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Monday, Jan 12, 2026

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The first full week of 2026 delivered a barrage of geopolitical shocks that would normally be expected to rattle global markets. Instead, investors largely looked through the noise, producing a market outcome that appears counterintuitive at first glance.

The most dramatic development came from Latin America, where the US carried out a direct military intervention that resulted in the capture of Venezuela’s President. Washington subsequently moved to take control of Venezuela’s vast oil reserves, for selling previously sanctioned crude, marking a decisive escalation in US involvement in the region.

Shortly after, geopolitical tensions widened further as the White House doubled down on rhetoric around Greenland, describing its acquisition as a “national security priority” to counter Russian and Chinese influence in the Arctic. While the likelihood of outright annexation remains remote, the language alone was enough to keep geopolitical risk firmly in focus.

At the same time, Iran entered one of its most significant periods of domestic unrest in years, with nationwide protests met by a violent crackdown. The deterioration in internal stability added further to an already crowded geopolitical picture, particularly given Tehran’s strained relationship with Washington.

Despite this heavy backdrop, global risk appetite proved remarkably resilient. Major equity indices including S&P 500, FTSE and DAX all pushed to fresh record highs, sending a clear signal that markets were unwilling to price in systemic risk from geopolitical headlines alone.

Instead, the adjustment occurred primarily in currencies. Dollar emerged as the strongest performer of the week, supported both by its hegemonic role during periods of global tension and by a shift in Fed expectations following a full slate of US data releases.

Aussie followed as the second-best performer, buoyed by firm risk appetite and reinforced by RBA rhetoric that ruled out near-term rate cuts. Sterling also benefited from the broader risk-on tone.

At the other end of the spectrum, Loonie stood out as the weakest major currency, followed by Swiss Franc and Euro. Kiwi and Yen finished the week mixed in the middle, highlighting that geopolitics did matter — but only selectively.

Dollar Leads But Lacks Intermarket Confirmation

Dollar finished last week as the strongest major currency, extending gains after some hesitation. Following a string of mixed but generally resilient US economic releases, markets have moved swiftly to price out the chance of near-term easing. Fed funds futures now imply over a 70% probability that rates will be held at 3.50–3.75% at the March FOMC meeting, a sharp reversal from less than 50% just a week earlier.

A key anchor for that repricing was the labor market. While December payroll growth was modest at 50k, the unemployment rate fell from a revised 4.5% in November to 4.4%, reinforcing the view that labor conditions remain tight despite slowing hiring momentum. That combination leaves the Fed with little incentive to rush into another “insurance cut.” With wage growth still firm and unemployment low, policymakers can afford to wait for clearer signs of deterioration before shifting stance.

Technically, Dollar Index’s rebound extended with firm break of 55 D EMA (now at 98.75). That move suggests the pullback from 100.39 has completed at 97.74 as a correction. Further rally is now in favor back to 100.39 resistance, and possibly above.

Even so, the broader structure remains corrective. The advance from 96.21 is still viewed as a counter-trend move within the longer-term decline from 110.17. As such, upside potential is expected to be capped near 38.2% retracement of 110.17 to 96.21 at 101.54, absent substantial shift in underlying developments.

For Dollar to transition from a corrective rebound to sustained medium-term strength, intermarket confirmation is required. Specifically, markets would need to see a meaningful correction in equities and a decisive upside break in Treasury yields — ideally occurring in tandem. But that confirmation has yet to materialize.

DOW extended its uptrend to fresh record highs last week, suggesting that risk appetite remained intact. As long as 47,853 support holds, near-term bias remains bullish, with attention on 50,000 psychological level, which coincide with medium term rising channel ceiling. Decisive break above that 50,000 zone would likely accelerate gains towards 100% projection of 41,981.14 to 48,431.57 from 45,728.93 at 52,179.36. Such development would cap momentum of any Dollar rally.

Treasury yields is also a critical missing link in determining whether Dollar’s rebound can evolve into something more durable. For now, US 10-year yield is locked in a narrowing range, repeatedly finding support at the 55 D EMA (now at 4.136), while failing to generate enough momentum to clear the 4.200 cluster resistance (38.2% retracement of 4.629 to 3.947 at 4.207) decisively.

