Over the past week (12/15-12/19), the US dollar index strengthened moderately, rising 0.33%, with mixed performances across non-USD currencies. The yen faced the most pressure, depreciating 1.28% for the week, the euro fell 0.23%, the Australian dollar dropped 0.65%, and the British pound rose slightly by 0.03%. Multiple factors including divergent central bank policies, better-than-expected economic data, and technical breakthroughs have intertwined, increasing market volatility.
Yen Depreciation Approaches Critical Psychological Level, Intervention Signals Emerging Frequently
The USD/JPY rate rose 1.28% last week, primarily driven by the Bank of Japan’s “dovish tone rate hike.” Although the BoJ raised rates by 25 basis points as expected, Governor Ueda Kazuo’s remarks were notably dovish, disappointing the market. More critically, Japan’s new cabinet approved a fiscal stimulus package worth 18.3 trillion yen, which directly offset the contractionary effects of the rate hike, putting further pressure on the yen.
Currently, the market widely expects the BoJ to cut rates only once in 2026. Sumitomo Mitsui Bank’s forecast is more pessimistic, believing the next rate hike will be delayed until October 2026, and predicting that the USD/JPY rate could reach 162 in the first quarter.
However, JPMorgan Chase issued a critical warning: if yen depreciation exceeds 160 and cannot be effectively controlled in the short term, the likelihood of Japanese government intervention in the exchange rate is very high. This statement has sounded an alarm for the market. In contrast, Nomura Securities takes a more optimistic view, believing that against the backdrop of Fed rate cuts, the dollar will ultimately struggle to sustain strength, predicting the yen could appreciate to 155 in the first quarter.
Technically, USD/JPY has broken through the 21-day moving average, with MACD showing a buy signal. Once it breaks through the 158 resistance level, it could open up more significant upside space. However, if it remains under pressure below 158, downside correction risks increase, with support to watch at 154.
Key focus this week: Bank of Japan Governor’s remarks and government verbal intervention signals will be critical. Any hawkish statements or escalated intervention could trigger a rapid pullback in USD/JPY.
Euro Rises Then Falls, Fed’s 2026 Rate Cut Expectations Remain Ambiguous
The EUR/USD rate rose then fell last week, ultimately closing down 0.23%. The ECB’s decision to hold rates steady met expectations, but President Lagarde failed to provide the hawkish signals the market had previously anticipated, with this policy silence disappointing markets.
US economic data presented a mixed picture. November non-farm payroll data was disappointing, while CPI data for the same period came in below expectations. Major investment banks including Morgan Stanley and Barclays subsequently pointed out that these data may be severely affected by statistical distortions and technical factors, making them difficult to accurately reflect the economy’s true picture. This uncertainty in data interpretation has further deepened market speculation about the Fed’s policy path.
Currently, market expectations for Fed rate cuts in 2026 are relatively stable—predicting 2 cuts for the full year, with an April cut probability of 66.5%. However, judging from market reaction, this expectation still carries considerable room for change.
Danske Bank’s analysis is more constructive. The institution believes that due to the Fed’s preference for rate cuts while the ECB remains neutral, the real interest rate differential after inflation adjustment may narrow over the medium term, providing support for the euro. Combined with the recovery of European asset markets, the impact of risk-off sentiment on the dollar, falling confidence among US institutions, and other factors, the euro has significant upside potential.
Technically, EUR/USD continues to trade above multiple moving averages, with short-term momentum to push higher. The previous highs around 1.18 represent important resistance; if it pulls back, the 100-day moving average at 1.165 provides support.
Key focus this week: US Q3 GDP data and geopolitical situation changes. If GDP exceeds expectations, it will be positive for the dollar and negative for EUR/USD; conversely, it will favor euro strength.
Australian Dollar Closely Tied to Global Liquidity Environment
Although the Australian dollar fell 0.65% last week, the performance of AUD/CNY should not be overlooked. As a commodity currency, the Australian dollar’s movements are closely related to global risk appetite and commodity prices. Against the backdrop of the Fed’s rate-cutting cycle beginning and a weakening dollar index, the Australian dollar has long-term appreciation pressure against the Chinese yuan. In the short term, the relative strength of AUD against CNY will become an important indicator reflecting liquidity and trade prospects in the Asia-Pacific region.
Outlook for This Week
The forex market is entering a critical decision window. Japan’s intervention willingness, the true meaning of US economic data, and the sustainability of Europe’s recovery will all determine currency movements in the coming week. Investors should closely monitor central bank remarks and official statements, as these often have more market impact than the data itself.
