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Dollar gyrates in a tight range and remains an underperformer for the week, showing little reaction to December US consumer inflation data. With no meaningful downside surprise in the data, inflation figures effectively cemented expectations for a policy hold by the Fed at its upcoming meeting. Futures now assign around 95% probability that interest rates will remain unchanged at 3.50–3.75% at the January 28 FOMC decision.

Pricing for a March rate cut was also largely unchanged, hovering slightly above 70%. That pricing remains conditional, however, as policymakers will have two additional CPI prints in hand before deciding whether inflation is cooling fast enough.

A central question is whether tariffs could continue to feed into prices over the coming months, either lifting inflation or preventing further progress toward lower core readings. While the base case still calls for at least one more Fed cut later this year, the length of the current pause will depend on how persistent price pressures prove to be. Any sign that inflation is stabilizing rather than easing would argue for a longer hold, even if the easing cycle is not formally over.

Tariffs have returned to the macro conversation after US President Donald Trump threatened to impose a 25% tariff on countries doing business with Iran. The move risks reopening old geopolitical and trade tensions with China, Iran’s largest trading partner. Although Trump has not named China directly, renewed efforts to isolate Iran are likely to sharpen scrutiny of Belt and Road Initiative, where Iran plays a strategic role as a transit hub for Chinese goods into the Middle East under President Xi Jinping’s flagship project.

In FX performance terms this week, Yen sits firmly at the bottom of the ladder, followed by Dollar and then Euro. Kiwi leads gains, with Sterling and Swiss Franc also outperforming. Aussie and Loonie trade in the middle.

In Europe, at the time of writing, FTSE is down -0.09%. DAX is up 0.33%. CAC is down -0.14%. UK 10-year yield is up 0.19 at 4.394. Germany 10-year yield is up 0.019 at 2.863. Earlier in Asia, Nikkei rose 3.10%. Hong Kong HSI rose 0.90%. China Shanghai SSE fell -0.64%. Singapore Strait Times rose 0.85%. Japan 10-year JGB yield rose 0.07 to 2.167.

US CPI meets headline, core undershoots at 2.7% in December

US consumer inflation data for December delivered a largely reassuring signal. Headline CPI rose 0.3% mom, in line with expectations. Core CPI increased just 0.2%, undershooting forecasts for a 0.3% gain.

Shelter was the dominant driver of monthly inflation, rising 0.4% and accounting for the largest share of the overall increase. Food prices were also firm, with the food index climbing 0.7% on the month, matching gains in both food at home and food away from home. Energy prices edged up 0.3% in December, contributing modestly to headline pressures.

On an annual basis, CPI was unchanged at 2.7% yoy, matched expectations. CPI core unchanged at 2.6% yoy, below expectation of 2.7% yoy. Energy prices rose 2.3% yoy, while food inflation increased 3.1%.

Australia Westpac consumer sentiment deteriorates, RBA won't tighten precipitously

Australian consumer sentiment weakened further at the start of the year, highlighting growing anxiety over the interest-rate outlook. The Westpac Consumer Sentiment Index fell -1.7% mom to 92.9 in January, pushing sentiment deeper into pessimistic territory.

Westpac pointed to a sharp shift in rate expectations as the main drag. Nearly two-thirds of consumers who expressed a view now expect mortgage rates to rise over the next 12 months, more than double the share seen back in September.

For policy, Westpac expects the RBA to stay on hold when it meets on February 2–3, and through the remainder of 2026. While the RBA has flagged readiness to tighten if inflation proves stubborn, softer labor market conditions and limited price pressures across many goods and services should allow inflation to drift back into the 2–3% target range without the need to "tighten precipitously."

NZIER confidence hits 10-year high, RBNZ to hold until H2 hike

New Zealand business confidence surged in Q4, reinforcing signs that an economic recovery is starting to form. The New Zealand Institute of Economic Research (NZIER) said a net 39% of firms expect better general economic conditions in the months ahead, a sharp rise from 17% in the September quarter and the strongest reading since March 2014.

NZIER noted that while a gap remains between headline confidence and firms’ own domestic trading activity, the direction of travel is clearly improving. The survey suggests the impact of earlier interest-rate cuts is now filtering through the broader economy, lifting sentiment even as activity indicators lag.

Inflation signals was reassuring. Cost and pricing indicators point to broadly contained pressures in the December quarter, with cost pressures easing and a net 37% of firms reporting higher costs.