On the one hand, decisive break above 4.200, would confirm that the fall from 4.629 has completed already. That would open the way to 61.8% at 4.63. However, sustained break of the 55 D EMA will argue that recent rebound from 3.947 has completed, and bring deeper fall back to 4.000 round number. If realized, that could also mark the completion of Dollar Index's corrective bound, and drag it lower back towards 96.21 support.

Venezuela Shock Exposes CAD’s Strategic Vulnerability

Among the major currencies, Canadian Dollar emerged as the clear underperformer of the week. Its weakness stood out not only against US Dollar, but also relative to other commodity-linked peers, highlighting that this was not a generic risk move but a distinctly Canada-specific repricing.

At the heart of the selloff was the US military intervention in Venezuela and the subsequent decision by Washington to take control of the country’s oil output. President Donald Trump announced that Venezuela’s interim authorities would transfer an estimated 30–50 million barrels of sanctioned crude to the US, with shipments expected to arrive directly at US unloading facilities.

In the near term, the mechanics and timing of these deliveries remain unclear. But markets wasted little time in pricing the implications. Any influx of Venezuelan crude into the US market would compete directly with Canadian oil exports.

Beyond the immediate supply impact, the longer-term strategic consequences weighed even more heavily on Loonie. Increased Venezuelan oil flows weaken Canada’s leverage ahead of this year’s review of the CUSMA trade agreement, which has so far shielded much of Canada’s exports from US tariffs.

Even though most Canadian crude enters the US through the Midwest rather than the Gulf Coast, markets are forward-looking. The prospect of Washington having alternative oil supply options reduces Ottawa’s negotiating power at a sensitive political juncture.

Technically, price action in USD/CAD mirrors that fundamental shift. Last week’s strong rally suggests decline from 1.4139 has completed as a correction at 1.3641. The advance from there is now seen as the third leg of a broader corrective pattern originating from 1.3538. That opens the scope for a retest of 1.4139, and possibly further to 100% projection of 1.3538 to 1.4139 from 1.3641 at 1.4242.

Whether this move evolves into a full bullish reversal could ultimately hinge on the outcome of the CUSMA review and how aggressively Washington reshapes continental energy flows.

Snap Election Speculation Lifts Nikkei, Undermines Yen

Yen failed to play its traditional safe-haven role last week. Instead, USD/JPY staged a clear upside breakout during, supported partly by firmer US data and Fed repricing. But more importantly, the selloff in Yen was fueled by a sharp shift in sentiment toward Japanese assets. The catalyst came from local political reporting rather than macro data.

According to the Yomiuri Shimbun's late report on Friday, Prime Minister Sanae Takaichi is weighing a snap election as early as February. The strategy would allow her to leverage high approval ratings to secure a more stable governing majority.

For markets, the election narrative is significant because it strengthens expectations of fiscal expansion. A renewed mandate would give Takaichi greater freedom to pursue growth-supportive spending policies, reinforcing Japan’s equity story.

That prospect drove Nikkei futures sharply higher to new records after the local market close. The rally, in turn, accelerated outflows from Yen, which once again behaved as a funding currency rather than a haven.

Technically, immediate attention now turns to whether Nikkei 225 can gap cleanly above 52,636.87 on Monday and sustain momentum. If it does, the next focus will be 138.2% projection of 25,661.89 to 42,426.77 from 30,792.74 at 53,961.80. Firm break there will pave the way to 161.8% projection at 57,918.32.

If Nikkei does push toward 58k region, USD/JPY is likely to follow toward the 161.94 high. The key risk then becomes policy response: whether Japanese authorities intensify verbal warnings, or ultimately move toward direct intervention should the pair break above 158.86 structural resistance zone.

EUR/USD Weekly Outlook

EUR/USD's extended fall last week suggests that rise from 1.1467 has completed at 1.1807 already. Fall from there is seen as the third leg of the corrective pattern from 1.1917. Initial bias stays on the downside this week for retesting 1.1467. Break there will pave the way to 100% projection of 1.1917 to 1.1467 from 1.1807 at 1.1357. ON the upside, above 1.1682 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.1807 resistance holds, in case of recovery.

