The Euro has edged up and is likely to grind higher in a choppy, low-volatility environment, with dips supported by the rising 200-day average but upside capped unless fresh US data weakens the dollar. Big banks remain constructive on the euro into 2026, targeting a move above 1.20 as eurozone growth stabilizes and the dollar fades, though January seasonality points to near-term consolidation. Persistent yen weakness and strong carry trades, alongside subdued option volatility, may also limit how aggressively EURUSD can rally for now.

USDJPY is tracking just below 160 with the yen the weakest G10 currency this week, pressured by surging JGB yields near 27-year highs, widening US-Japan yield gaps, and renewed focus on a possible snap election under PM Takaichi that could reinforce reflationary, yen-negative policies. Speculative yen longs have been largely unwound, leaving room for fresh short positioning if USDJPY breaks higher through 160, though rising intervention warnings from Japanese officials add two-way risk. Overall, markets see a heavy yen bias near term, with political headlines and intervention chatter driving volatility.

The Aussie dollar is holding comfortably above recent support as rate expectations remain largely unchanged, with markets pricing around a 30–40% chance of an RBA hike by early 2026. Job vacancies were more resilient than expected, while Australian bond yields briefly pushed higher. Policymakers continue to warn inflation is still too high, and Australia’s high G10 yields are seen as supportive for AUD, though upcoming employment and inflation data will be key for February’s RBA decision. Meanwhile, the USD outlook is more balanced as Fed cut expectations depend on data, and rising global political risks could still trigger safe-haven flows that would weigh on the Aussie.