FX markets face a data-heavy period in the coming days, led by US inflation releases and late-week flash purchasing managers’ indexes (PMIs). 

Regional data and central bank expectations in Japan, Europe, and Australia may influence cross-currency moves, particularly if outcomes differ from expectations.

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Quick facts:

• US Personal Income and Outlays is a key inflation release this week, closely watched by policymakers.
• Flash PMIs across the US, Eurozone, Germany, and the UK offer a timely read on growth momentum.
• Australian data, including labour market indicators, remains important for AUD sensitivity and Reserve Bank of Australia (RBA) expectations.
• FX markets can be sensitive when data outcomes differ from expectations.

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USDJPY

What to watch

US attention centres on inflation and activity data, particularly the Personal Income and Outlays report and the PCE price index, alongside late-week flash manufacturing and services PMIs.

These releases are closely followed by markets for their potential influence on rate expectations and USD sensitivity.

On the JPY side, Bank of Japan (BoJ) developments remain relevant, although US data has often been a key driver of recent moves.

Key releases and events

• Fri 23 Jan (US): US Personal Income and Outlays (including PCE inflation)
• Fri 23 Jan (US): Manufacturing and services PMI

Technical snapshot

USDJPY continues to trade above its rising 200-day moving average, with recent daily candles showing greater overlap and smaller ranges over recent weeks.

• Price has remained above the long-term average since late September, with higher swing lows still visible.
• Momentum appears to have moderated since early January, consistent with slowing follow-through rather than reversal.
• Daily ranges have narrowed compared with the October to November advance, again suggesting short-term consolidation.

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EURUSD

What to watch

Eurozone flash PMIs and Germany producer price index (PPI) data provide insights into regional growth momentum and whether inflation pressures are building.

While these releases may influence immediate EUR sentiment, EURUSD continues to trade in the broader context of US data outcomes and global risk conditions.

Key releases and events

• Thu 22 Jan: Germany Producer Price Index (PPI)
• Fri 23 Jan: Eurozone / Germany flash PMIs (manufacturing and services)

Technical snapshot

EURUSD is trading above its rising 200-day moving average (daily chart), although price action since July suggests the market has become more range-bound rather than directional, following the advances in the first half of 2025.

• The broader upward structure has been in place since the beginning of 2025, although progress higher has stalled over recent months.
• Momentum readings have drifted toward neutral since late November, consistent with balanced conditions.
• Average daily range has continued to compress since July, consistent with a flattening of the trend.

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GBPAUD

What to watch

Australian labour market data remains central for AUD sensitivity and RBA expectations. UK CPI is also due this week, which may contribute to cross volatility, particularly if it shifts expectations around the UK rates outlook.

Late-week PMI releases can also influence short-term direction, especially where they add to or challenge the current growth narrative.

Key releases and events

• Wed 21 Jan: UK CPI
• Thu 22 Jan: Australia Labour Force, Australia (December 2025)
• Fri 23 Jan: UK flash PMIs (manufacturing and services)

Technical snapshot

• GBPAUD continues to trade below its long-term moving average, with price action remaining in a downside direction since late November.
• The long-term average flattened through September and has turned lower since October, with the price remaining below and showing recent signs of a greater gap between the price and the moving average.
• Momentum has remained below neutral over recent months, with any retracements to the upside showing limited follow-through.
• Daily ranges have narrowed compared with earlier swings, suggesting a consistent but controlled drop in price rather than impulsive movement.

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Bottom line

With multiple data releases due across key regions, FX markets may remain sensitive to outcomes that differ from expectations.

Existing technical conditions suggest that reactions may vary by pair, with some markets consolidating while others could retain recent directional characteristics.

In 2025, the S&P 500 traded around 6,835 and was up approximately 16% year to date (YTD). Market direction remained most sensitive to Federal Reserve expectations, inflation data and the earnings outlook, with returns also shaped by mega-cap tech leadership and the broader AI narrative. The index pulled back from earlier December highs, but it has so far held above key major moving averages (MA).