With demand recovering but inflation subdued, NZIER expects no further OCR cuts this cycle, forecasting the RBNZ’s Official Cash Rate to trough at 2.25% before hikes begin in the second half of 2026.

CHF/JPY breaks records as Yen rout meets Fed worries, targets 205 if momentum builds further

CHF/JPY surged to a fresh record high today, driven primarily by accelerating Yen weakness and, to a lesser extent, renewed support for the Swiss Franc. The cross has become a focal point for markets expressing both Japan-specific political risk and broader institutional unease centered on the US.

The Yen leg of the move was triggered by widespread reports that Japanese Prime Minister Sanae Takaichi intends to dissolve the House of Representatives at the outset of the regular Diet session on January 23, paving the way for a snap general election. The decision was reportedly conveyed to senior members of the ruling Liberal Democratic Party.

With Takaichi’s cabinet enjoying strong approval ratings nearly three months into her term, markets see the move as a calculated gamble to stabilize a fragile governing position. The ruling coalition currently holds only a razor-thin majority in the lower house, raising incentives to seek a fresh mandate while political momentum remains favorable.

If the lower house is dissolved on January 23, official campaigning could begin as early as January 27 or February 3, with voting widely expected on February 8 or February 15. An early election would allow Takaichi to push her agenda of expansionary fiscal spending.

Beyond domestic economics, a renewed mandate could also strengthen Takaichi’s hand on foreign policy. Her recent parliamentary remarks on Japan’s potential response to a Taiwan contingency have already contributed to deteriorating Japan–China relations, and an election win would give her greater backing to confront diplomatic challenges.

At the same time, the Swiss Franc has found support from safe-haven demand as confidence in the US Dollar softens. The Donald Trump administration’s threat of criminal indictment against Fed Chair Jerome Powell has raised concerns about the durability of US institutional credibility, diverting some defensive flows toward the Franc.

Technically, CHF/JPY’s uptrend resumed decisively this week with a break above 198.53. Near-term outlook remains bullish as long as 196.03 support holds, with the next target at the 138.2% projection of 173.06 to 186.02 from 183.95 at 201.86. A break higher in D MACD above its signal line would confirm strengthening momentum and open scope for further gains toward 161.8% projection at 204.91.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3409; (P) 1.3447; (R1) 1.3504; More...

GBP/USD is staying in range between 1.3389/3567 and intraday bias remains neutral. On the upside, break of 1.3567 will resume the rally from 1.3008 towards 1.3787 high. On the downside, break of 1.3389 will resume the fall from 1.3567. Sustained break of 55 D EMA (now at 1.3374) 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.

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.

Headline CPI inflation was 2.7% year-on-year (y/y) in December, in line with consensus expectations. That maintained the deceleration from the recent high of 3.0% in September.

Food prices were a little hot under the collar in December, up 0.7% month/month (m/m), and 3.1% versus a year ago as food inflation trended higher in 2025. In contrast, energy prices rose a more muted 0.3% m/m, as a drop in gasoline prices partially offset higher natural gas utility costs. Energy prices are up 2.3% y/y.

Beneath the surface, core inflation was slightly cooler than expected, up 2.6% y/y, unchanged from November's pace. That is a result of a 0.2% month/month (m/m) increase, one tenth lower than expected.

Within the core, goods prices were flat in December, breaking a streak of five reports of gains. The three-month annualized rate of change slowed to just 0.2%.

Price pressures on the services side were a little firmer (+0.3% m/m) as shelter costs accelerated (+0.4% m/m). Costs for lodging away from home rebounded (+2.9% m/m) after weakness through much of 2025. Recreation costs also surged ahead 1.2% m/m – a one-month record – as video services prices surged. Overall core services were up 3% y/y in December, unchanged from November.

Key Implications

Zooming out, inflation remained steady in December. It was encouraging to see core goods prices stand pat after a period of firming. Similarly, core services continued to cool on a trend basis.

Core inflation is tracking slightly cooler than our December forecast, but we still expect the knock-on effects from tariffs will push inflation higher over the coming months. This is likely to lead the Fed to push pause on its interest rate cuts for at least a couple of meetings. Eventually, we expect it to become clearer that the impact of tariffs on prices was a one-time shift, and a new Fed chair is likely to provide a more dovish tilt, leading to 2 additional quarter-point rate cuts mid-year.

US consumer inflation data for December delivered a largely reassuring signal. Headline CPI rose 0.3% mom, in line with expectations. Core CPI increased just 0.2%, undershooting forecasts for a 0.3% gain.

