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Daily Pivots: (S1) 1.1678; (P) 1.1703; (R1) 1.1748; More….

Intraday bias in EUR/USD remains neutral for the moment. Rise from 1.1467 could still be in progress. Firm break there will resume the rally to retest 1.1917 high. However, break of 1.1658 support will target 1.1467, as corrective pattern from 1.1917 has started the third leg.

In the bigger picture, as long as 55 W EMA (now at 1.1408) 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.

Daily Pivots: (S1) 1.3454; (P) 1.3502; (R1) 1.3589; More...

Intraday bias in GBP/USD remains on the upside for the moment. Current rally from 1.3008 is in progress for retesting 1.3787 high. Near term outlook will stay bullish as long as 1.3401 support holds, in case of recovery.

In the bigger picture, current development suggests that fall from 1.3787 is merely a corrective move, and larger rise from 1.0351 (2022 low) is still in progress. Firm break of 1.3787 will target 1.4248 (2021 high) key structural resistance. This will remain the favored case as long as target 38.2% retracement of 1.0351 to 1.3787 at 1.2474 holds, in case of another fall.

Daily Pivots: (S1) 155.91; (P) 156.61; (R1) 157.09; More...

No change in USD/JPY's outlook as sideway consolidation from 157.88 continues. Intraday bias stays neutral at this point. Outlook will stay bullish as long as 154.33 support holds. On the upside, firm break of 158.85 key structural resistance will be an important medium term bullish sign. Next target will be 161.94 high. However, decisive break of 154.38 will turn bias to the downside for deeper correction.

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 high. Decisive break of 158.85 structural resistance will solidify this bullish case and target 161.94 for confirmation. On the downside, break of 150.90 resistance turned support will dampen this bullish view and extend the corrective range pattern with another falling leg.

Daily Pivots: (S1) 0.7897; (P) 0.7932; (R1) 0.7952; More….

Intraday bias in USD/CHF stays neutral for the moment. Further decline is mildly in favor with 0.7986 resistance intact. On the downside, below 0.7900 minor support will turn bias to the downside. Break of 0.7860 will target a retest on 0.7828 low. However, break of 0.7986 will argue that corrective pattern from 0.7828 is still extending with another rising leg already in progress.

In the bigger picture, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low). Long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.

Market conditions have settled after earlier risk-on moves, with European indexes and US futures showing little direction. The absence of follow-through buying suggests traders are shifting toward more cautious trading. With desks fully staffed again, attention is turning to Friday’s December US non-farm payrolls report. Dollar remains broadly on the back foot and will be looking to the labor data for support after this week's underperformance.

The base case still points to Fed delivering one more rate cut later this year, in line with the latest dot plot guidance. However, any renewed tightness in the labor market could push the timing of that move deeper into the second half of 2026. Even so, there remains a substantial flow of inflation and employment data before the March FOMC meeting. As a result, markets could remain wary of taking large directional bets based on a single payroll print.

The immediate attention, though, is shifting to Australia’s November CPI data first, which will be released in the upcoming Asian session. Consensus hopes for a moderation in inflation from October’s 3.8% pace, though forecasts span a wide range, leaving scope for upside surprise.

Australia’s interest-rate outlook has undergone a sharp reassessment since late 2025. Expectations have swung from further easing — after three cuts last year — to discussions around an extended pause and even the possibility of renewed tightening this year. That pivot was reinforced by RBA Governor Michele Bullock, who said she does not see rate cuts “on the horizon for the foreseeable future,” adding that the board is weighing an extended hold against the risk of a rate rise.

Markets currently see February as a low-probability hiking window for the RBA, but pricing jumps sharply by mid-year, with a quarter-point increase fully priced by August. Tomorrow's data could reshape these expectations.

For the week so far, Sterling leads FX performance, followed by Aussie and Kiwi. Loonie lags at the bottom, with Euro and Swiss Franc also under pressure. Dollar and Yen sit mid-pack.

In Europe, at the time of writing, FTSE is up 1.08%. DAX is up 0.29%. CAC is down -0.03%. Germany 10-year yield is down -0.021 at 4.486. UK 10-year yield is down -0.029 at 2.845. Earlier in Asia, Nikkei rose 1.32%. Hong Kong HSI rose 1.38%. China Shanghai SSE rose 1.50%. Singapore Strait Times rose 1.27%. Japan 10-year JGB yield rose 0.011 to 2.130.

Fed’s Barkin says policy near neutral, dual mandate tensions persist

Richmond Fed President Tom Barkin said today the outlook for US monetary policy is in a “delicate balance,” as policymakers weigh still-elevated inflation against signs of rising unemployment. Speaking on the policy outlook, Barkin stressed that conflicting pressures mean "both sides of the Fed’s dual mandate bear watching."