Key 2025 drivers included:

• ‍Fed expectations and inflation: Inflation cooled through the year but remained sticky around 2.5% to 3%. A Fed easing bias likely supported price to earnings (P/E) multiples and “risk-on” positioning. More recently, markets appeared increasingly rate-sensitive, with the decreased likelihood of an additional rate cut until March 2026.
• ‍Earnings and guidance: Corporate earnings remained strong quarter on quarter. Recent Q3 results reportedly saw over 80% of the S&P 500 beat earnings per share (EPS) expectations. For Q4, the estimated year-over-year earnings growth rate is 8.1%, despite ongoing concerns around import tariffs and potential margin pressure.
• ‍Index leadership and breadth: Returns were heavily influenced by mega-cap tech and AI beneficiaries, even as broader market breadth appeared less consistent at points through the year.
• ‍Policy headlines and volatility: Trade and tariff headlines drove sharp moves, particularly earlier in the year. Some investors pointed to the “TACO” trade, with rapid recoveries after policy proposals were softened. Over time, similar shocks appeared to have less impact as the market became somewhat desensitised.
• ‍Valuations and sensitivity: The forward 12-month P/E ratio for the S&P 500 is 22, above the 5-year average (20.0) and above the 10-year average (18.7). That gap kept valuation sensitivity, especially in AI-linked names, firmly in focus.

Current state

The S&P 500 is about 1% below record highs hit earlier in December. That could indicate the broader uptrend remains in place, with a move back toward the recent highs one possible scenario if momentum improves. Despite the recent retracement, the index remains above all key major moving averages (MA). The latest bounce followed lower than expected CPI numbers earlier this week, alongside continued, and to some, surprising optimism about what may come next.

What to watch in January

• ‍Q4 earnings from mid-January: Results and guidance may help clarify whether valuations are being supported by forward expectations.
• ‍AI narrative and positioning: With AI-linked mega-caps carrying a large share of market capitalisation, changes in sentiment or expectations could have an outsized impact on index performance.
• ‍US jobs and CPI data: The latest US jobs report reportedly points to the highest headline unemployment rate since 2021. Cooling inflation this week may keep markets alert to shifts in rate cut timing, particularly around the March decision.

S&P 500 daily chart

Major FX pairs

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AUD/USD

AUD/USD has been choppy in 2025. Since the “redemption day” drop in April, the move has looked more like a steady grind higher than a clean upside trend.

Key levels
Recent peaks in early September and mid-December highlight resistance near 0.6625. Support has been evident around 0.6425, where price bounced over the last month.

What is supporting the bounce
That support test coincided with stronger than expected jobs and inflation data, lifting expectations that the Reserve Bank of Australia (RBA) may raise rates during 2026 rather than cut again. The latest pullback looks contained so far, with buying interest already visible and price still above key longer-term moving averages.

What could drive a breakout
The pair remains range-bound, but the tilt is still constructive. If Chinese data stays firm, metals prices hold up, and the central bank outlook remains relatively hawkish, a break above resistance could gain more traction.

AUD/USD daily chart

EUR/USD

After early 2025 euro strength, EUR/USD has mostly consolidated since June in a roughly 270 pip range. This month tested 1.18 resistance, reaching highs not seen since September.

What price is doing now
The recent pullback still lacks strong downside conviction. Some technical analysts refer to the 1.17 area as a near-term reference level.

What could come next
If price holds 1.17 and buyers step back in, another push toward 1.18 is possible. One view is that the European Central Bank (ECB) could be less inclined to ease in 2026, which could be consistent with a firmer EUR/USD scenario. Broader analyst commentary also suggests the euro may stall rather than collapse against the US dollar, although outcomes remain data and policy dependent.

EUR/USD daily chart

USD/JPY

Year-to-date picture
USD/JPY is close to flat overall for the year. After US dollar weakness in Q1, the pair reversed higher and now sits just below resistance near 158.

Rates remain the main driver
Rate differentials still favour the US dollar. The Bank of Japan (BOJ) held steady for much of the period despite expectations it might act, and the recent rate increase was modest. Policy has only moved marginally away from zero.