Shelter was the dominant driver of monthly inflation, rising 0.4% and accounting for the largest share of the overall increase. Food prices were also firm, with the food index climbing 0.7% on the month, matching gains in both food at home and food away from home. Energy prices edged up 0.3% in December, contributing modestly to headline pressures.

On an annual basis, CPI was unchanged at 2.7% yoy, matched expectations. CPI core unchanged at 2.6% yoy, below expectation of 2.7% yoy. Energy prices rose 2.3% yoy, while food inflation increased 3.1%.

Full US CPI release here.

As the XAG/USD chart shows, the price of silver per ounce is consolidating near its all-time high, which lies above $85.

Bullish sentiment dominates the market, as concerns over the independence of the US Federal Reserve, heightened geopolitical tensions, and other factors have fuelled demand for safe-haven metals. According to media reports:

→ Official authorities are exerting pressure on the Fed to cut interest rates, having opened a criminal case against its Chair. Powell, in turn, described these actions as a “pretext” for influencing the decisions of an independent financial institution.

→ Traders are also closely monitoring the escalation of protests in Iran, which could lead to US military involvement, alongside President Trump’s statements about the annexation of Greenland. In the aftermath of the operation in Venezuela, such scenarios are increasingly being viewed as realistic.

Technical Analysis of the XAG/USD Chart

On 29 December, we updated the previously drawn ascending channel and suggested a potential decline in silver prices towards its lower boundary, with a possible bearish breakout attempt.

Indeed, prices moved down to the lower boundary. However, after the formation of an Inverted Head and Shoulders (IHS) pattern, bulls found support there and resumed the upward trend.

The current consolidation in XAG/USD confirms the role of the channel median, which appears to act as a reference level acceptable to both buyers and sellers. That said, today’s CPI release could disrupt this balance. Possible scenarios include:

→ a pullback towards the psychological support around $80, where the bullish impulse marked by the arrow began;

→ a rise towards the QH line, which divides the upper half of the channel into two quarters.

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In this technical blog, we will look at the past performance of the 1-hour Elliott Wave Charts of EURJPY. In which, the rally from 31 July 2025 low is unfolding as an impulse sequence. Therefore, called for more upside to take place. We knew that the structure in the pair should remains incomplete & should see more upside. So, we advised members not to sell the pair & buy the dips in 3, 7, or 11 swings at the blue box areas. We will explain the structure & forecast below:

EURJPY 1-Hour Elliott Wave Chart From 1.07.2026

Here’s the 1-hour Elliott wave Chart from the 1.07.2026 London update. In which, the rally to 184.92 high completed wave ((iii)) & made a pullback in wave ((iv)). The internals of that pullback unfolded as Elliott wave double correction where wave (w) ended at 183.19 low. Then a bounce to 184.43 high-ended wave (x) & started the next leg lower in wave (y) towards 182.73- 181.68 blue box area. From there, buyers were expected to appear looking for new highs ideally or for a 3-wave bounce minimum.

EURJPY Latest 1-Hour Elliott Wave Chart From 1.13.2026

This is the latest 1-hour Elliott wave Chart from the 1.13.2026 Asia update. In which the pair is showing a strong reaction higher taking place, right after ending the double correction within the blue box area. Allowed members to create a risk-free position shortly after taking the long position at the blue box area. Since than the pair has already made a new high above previous wave ((iii)) high and now targeting 185.47- 186.34 minimum extension target to end wave ((v)).

While developments in Venezuela acted as a headwind for oil prices, events surrounding Iran provided clear support. Expectations of an influx of cheaper supply from Latin America pushed Brent crude to its lowest level in eight months. However, escalating tensions in the Middle East helped North Sea crude find a floor and rebound. The four-day rally in black gold highlights a renewed rise in geopolitical risk premiums.

According to Capital Economics, mass protests, oil workers’ strikes, the blockade of the shadow fleet, and Tehran’s threats to close the Strait of Hormuz could push Brent prices up by $15-20 per barrel.

Iran is a much larger oil producer than Venezuela, ranking fourth in OPEC. It accounts for about 3% of global production, or 3.3 million barrels per day. Exports are estimated at 2 million barrels per day, with about 90% going to China. The country’s share of China’s black gold imports is estimated at 15%. Venezuela’s share is only 2%. Western sanctions have significantly undermined Tehran’s potential. At the peak of its glory in the 1970s, Iran’s share of global production was 10%.

