. Gold’s impressive rally past $4,950 is driven by the ongoing trend of de-dollarization and ongoing geopolitical risks. However, the metal’s Relative Strength Index (RSI) has now gone above 80, suggesting a high chance of a short-term price correction. Using options strategies like bull call spreads could allow us to benefit from any further upside while managing risk in case of sudden changes in market sentiment. Meanwhile, the Bank of Japan is expected to maintain its interest rate at 0.75%, continuing a policy that differs from other central banks. After the notable rate hike in December 2025, the central bank appears to be in a wait-and-see phase, which puts pressure on the yen. This scenario supports long USD/JPY positions, and we believe call options are a sound choice for targeting a potential rise toward the 160 level. As tensions between the US and EU ease, both the Euro and the British Pound are gaining strength against the weaker dollar. Traders are eyeing 1.1800 for EUR/USD and 1.3500 for GBP/USD, riding the wave of anti-dollar sentiment. This perspective is supported by last week’s Eurozone PMI data, which surprisingly outperformed expectations. Create your live VT Markets account and start trading now.The shared currency rises above 1.1740 as Trump eases tariff threats, weakening the dollar.
EUR/USD rose above 1.1740, increasing by over 0.50% as the dollar weakened despite positive US economic news. This rise was driven by better risk sentiment following US President Trump’s decision to drop tariff threats on Europe, which boosted the euro. At the time of reporting, EUR/USD was at 1.1743, recovering from a daily low of 1.1670.
Strong Economic Indicators
The strong GDP numbers from Q3 and stable inflation in the US lowered expectations for a Federal Reserve rate cut in January. Market predictions showed a 95% chance that the Fed will keep rates steady, along with reduced predictions for future cuts. In Europe, minutes from the ECB meeting indicated a shared view that underlying inflation remains close to the 2% target.
The EU’s economic calendar will include Flash PMIs for Germany, France, and the overall bloc, plus comments from ECB President Christine Lagarde. In the US, attention will be on the S&P Global Flash PMIs and consumer sentiment data. The euro has shown mixed changes against other major currencies this week, performing well against the Japanese Yen.
The ECB, based in Frankfurt, manages monetary policy in the Eurozone, focusing on price stability through interest rate decisions. Important economic data, like GDP, inflation rates, and trade balances, are key to assessing the euro’s strength. Positive trade balances, where exports exceed imports, usually bolster the currency.
Last year, when tariff threats were lifted, EUR/USD exceeded 1.1740. However, that optimism seems to have peaked, as the pair has significantly declined since then. Now, the focus has shifted from settling trade disputes to the growing differences in central bank policies.
Changing Economic Outlook
Looking back, markets correctly anticipated Fed rate cuts in 2025, but they underestimated the US economy’s strength. The US Core PCE data from December 2025 showed inflation at 2.9% year-over-year, weakening the case for more aggressive rate cuts. This stands in stark contrast to a year ago when markets expected over 40 basis points of easing.
In Europe, the ECB’s earlier confidence has diminished. Recent Eurostat data revealed that Eurozone GDP growth was almost flat in the fourth quarter of 2025, and flash PMI figures for January suggest a weak beginning to the year. Consequently, money markets now believe there is a 70% chance of an ECB rate cut by June, adding pressure on the euro.
This policy divergence signals potential increased volatility. The implied volatility in EUR/USD options remains moderate, creating opportunities to buy straddles or strangles for potential profits from significant price moves in either direction over the next month. The current environment is much uncertain compared to the risk-on attitude seen last year.
For traders with specific views, the economic outlook leans toward a weaker euro against the dollar. It would be wise to consider buying put options or setting up bearish put spreads targeting a drop below 1.0800 in the weeks ahead. The previous technical targets of 1.1800 and higher no longer seem relevant given the current macroeconomic situation.
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New Zealand’s Consumer Price Index surpasses expectations with a 3.1% year-on-year increase in Q4
Bank of Japan’s Monetary Policy Outlook
The Bank of Japan (BOJ) is likely to keep interest rates steady while the market considers possible future rate increases. The USD/JPY is showing slight gains, nearing 158.50, ahead of the BOJ’s decision on rates. For currency traders, several brokers are being reviewed, focusing on low spreads, high leverage, and special accounts. There are also guides available to help select the right brokers in different regions and platforms. FXStreet reminds traders that their market insights are for educational use only and highlight the risks involved in trading. They stress the importance of conducting personal research due to the significant risks of investments. New Zealand’s inflation rate surprised many by reaching 3.1% for the last quarter of 2025. This challenges the idea that the Reserve Bank of New Zealand (RBNZ) might ease policy soon. As a result, the market may now expect a higher chance of another rate hike or a “higher for longer” stance from the central bank.RBNZ’s Potential Monetary Policy Moves
Looking back at the RBNZ’s actions from 2022 to 2023, they were quick to respond to rising inflation. They were among the first major banks to raise rates significantly, setting an example for others. Traders should consider preparing for a similar strong response now, perhaps by using call options on the New Zealand dollar to take advantage of potential gains. The difference between New Zealand’s approach and Australia’s is becoming more noticeable. Australia’s latest inflation data from late 2025 indicates a clear cooling trend, with their monthly CPI dropping to around 3.4%. This divergence in policy—where the RBNZ seems hawkish while the Reserve Bank of Australia is more neutral—supports a long position on NZD/AUD. Historically, the interest rate difference is important for this currency pair, and it appears to be widening in favor of the Kiwi dollar. It’s also essential to note that speculative positions tracked by the CFTC up to early January 2026 showed a significant short position on the Kiwi dollar. This one-sided bet means that the recent inflation surprise could lead to a major short-squeeze, forcing those betting against the currency to cover their positions. This could amplify any initial upward movement in the coming weeks. The positive outlook for the NZD is further bolstered by a weaker US dollar, as the Dollar Index (DXY) recently dipped below 101.50 for the first time since last summer. A weaker dollar benefits commodity currencies like the New Zealand dollar. Thus, strategies such as buying NZD/USD call spreads could be a profitable way to capitalize on both Kiwi strength and a broadly weaker dollar. Create your live VT Markets account and start trading now.In January, South Korea’s Consumer Sentiment Index increased from 109.9 to 110.8.