In the bigger picture, as long as 55 W EMA (now at 1.1406) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will carry larger bullish implication. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

In the long term picture, 38.2% retracement of 1.6039 to 0.9534 at 1.2019, which is close to 1.2000 psychological level is the key for the outlook. Rejection by this level will keep the multi decade down trend from 1.6039 (2008 high) intact, and keep outlook neutral at best. However, decisive break of 1.2000/19, will suggest long term bullish trend reversal, and target 61.8% retracement at 1.3554.

EUR/USD's extended fall last week suggests that rise from 1.1467 has completed at 1.1807 already. Fall from there is seen as the third leg of the corrective pattern from 1.1917. Initial bias stays on the downside this week for retesting 1.1467. Break there will pave the way to 100% projection of 1.1917 to 1.1467 from 1.1807 at 1.1357. ON the upside, above 1.1682 minor resistance will turn intraday bias neutral first. But risk will stay on the downside as long as 1.1807 resistance holds, in case of recovery.

In the bigger picture, as long as 55 W EMA (now at 1.1406) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will carry larger bullish implication. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

In the long term picture, 38.2% retracement of 1.6039 to 0.9534 at 1.2019, which is close to 1.2000 psychological level is the key for the outlook. Rejection by this level will keep the multi decade down trend from 1.6039 (2008 high) intact, and keep outlook neutral at best. However, decisive break of 1.2000/19, will suggest long term bullish trend reversal, and target 61.8% retracement at 1.3554.

USD/JPY's rise from 139.87 resumed by breaking through 157.88 last week. Initial bias stays on the upside this week for 161.8% projection of 142.66 to 150.90 from 145.47 at 158.80. Firm break there will pave the way to 200% projection at 161.95, which is close to 161.94 high. For now, outlook will stay bullish as long as 156.10 support holds, in case of retreat.

In the bigger picture, corrective pattern from 161.94 (2024 high) could have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94. Decisive break of 158.85 structural resistance will solidify this bullish case and target 161.94 for confirmation. On the downside, break of 154.38 support will dampen this bullish view and extend the corrective range pattern with another falling leg.

In the long term picture, up trend from 75.56 (2011 low) is still in progress and might be ready to resumption. Firm break of 161.94 will target 61.8% projection of 102.58 (2020 low) to 161.94 (2024 high) from 139.87 at 176.55 in the medium term.

GBP/USD edged higher to 1.3567 last week but formed a short term top there and reversed. Initial bias is mildly on the downside this week for 55 D EMA (now at 1.3366). Sustained break there will argue that the decline is another falling leg in the corrective pattern from 1.3787. In this case, deeper fall should be seen back to 1.3008 support. For now, risk will stay mildly on the downside as long as 1.3567 holds, in case of recovery.

In the bigger picture, price actions from 1.3787 (2025 high) are seen as a correction to the larger up trend from 1.3051 (2022 low). Deeper decline could be seen as the pattern extends, but downside should be contained by 38.2% retracement of 1.0351 to 1.3787 at 1.2474 to bring rebound. Break of 1.3787 for up trend resumption is expected at a later stage.

In the long term picture, as long as 1.4248/4480 resistance zone holds (38.2% retracement of 2.1161 to 1.0351 at 1.4480), the long term outlook will remain bearish. That is, price actions from 1.3051 are seen as a corrective pattern to down trend from 2.1161 (2007 high) only. Nevertheless, decisive break of 1.4248/4480 will be a strong sign of long term bullish reversal.

USD/CHF's strong rally last week suggests that fall from 0.8123 has completed at 0.7860 already. Rise from there is seen as another leg in the corrective pattern from 0.7828 low. Initial bias stays on the upside this week for 0.8123 resistance. On the downside, below 0.7967 minor support will turn intraday bias neutral again first.

In the bigger picture, price actions from 0.7828 are seen as a correction. Larger down trend from 1.0342 (2017 high) is in still in progress. Break of 0.7828 will target 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).

In the long term picture, price action from 0.7065 (2011 low) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high). It's uncertain if the fall from 1.0342 is the second leg of the pattern, or resumption of the downtrend. But in either case, outlook will stay bearish as long as 0.8756 support turned resistance holds (2021 low). Retest of 0.7065 should be seen next.