Barkin noted that last year’s 75 basis points of easing have brought interest rates “within range of neutral,” likening the move to taking out insurance against downside risks. Inflation has cooled but remains above target, while unemployment is still low by historical standards. However, he cautioned that policymakers do not want labor market conditions to deteriorate much further.

Despite near-term uncertainty, Barkin said he is optimistic on the 2026 outlook. He expects last year’s elevated uncertainty to ease, boosting confidence among consumers and businesses. Fiscal changes, deregulation efforts, and the delayed impact of monetary easing are all expected to provide meaningful support to economic growth.

UK PMI services finalized at 51.4, tepid expansion, inflation risks linger

UK service sector activity showed only marginal improvement at the end of 2025, with Services PMI finalized at 51.4 in December, up fractionally from 51.3 in November. Composite PMI also edged higher to 51.4 from 51.2, pointing to continued but lackluster expansion across the broader economy.

According to S&P Global Market Intelligence, Economics Director Tim Moore said business activity growth remained subdued and weaker than indicated by the earlier flash estimate. Survey respondents cited persistent sales headwinds tied to soft UK growth prospects, rising business costs, and weak overseas demand, contributing to another notable decline in service sector employment.

Despite muted demand, inflation pressures intensified. Input prices rose at the fastest pace in seven months, while output charge inflation rebounded from November’s low.

Eurozone PMI services slows but remains key pillar for 2026 outlook

Eurozone economic momentum cooled modestly at the end of 2025, with Services PMI finalized at 52.4 in December, down from 53.6 in November. Composite PMI also eased to 51.5 from 52.8.

Performance across countries remained uneven. Spain led the bloc with a composite reading of 55.6, a two-month high. Ireland slipped to 53.6. Germany eased to 51.3, its lowest in four months, Italy fell to 50.3, an eleven-month low, and France hovered at the stagnation threshold at 50.0.

Despite the slowdown, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said the services sector has now expanded for seven consecutive months and that “the picture looks good” overall. He added that Composite PMI averaged a "visibly higher level" in the final quarter, suggesting GDP growth likely accelerated toward year-end, driven primarily by services. Growth prospects for 2026 improve modestly, with overall expansion seen above 1% but far from robust.

At the same time, rising cost pressures in services remain a key constraint on policy. ECB President Christine Lagarde has stressed close monitoring of services inflation, where higher wages continue to push costs and prices up. That dynamic explains why the ECB has paused further rate cuts.

Japan monetary base drops below JPY 600T, as BoJ presses ahead with normalization

Japan’s monetary base contracted in 2025 for the first time since 2007, underlining the Bank of Japan’s decisive shift away from decades of ultra-loose policy. Data released today showed the average balance of the monetary base fell -4.9% year-on-year, echoing the period when the BoJ last embarked on a rate-hike cycle.

The contraction accelerated toward year-end. The average balance in December stood at JPY 594.19 trillion, down -9.8% yoy and falling below the JPY 600 trillion mark for the first time since September 2020.

The decline reflects the BoJ’s ongoing exit from its decade-long stimulus, which began in 2024. Since then, the central bank has raised interest rates, slowed purchases of JGBs and wound down funding schemes designed to encourage bank lending. With policy normalization still underway, Japan’s monetary base is expected to continue shrinking as bond tapering and further rate hikes proceed.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.7897; (P) 0.7932; (R1) 0.7952; More….

Intraday bias in USD/CHF stays neutral for the moment. Further decline is mildly in favor with 0.7986 resistance intact. On the downside, below 0.7900 minor support will turn bias to the downside. Break of 0.7860 will target a retest on 0.7828 low. However, break of 0.7986 will argue that corrective pattern from 0.7828 is still extending with another rising leg already in progress.

In the bigger picture, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low). Long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.

Richmond Fed President Tom Barkin said today the outlook for US monetary policy is in a “delicate balance,” as policymakers weigh still-elevated inflation against signs of rising unemployment. Speaking on the policy outlook, Barkin stressed that conflicting pressures mean "both sides of the Fed’s dual mandate bear watching."

Barkin noted that last year’s 75 basis points of easing have brought interest rates “within range of neutral,” likening the move to taking out insurance against downside risks. Inflation has cooled but remains above target, while unemployment is still low by historical standards. However, he cautioned that policymakers do not want labor market conditions to deteriorate much further.

Despite near-term uncertainty, Barkin said he is optimistic on the 2026 outlook. He expects last year’s elevated uncertainty to ease, boosting confidence among consumers and businesses. Fiscal changes, deregulation efforts, and the delayed impact of monetary easing are all expected to provide meaningful support to economic growth.

EUR/USD has had an interesting start to 2026. US Dollar strength has kept the pair on a downward trajectory from December 24, 2025 highs around the 1.1800 handle.