The South Korea Consumer Sentiment Index increased to 110.8 in January, up from 109.9. This indicates a slight boost in how consumers feel about South Korea’s economy.
In other economic news, the Bank of Japan decided to keep interest rates unchanged. The USD/CNY reference rate was set at 6.9929, down from 7.0019.
Gold Prices Surge
Gold prices have soared past $4,950 due to easing tensions between the US and EU. The NZD/USD pair rose above 0.5900 after New Zealand’s inflation surpassed expectations. In currency markets, the EUR/USD pair is currently eyeing the 1.1800 level, supported by a weaker US Dollar. Meanwhile, the GBP/USD is gaining strength, approaching 1.3500, thanks to pressure on the USD. Gold’s rise is backed by safe-haven demand and possible changes in Federal Reserve policies. In the cryptocurrency market, XRP remains above $1.90 despite some fluctuations. FXStreet offers in-depth analysis and data about financial markets. They aim to provide useful insights while emphasizing the risks involved in financial trading. All viewpoints in their articles are the authors’ own, and FXStreet does not guarantee error-free content.US Dollar Trends
As of January 23, 2026, continuous selling of the US dollar remains a key trend, affecting other currencies. Traders might consider buying call options on major pairs like EUR/USD and GBP/USD to profit from this trend. Futures markets are currently predicting a 75% chance of a Federal Reserve rate cut by March, suggesting a downward path for the dollar. The substantial rise in gold, now above $4,950, indicates significant market concern, even as currencies reflect a risk-on mood. Although gold’s momentum might push prices higher, its overbought status raises the risk of a sharp price drop. Traders are using strangles—buying both a call and a put option—to take advantage of expected price swings without betting on a specific direction. We’re closely monitoring the Japanese yen as the Bank of Japan keeps rates steady after raising them in December 2025. This difference in policy with the easing Fed could strengthen the yen against the dollar. We expect USD/JPY to break below the 155 level, and buying put options on this pair could be a good way to position for this move. The slight improvement in consumer sentiment in South Korea adds to a picture of relative strength in Asian economies, suggesting that the Korean Won might perform well against the weakening US dollar. Historically, rising consumer confidence has often led to gains in the KOSPI 200 index, similar to trends observed during the 2021 recovery. Create your live VT Markets account and start trading now.An unexpected development occurred, but the NASDAQ 100 still aligns with Elliott Wave analysis.
The NASDAQ 100 is being analyzed using the Elliott Wave Principle. Earlier, it was expected to move forward in the 3rd wave of a 3rd wave, leading to a final 5th wave, as long as prices stayed above certain warning levels. However, the index reached a high of 25873 on January 13 and then dropped to 24954, which contradicted the earlier prediction.
### The Unexpected Movements
These unexpected changes suggest that the index might be forming a larger ending diagonal pattern, which has a 3-3-3-3-3 structure. The rally from November to January consisted of three waves, with the first wave (W-1) measuring 0.618 times the previous larger wave, a common ratio used in this analysis. Even with the drop, as long as the index remains above important lows of 24647 and 23854, the possibility of the 3rd wave of a 3rd wave is still alive.
For confirmation, the index should exceed the January 13 high, possibly aiming for around 26900. The 3rd wave in an ending diagonal typically reaches around 123.6-138.2% of the first wave, indicating a target range of 27090-27380. Warning levels are established at 25602, 25400, 25086, 24647, and 23854, and these will be updated if the index rises further.
Looking back to early 2025, we noticed an unexpected deviation in the NASDAQ 100 after it peaked on January 13. This price action complicated the immediate outlook but eventually led into the larger ending diagonal pattern we anticipated. That pattern unfolded, pushing the index toward the 27,300 level by the second quarter of 2025 before a notable correction occurred.
### The Current Market Environment
As of late January 2026, the market is experiencing hesitation following a volatile fourth quarter. The latest Consumer Price Index report indicates that inflation remains steady at 3.2%. Meanwhile, a strong jobs report from December has reduced expectations for immediate interest rate cuts. This uncertainty is reflected in the CBOE Volatility Index (VIX), which has risen to around 19.5, indicating increased trader anxiety compared to last year.
In the coming weeks, a cautious approach seems wise. Derivative traders might consider strategies that protect against downside risk, such as buying puts on the QQQ or using bear put spreads to prepare for a potential test of the late 2025 lows. With mixed earnings reports from major tech companies so far, weakness in specific sectors could drag the broader index down.
However, any positive developments, such as a lower inflation rate or more favorable comments from Federal Reserve officials, could lead to a strong relief rally. Quick-thinking traders may want to use short-dated call options to capitalize on any bounce if the index shows signs of strength. A clear break above the recent highs near 26,100 would be the first sign that bullish momentum is returning.
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