In the foreign exchange market for the week that ended on January 12th, the dollar dominated other major currencies. Meanwhile, the market experienced nervous fluctuations in response to President-elect Donald Trump's potential tariff policies and strong U.S. economic indicators.

The USDJPY temporarily touched the upper 158 yen range. However, traders took profits after the release of the U.S. job figures and shifted to risk aversion. As a result, the dollar was subdued by the profit-taking momentum.

Meanwhile, the EURUSD and GBPUSD continued to show relatively moderate downtrends. The pound was sold off in response to the rise in U.K. bond yields and market uncertainty.

January 6 (Mon)

The USDJPY started the week trading in the lower 157 yen range. Later, the pair fell back to the lower 156 yen range as a media report that an aide to President-elect Donald Trump was considering imposing tariffs only on major imports weakened the dollar.

However, Trump's denial of the report fueled the dollar's rebound to the mid-157 yen range.

January 7 (Tue)

The Eurozone's all-items HICP (Harmonized Index of Consumer Prices) rose by 2.4% year-on-year in December, while the HICP core index rose by 2.7%. These predictable results pushed the EURUSD into a downtrend.

On the other hand, the USDJPY fell to the lower 157 yen range after Japanese Finance Minister Katsunobu Kato commented that his country would respond to excessive volatility in the currency market. However, the result of the U.S. December ISM Non-Manufacturing Index came in at 54.1, exceeding the forecast of 53.3, which fueled dollar buying and pushed the USDJPY back to the 158 yen level.

January 8 (Wed)

The USDJPY rose to the mid-158 yen range as the rise in U.S. long-term interest rates strengthened the dollar. However, the ADP National Employment Report registered an increase of 122,000 jobs in December, missing forecasts for a 140,000 increase. The weaker-than-expected result slowed the dollar's upward momentum. In addition, the FOMC minutes released the same day revealed no significant surprises.

January 9 (Thu)

With no major economic releases, the pause in the rise of U.S. long-term interest rates slightly weakened the dollar. Although the USDJPY fell to the mid-157 yen range, the pair fluctuated moderately throughout the day.

January 10 (Fri)

The U.S. Bureau of Labor Statistics reported the December employment figures. Total nonfarm payroll employment increased by 256,000, far exceeding the forecast of a 160,000 increase, and the unemployment rate registered a lower-than-expected 4.1%. The reaffirmed solidity of the U.S. labor market bolstered the dollar as the USDJPY surged to the upper 158 yen range.

However, as the Dow Jones Index temporarily plunged over 700 points, traders took a risk-averse stance, and the USDJPY pulled back.

Meanwhile, the EURUSD and GBPUSD continued to fall as a result of the U.S. job figures.

January 15 (Wed)

• 13:30 U.S: December Consumer Price Index（CPI）
• 13:30 U.S: December Consumer Price Index（CPI core index）

January 16 (Thu)

• 07:00 U.K.: November monthly gross domestic product (GDP, month-on-month data)
• 12:30 Europe: European Central Bank (ECB) Governing Council meeting minutes
• 13:30 U.S.: December retail sales

January 17 (Fri)

• 10:00 Europe: December Harmonised Index of Consumer Prices (revised HICP)
• 10:00 Europe: December Harmonised Index of Consumer Prices (revised HICP core index)

The following currency pair charts are analyzed using an overlay of the ±1 and ±2 standard deviation Bollinger Bands, with a period of 20 days.

USDJPY

The better-than-expected U.S. job figures released on January 10th lowered expectations for a Federal Reserve Board interest rate cut and strengthened the dollar. Thus, the yen is likely to weaken further. However, as some media outlets are reporting that the Bank of Japan is expected to raise interest rates earlier, it is possible that the yen temporarily strengthens against the dollar.

Next is an analysis of the USDJPY daily chart.

Last week, the pair gradually rose along +1σ amid moderate fluctuations to hit a new high. The upward middle line indicates that the uptrend is likely to continue.

We continue with an analysis of the USDJPY weekly chart.

The band walk continues to show an uptrend, and so does the middle line. It is safe to say that the pair's uptrend will continue and may soon reach the 160 yen level.

EURUSD

The dollar continued to strengthen against the euro following strong U.S. economic data. Given the wide gap in economic growth expectations between the U.S. and Europe, some believe that the dollar will strengthen even further after Donald Trump's inauguration on January 20th and that the pair could fall to parity (USD 1.00).

Next is an analysis of the EURUSD daily chart.

The pair managed to avoid hitting 1.02 to make a brief rebound. However, after failing to break above the middle line, the pair resumed its downtrend and broke the previous week's low. The downtrend is likely to continue.

We continue with an analysis of the EURUSD weekly chart.

On the weekly chart, five consecutive bearish candlesticks have appeared, and the band walk shows a downward trend. It is safe to say that the downtrend will continue as the pair may break below the 1.02 level.

GBPUSD

Widespread financial uncertainty in the U.K. accompanies the selling of U.K. bonds and a rise in yields. As a result, the selling of the pound accelerates. Like the EURUSD, the GBPUSD is also affected by the strong dollar based on strong U.S. economic data.

Now, we analyze the daily GBPUSD chart.

The pair touched the middle line early last week but then plunged below -2σ. The downtrend is likely to continue.

We continue with an analysis of the GBPUSD weekly chart.

Amid the continuous downtrend, the pair broke below 1.2299, the 2024 low. It is safe to say that this trend will not end anytime soon as the pair may drop as low as 1.2037, the low set in October 2023.