Since then, EUR/USD has fallen around 140 pips to a low of around the 1.1660 level yesterday with the potential for further downside still a possibility.

US Dollar Seasonality to Play a Role?

Despite all the talk and concern around the US Dollar, January is historically a positive month for the greenback. With that in mind, this could work in favor of another leg to the downside for EUR/USD.

The US Dollar has risen at the start of the year and this week as well, but this was largely attributed to a spike in haven demand after the US/Venezuela tensions over the weekend.

I do expect the US dollar to gain a bit of strength in the near-term and this feeds in to the trade setup for EUR/USD.

My reasoning is simply down to seasonality as well as the fact that market participants seem too relaxed about global political conflicts right now; if tensions suddenly flare up again, especially in Latin America or Greenland, risky investments could crash, causing traders to rush back to the safety of the dollar.

Technical Analysis on EUR/USD

Let us start with the technical picture on the four-hour chart

EUR/USD has broken the ascending wedge pattern which had been in play since Mid-November.

The breakout of the wedge pattern should lead to a drop of around 160 pips.

The pair has already dropped about a 100-pips before a pullback of around 80-pips

The price is now at the 100-day MA which is providing resistance and could be the start of the next leg to the downside.

EUR/USD Four-Hour Chart, January 6, 2026

Source: TradingView.com

Dropping down to the one-hour chart below and for those looking for a better risk-to-reward there may be another opportunity to get involved.

A break below the red zone on the chart below with a potential retest of the zone could provide a tighter stop loss for those looking to get involved.

At present, only a four-hour candle close above the 1.1750 handle would lead me to re-evaluate the setup as that would mean a change in structure has taken place and the par may break to the upside and test recent highs around the 1.1800 handle.

EUR/USD One-Hour Chart, January 6, 2026

Source: TradingView.com

As the GBP/USD chart shows, the pound rose above 1.3560 today — its highest level since September 2025.

The pound’s strength may be driven by expectations of a tighter monetary policy from the Bank of England in 2026, which seems reasonable given that inflation has remained above 3% since April 2025.

At the same time, market participants may be concerned about the implications of US actions in Venezuela, prompting a shift of capital into other currencies and contributing to dollar weakness.

GBP/USD Technical Analysis

In December, GBP/USD formed an ascending channel (shown in blue), which remains relevant in January:

• The sharp rise from point A indicates clear buyer dominance.
• The pair has moved into the upper half of the channel.

It appears that the decline at the end of December, which formed a resistance trendline (shown in red), has ended, and bulls successfully resumed the uptrend by finding support at the lower boundary of the channel.

However, attention should be paid to the RSI on the GBP/USD chart: a bearish divergence is visible between peaks B and C, which can be interpreted as a potential slowdown in the uptrend. On this basis, the market may be vulnerable to a correction. In such a scenario, GBP/USD could fall towards 1.3505, which may act as support given the strength of buyers at this level during the break of the resistance line and the channel’s median.

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UK service sector activity showed only marginal improvement at the end of 2025, with Services PMI finalized at 51.4 in December, up fractionally from 51.3 in November. Composite PMI also edged higher to 51.4 from 51.2, pointing to continued but lackluster expansion across the broader economy.

According to S&P Global Market Intelligence, Economics Director Tim Moore said business activity growth remained subdued and weaker than indicated by the earlier flash estimate. Survey respondents cited persistent sales headwinds tied to soft UK growth prospects, rising business costs, and weak overseas demand, contributing to another notable decline in service sector employment.

Despite muted demand, inflation pressures intensified. Input prices rose at the fastest pace in seven months, while output charge inflation rebounded from November’s low.

Full UK PMI service final release here.

Eurozone economic momentum cooled modestly at the end of 2025, with Services PMI finalized at 52.4 in December, down from 53.6 in November. Composite PMI also eased to 51.5 from 52.8.

Performance across countries remained uneven. Spain led the bloc with a composite reading of 55.6, a two-month high. Ireland slipped to 53.6. Germany eased to 51.3, its lowest in four months, Italy fell to 50.3, an eleven-month low, and France hovered at the stagnation threshold at 50.0.

Despite the slowdown, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said the services sector has now expanded for seven consecutive months and that “the picture looks good” overall. He added that Composite PMI averaged a "visibly higher level" in the final quarter, suggesting GDP growth likely accelerated toward year-end, driven primarily by services. Growth prospects for 2026 improve modestly, with overall expansion seen above 1% but far from robust.

At the same time, rising cost pressures in services remain a key constraint on policy. ECB President Christine Lagarde has stressed close monitoring of services inflation, where higher wages continue to push costs and prices up. That dynamic explains why the ECB has paused further rate cuts.

Full Eurozone PMI services final release here.