What could shift the balance
Rate differentials remain a key influence. Without a clearer shift in BOJ policy, the JPY may find it difficult to sustain a rebound. Some market commentators cite 154.20 as a chart reference level.

USD/JPY daily chart

In 2025, the ASX 200 closed around 8,621 points and was up approximately 6% year to date (YTD) as of 19 December close. Market direction was most sensitive to Reserve Bank of Australia (RBA) expectations, commodity prices and China-linked demand, and (to a lesser extent) moves in the Australian dollar (AUD). The index recovered from November’s pullback, but remained below October’s record close.

Key 2025 drivers included:

• RBA policy expectations: Sentiment was shaped by shifting views on the timing and extent of rate moves. The November pullback reflected repricing towards a longer pause and higher uncertainty around whether the next move could be a hike rather than a cut, particularly as jobs and inflation data surprised.
• Resources and China sensitivity: With a meaningful resources weight, the index responded to iron ore stability, strong gold prices and relative firmness in base metals. China data and any perceived policy support (including signals from the People’s Bank of China (PBOC)) remained important for the export backdrop. A relatively stable AUD also reduced currency-related noise for exporters.
• Index composition and market structure: The ASX 200’s heavier tilt to materials and banks, and lower exposure to high-growth technology, meant it often lagged tech-led global rallies, but tended to hold up better when AI and growth valuations were questioned.
• Corporate earnings: Reporting season outcomes influenced valuation support. In September’s half-year reporting season, around 33% of ASX 200 companies beat expectations, which helped underpin pricing around current levels.

Current state

The ASX 200 was roughly 5% below its late-October record high close of 9,094 points. After the November retracement, support around 8,400 appeared to hold and buying interest improved. The 50-day EMA near 8,730 (a prior consolidation area) was a commonly watched near-term reference, noting technical indicators can be unreliable.

What to watch in January

• China and commodity demand: Growth, trade and any fresh stimulus inference from the PBOC may affect sentiment.
• Domestic inflation and labour data: CPI and jobs prints are key inputs into RBA expectations.
• Key levels and follow-through: The post-November rebound may need continued demand to sustain momentum.

What moved the Nikkei 225 in 2025?

In 2025, the Nikkei 225 traded around 39,200 points and was up approximately 21% year to date (YTD). Market direction was most sensitive to moves in the Japanese yen (JPY) and Bank of Japan (BOJ) communication, with the index consolidating after multi-decade highs. While broader signals remained constructive, consolidation can resolve either higher or lower.

Key influences included:

• JPY movements and earnings translation: A weaker JPY can boost the reported value of overseas earnings for some exporters, although it may also increase input and import costs. The net impact often depends on company hedging practices and varies by sector, with effects most evident in export-heavy industries such as automotive, industrials and parts of technology manufacturing.
• Gradual BOJ policy transition: The BOJ continued to step away from ultra-easy settings, but tightening was generally cautious. Markets largely priced a slow, conditional normalisation, which helped limit downside, even as policy headlines created bouts of volatility.
• Corporate governance reforms: Ongoing improvements in capital efficiency and shareholder returns supported interest from overseas investors. Share buybacks, stronger balance-sheet discipline and improved return on equity (ROE) contributed to re-rating in parts of the market.
• Global cyclical exposure: The Nikkei moved with shifts in global manufacturing sentiment and expectations for US growth, particularly during risk-on phases associated with AI-related capital spending.

Current state

After pushing to multi-decade highs earlier in the year, the Nikkei spent time consolidating but has remained structurally strong. Price sits above key long-term moving averages, and some technicians watch the 50-day exponential moving average (EMA) as a potential reference level (noting these indicators can be unreliable). Currency swings and shifting BOJ expectations were commonly cited as contributors to much of the second-half volatility, although pullbacks were generally met with buying interest.

What to watch in January for Japan

• JPY volatility: Sharper yen moves, especially if driven by BOJ or Federal Reserve expectations, could quickly change exporter earnings assumptions.
• BOJ communication: Small changes in language on inflation persistence or bond market operations may move sentiment.
• Global growth data: US and China manufacturing and trade prints remain key inputs for an externally focused economy.