円安加速の警告！中央銀行の政策介入のタイミングが近づく【為替週間レビュー】
Last Week’s Market Summary
Over the past week (12/15-12/19), the US dollar index strengthened moderately, rising 0.33%, with mixed performances across non-USD currencies. The yen faced the most pressure, depreciating 1.28% for the week, the euro fell 0.23%, the Australian dollar dropped 0.65%, and the British pound rose slightly by 0.03%. Multiple factors including divergent central bank policies, better-than-expected economic data, and technical breakthroughs have intertwined, increasing market volatility.
Yen Depreciation Approaches Critical Psychological Level, Intervention Signals Emerging Frequently
The USD/JPY rate rose 1.28% last week, primarily driven by the Bank of Japan’s “dovish tone rate hike.” Although the BoJ raised rates by 25 basis points as expected, Governor Ueda Kazuo’s remarks were notably dovish, disappointing the market. More critically, Japan’s new cabinet approved a fiscal stimulus package worth 18.3 trillion yen, which directly offset the contractionary effects of the rate hike, putting further pressure on the yen.
Currently, the market widely expects the BoJ to cut rates only once in 2026. Sumitomo Mitsui Bank’s forecast is more pessimistic, believing the next rate hike will be delayed until October 2026, and predicting that the USD/JPY rate could reach 162 in the first quarter.
However, JPMorgan Chase issued a critical warning: if yen depreciation exceeds 160 and cannot be effectively controlled in the short term, the likelihood of Japanese government intervention in the exchange rate is very high. This statement has sounded an alarm for the market. In contrast, Nomura Securities takes a more optimistic view, believing that against the backdrop of Fed rate cuts, the dollar will ultimately struggle to sustain strength, predicting the yen could appreciate to 155 in the first quarter.
Technically, USD/JPY has broken through the 21-day moving average, with MACD showing a buy signal. Once it breaks through the 158 resistance level, it could open up more significant upside space. However, if it remains under pressure below 158, downside correction risks increase, with support to watch at 154.
Key focus this week: Bank of Japan Governor’s remarks and government verbal intervention signals will be critical. Any hawkish statements or escalated intervention could trigger a rapid pullback in USD/JPY.
Euro Rises Then Falls, Fed’s 2026 Rate Cut Expectations Remain Ambiguous
The EUR/USD rate rose then fell last week, ultimately closing down 0.23%. The ECB’s decision to hold rates steady met expectations, but President Lagarde failed to provide the hawkish signals the market had previously anticipated, with this policy silence disappointing markets.
US economic data presented a mixed picture. November non-farm payroll data was disappointing, while CPI data for the same period came in below expectations. Major investment banks including Morgan Stanley and Barclays subsequently pointed out that these data may be severely affected by statistical distortions and technical factors, making them difficult to accurately reflect the economy’s true picture. This uncertainty in data interpretation has further deepened market speculation about the Fed’s policy path.
Currently, market expectations for Fed rate cuts in 2026 are relatively stable—predicting 2 cuts for the full year, with an April cut probability of 66.5%. However, judging from market reaction, this expectation still carries considerable room for change.
Danske Bank’s analysis is more constructive. The institution believes that due to the Fed’s preference for rate cuts while the ECB remains neutral, the real interest rate differential after inflation adjustment may narrow over the medium term, providing support for the euro. Combined with the recovery of European asset markets, the impact of risk-off sentiment on the dollar, falling confidence among US institutions, and other factors, the euro has significant upside potential.
Technically, EUR/USD continues to trade above multiple moving averages, with short-term momentum to push higher. The previous highs around 1.18 represent important resistance; if it pulls back, the 100-day moving average at 1.165 provides support.
Key focus this week: US Q3 GDP data and geopolitical situation changes. If GDP exceeds expectations, it will be positive for the dollar and negative for EUR/USD; conversely, it will favor euro strength.
Australian Dollar Closely Tied to Global Liquidity Environment
Although the Australian dollar fell 0.65% last week, the performance of AUD/CNY should not be overlooked. As a commodity currency, the Australian dollar’s movements are closely related to global risk appetite and commodity prices. Against the backdrop of the Fed’s rate-cutting cycle beginning and a weakening dollar index, the Australian dollar has long-term appreciation pressure against the Chinese yuan. In the short term, the relative strength of AUD against CNY will become an important indicator reflecting liquidity and trade prospects in the Asia-Pacific region.
Outlook for This Week
The forex market is entering a critical decision window. Japan’s intervention willingness, the true meaning of US economic data, and the sustainability of Europe’s recovery will all determine currency movements in the coming week. Investors should closely monitor central bank remarks and official statements, as these often have more market impact than the data itself.