AUD/USD jumped higher to 0.6765 last week but retreated from there. But downside is contained by 0.6659 support so far. Initial bias stays neutral this week first, and further rally is in favor. Break of 0.6765 will resume the whole rise from 0.5913 and target 61.8% projection of 0.5913 to 0.6706 from 0.6420 at 0.6910. However, considering bearish divergence condition in 4H MACD, firm break of 0.6659 will confirm short term topping, and bring deeper correction back to 55 D EMA (now at 0.6612).

In the bigger picture, current development argues that rise from 0.5913 (2024 low) is reversing whole down trend from 0.8006 (2021 high). Further rally should be seen to 61.8% retracement of 0.8006 to 0.5913 at 0.7206. This will remain the favored case as long as 0.6420 support holds, even in case of deep pullback.

In the long term picture, rise from 0.5913 is tentatively seen as the third leg of the pattern from 0.5506 (2020 low). Sustained trading above 55 M EMA (now at 0.6711) will solidify this medium term bullish case. It's still early to judge if this is an impulsive or corrective pattern. But in either case, firm break of 0.6941 will open up further rise back to 0.8006. However, rejection by the 55 M EMA will retain bearishness and bring another fall through 0.5913.

USD/CAD's strong and accelerated rise last week suggests that fall from 1.4139has completed at 1.3641. rise from there is currently seen as the third leg of the corrective pattern from 1.3538. Initial bias stays on the upside this week for 1.4139 first. Break there will target 100% projection of 1.3538 to 1.4139 from 1.3641 at 1.4242. On the downside, below 1.3849 minor support will turn intraday bias neutral first.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen as the pattern extends, and break of 1.3538 will target 61.8% retracement of 1.2005 to 1.4791 at 1.3069. For now, medium term outlook will be neutral until there are signs that the correction has completed.

In the long term picture, rising 55 M EMA (now at 1.3567) remains intact. Thus, up trend from 0.9056 (2007 low) should still be in progress. However, considering bearish divergence condition M MACD, sustained trading below 55 M EMA will argue that the up trend has completed with five waves up to 1.4791, and turn medium term outlook bearish for correction to 38.2% retracement of 0.9056 to 1.4791 at 1.2600.

GBP/JPY stayed in sideway consolidations below 212.13 last week. Initial bias stays neutral this week first, and further rally is in favor as long as 21.02 support holds. On the upside, decisive break of 61.8% projection of 184.35 to 205.30 from 199.04 at 211.98 will extend current up trend to 100% projection at 219.99 next. Nevertheless, firm break of 210.02 support should confirm short term topping. Deeper decline would be seen to 55 D EMA (now at 207.19) as a correction.

In the bigger picture, up trend from 123.94 (2020 low) is in progress. Next target is 61.8% projection of 148.93 (2022 low) to 208.09 (2024 high) from 184.35 at 220.90. On the downside, break of 205.30 resistance turned support is needed to indicate medium term topping. Otherwise, outlook will stay bullish even in case of deep pullback.

In the long term picture, up trend from 116.83 (2011 low) is resuming. Next target is 251.09 (2007 high). This will remain the favored case as long as 55 M EMA (now at 182.91) holds.

EUR/JPY gyrated lower to 182.60 last week, but recovered since then. Initial bias stays neutral this week first. On the downside, below 182.60 will extend the correction from 184.89 to 55 D EMA (now at 180.92) and below . But strong support should emerge from 180.07 cluster (38.2% retracement of 172.24 to 184.89 at 180.05) to bring rebound. On the upside, firm break of 184.89 will resume larger up trend to 186.31 fibonacci level.

In the bigger picture, up trend from 114.42 (2020 low) is in progress and should target 61.8% projection of 124.37 to 175.41 from 154.77 at 186.31. Considering bearish divergence condition in D MACD, upside could be capped by 186.31 on first attempt. Still, outlook will stay bullish as long as 55 W EMA (now at 172.16) holds, even in case of deep pullback. Sustained break of 186.31 will pave the way to 100% projection at 205.81 next.

In the long term picture, up trend from 94.11 (2021 low) is in progress. Next target is 138.2% projection of 94.11 to 149.76 (2014 high) from 114.42 (2020 low) at 191.32. This will remain the favored case as long as 154.77 support holds.