Investors are hedging against the risks of Brent’s rally continuing at its fastest pace since the joint US-Israeli attack on Iran last summer. At the same time, the market is considering two key scenarios for further developments. Either there will be a supply crisis, or the resumption of the trade war between the United States and China will deal a blow to the world economy and global demand for oil. Following Donald Trump’s announcement of additional 25% tariffs on countries doing business with Tehran, such a scenario is quite likely.

Such a rapid rally in Brent would not have happened if speculators had not built up huge short positions in North Sea crude against the backdrop of events in Venezuela. Their unwinding is leading to a rebound. Demand for oil call options has jumped to its highest level since October. A significant share of them are trading with strike prices at $80 per barrel.

Market Overview

The crypto market gained 0.75% over the past 24 hours to $3.13T in another attempt to turn towards growth, pushing off the 50-day moving average. Appetite for crypto grew amid a rebound in US financial markets during Monday’s trading and continued growth in Japanese stocks on Tuesday morning. Steady risk appetite began to spread to cryptocurrencies, which had underperformed the market for many weeks.

Bitcoin has exceeded $92K since Monday evening, attempting to climb above levels seen a week ago. There were wide fluctuations on Monday, with an impressive increase in sales when the price rose above $92K, but this did not deter the bulls from continuing their attempts. It would be too hasty to conclude sustained risk appetite while the price remains below previous local highs of $95K. An optimistic view of the situation considers a series of rising local lows since November.

Ethereum is holding above $3,000, carefully forming a bottom at this level over the past five days. At the end of last month, a similar support level was near $2,920. As with Bitcoin, ETH is trading above the 50-day MA, but still below the local peak on 6 January.

News Background

Retail investors continue to offload loss-making assets due to fears of volatility, which is increasing selling pressure, according to CryptoQuant.

Profit-taking and shifting expectations in the options market indicate that investors are postponing bullish expectations to a later date, not believing in a quick rally. Optimism about a breakout in the first quarter is fading, QCP Capital notes.

Views of cryptocurrency content on YouTube have fallen to their lowest levels since 2021, ITC Crypto notes. A similar decline in social interest has also been recorded on social network X.

According to Arkham Intelligence, the DAT company BitMine has increased the amount of locked assets on the Ethereum network to 1.08 million coins. The value of the portfolio exceeded $3 billion.

The theory of Ethereum’s ‘demise,’ based on its prolonged decline against Bitcoin, is untenable, said MN Trading founder Michael van de Poppe. In his opinion, the ETH/BTC rate has already bottomed out. The key argument in favour of growth is the increase in the volume of stablecoins on the Ethereum network.

South Korea has lifted its ban on corporate investment in cryptocurrencies. Legal entities will be able to allocate up to 5% of their share capital to coins from the top 20 by market capitalisation, excluding stablecoins.

CHF/JPY surged to a fresh record high today, driven primarily by accelerating Yen weakness and, to a lesser extent, renewed support for the Swiss Franc. The cross has become a focal point for markets expressing both Japan-specific political risk and broader institutional unease centered on the US.

The Yen leg of the move was triggered by widespread reports that Japanese Prime Minister Sanae Takaichi intends to dissolve the House of Representatives at the outset of the regular Diet session on January 23, paving the way for a snap general election. The decision was reportedly conveyed to senior members of the ruling Liberal Democratic Party.

With Takaichi’s cabinet enjoying strong approval ratings nearly three months into her term, markets see the move as a calculated gamble to stabilize a fragile governing position. The ruling coalition currently holds only a razor-thin majority in the lower house, raising incentives to seek a fresh mandate while political momentum remains favorable.

If the lower house is dissolved on January 23, official campaigning could begin as early as January 27 or February 3, with voting widely expected on February 8 or February 15. An early election would allow Takaichi to push her agenda of expansionary fiscal spending.

Beyond domestic economics, a renewed mandate could also strengthen Takaichi’s hand on foreign policy. Her recent parliamentary remarks on Japan’s potential response to a Taiwan contingency have already contributed to deteriorating Japan–China relations, and an election win would give her greater backing to confront diplomatic challenges.

At the same time, the Swiss Franc has found support from safe-haven demand as confidence in the US Dollar softens. The Donald Trump administration’s threat of criminal indictment against Fed Chair Jerome Powell has raised concerns about the durability of US institutional credibility, diverting some defensive flows toward the Franc.

Technically, CHF/JPY’s uptrend resumed decisively this week with a break above 198.53. Near-term outlook remains bullish as long as 196.03 support holds, with the next target at the 138.2% projection of 173.06 to 186.02 from 183.95 at 201.86. A break higher in D MACD above its signal line would confirm strengthening momentum and open scope for further gains toward 161.8% projection at 204.91.

The EUR/USD pair stabilised around 1.1658 on Tuesday, following a period of volatility over the preceding two sessions.

Market focus remains firmly on the forthcoming US inflation data, which is expected to provide crucial clarity on the future path of Federal Reserve policy. Currently, the market is pricing in two rate cuts this year, with the first anticipated in June. However, any upside surprise in inflation could significantly temper expectations for policy easing.

Supporting a more dovish outlook was last week’s disappointing Non-Farm Payrolls (NFP) report for December, which revealed weaker-than-expected job growth.

Investors are also monitoring developments in the US Supreme Court, which is expected to rule on the legality of President Donald Trump’s tariff policy as early as Wednesday.

Earlier this week, the US dollar faced additional headwinds following reports that Fed Chair Jerome Powell could face scrutiny over his congressional testimony related to a building renovation project. This has raised concerns, albeit limited, regarding the perceived independence of the Federal Reserve.

Technical Analysis: EUR/USD

H4 Chart:

On the H4 chart, the pair is forming a corrective retracement within the context of the second downward impulse. The immediate corrective target stands at 1.1700. Once this correction concludes, we anticipate the resumption of the downtrend, with the next bearish target at 1.1555. This scenario is supported by the MACD indicator, whose signal line is below zero and pointing decisively downward, reinforcing the ongoing bearish momentum and potential for further downside.

H1 Chart:

On the H1 chart, the market has completed a decline to 1.1655 and is now forming an upward corrective impulse towards 1.1700. Upon reaching this level, we expect a renewed wave of selling pressure to emerge. The Stochastic oscillator aligns with this view, as its signal line is currently below 20 but is turning upward towards 80, indicating room for a short-term rebound before the next potential decline.

Conclusion

The EUR/USD pair is in a holding pattern ahead of key US inflation data, which will likely dictate the near-term direction of the pair. While the technical structure remains bearish, a corrective bounce towards 1.1700 appears likely before sellers potentially regain control. A stronger-than-expected inflation print could reinforce the dollar’s strength and accelerate the move towards 1.1555.

Disclaimer:
Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

• The dollar resumed its growth after the lawsuit against the Fed chairman.
• Rumours of early elections in Japan drove up USDJPY quotes.

‘We’re screwed!’ — that’s how Donald Trump described the possible Supreme Court’s ruling against his tariffs. The US will have to return hundreds of billions of dollars, not to mention the cancellation of investments that other countries intended to make in exchange for lower import duties.

In fact, the White House screwed up a little earlier when the Justice Department informed Jerome Powell about the lawsuit. The Fed chairman and the markets perceive this event as a factor putting pressure on the central bank. Lowering rates under pressure from the president could lead to uncontrolled inflation, as has occurred in several emerging market countries in the past. Investors will demand a higher risk premium on bonds. Higher Treasury yields will weigh on the economy.

The greenback is poised to benefit from both the Supreme Court’s repeal of tariffs and the lawsuit against Jerome Powell. The latter led to a rise in EURUSD and allowed the euro to be sold at a higher price. The refund of previously paid fees could be seen as a fiscal stimulus that will boost the US economy.

The strength of the dollar was one of the reasons for the USDJPY’s surge to its highest level since July 2024. The second factor was rumours of early elections in Japan. The new prime minister’s ratings are high, and she intends to strengthen the Liberal Democratic Party’s position in parliament. As a result, investors are returning to a so-called ‘Takaichi trade’ with stocks rising while the yen is weakening.

The USDJPY rally is forcing the government to return to verbal interventions. Japanese Finance Minister Satsuki Katayama expressed concern about the speculative nature of the yen’s weakening at a meeting with her American counterpart. She said that Scott Bessent is also unhappy with what is happening on Forex.

Now the markets are trying to determine the levels of Tokyo’s potential intervention in the international currency market. In 2024, it resorted to currency interventions four times near the 160 level, a very close call with 159 now.

Gold took advantage of the growing distrust of fiat currencies. It reached a new record high. As a result, CME changed its margin calculation methodology to reduce volatility. Its increase at the end of 2025 caused precious metals to retreat.