The USD/JPY faces a critical test as exchange rates navigate choices amid improving market sentiment

Market risk sentiment is improving, with the VIX fear index significantly declining, but the USD/JPY trend presents a complex picture. On one hand, “de-dollarization” trades continue, with the US Dollar Index approaching the key support level of 98.0; on the other hand, the Bank of Japan’s policy adjustments and political changes introduce new variables into the exchange rate. Traders should pay attention to the technical performance of USD/JPY under multiple influences.

Market Fear Index Declines, USD/JPY Faces Pressure

The VIX fear index drops over 7%, reflecting a notable improvement in market risk sentiment. However, amid ongoing global de-dollarization, the US Dollar Index faces downside pressure, approaching the critical support level of 98.0. Signals of military action from the US suggest possible further moves against Iran, so geopolitical risks remain to be cautious of.

The Bank of Japan maintains short-term interest rates at 0.75% and raises economic growth and inflation expectations, signaling policy adjustments. Japanese Prime Minister Sanae Takaichi has decided to dissolve the House of Representatives, adding political variables that could impact the yen’s volatility. Against this backdrop, USD/JPY has become a focal point for the market.

Technical Outlook for USD/JPY: Resistance at 160.0 as a Key Turning Point

USD/JPY has recently shown high-level oscillations. It has risen for four consecutive trading days, reaching a high of 158.95, but under the dual constraints of the 160.0 resistance level and overall dollar weakness, the upward momentum is gradually limited, and a decisive move is imminent.

Key Technical Levels:

If USD/JPY successfully stays above 158.0, the rebound momentum could extend toward 160.0, further challenging the 165.0 level. Close attention should be paid to the US Dollar Index trend and Japanese political developments.

Conversely, if USD/JPY effectively breaks below 157.80 support, the uptrend will reverse, and further declines below 155.0 support zone are expected. In this scenario, the market will reassess the medium-term trend of USD/JPY.

Support Levels: 157.80, 157.0, 154.0

Resistance Levels: 159.0, 160.0, 165.0

AUD/USD Rises to 0.6900, Gold Surges Toward $5000

AUD/USD hits a 15-month high, reaching 0.5854, entering an accelerated upward phase after breaking through the 0.6600 range high. Investors should watch the end of January and the potential turning points from US and European economic data.

If AUD/USD stabilizes above 0.6770, further rebound toward 0.6900 and even 0.7000 round numbers is possible. However, a break below 0.6770 warrants caution for a reversal of the rally.

Gold remains strong, reaching a high of $4967.3, just a step away from the $5000 mark, with four consecutive days of gains. In this strong momentum, it is not advisable to be overly bearish. If gold stabilizes above $4890, further rebound toward $5000 and $5230 is likely. To reverse the uptrend, a drop below $4760 is needed first.

AUD/USD Support Levels: 0.6800, 0.6770, 0.6600

AUD/USD Resistance Levels: 0.6900, 0.7000, 0.7030

Gold Support Levels: 4890, 4700, 4600

Gold Resistance Levels: 5000, 5230, 5700

ETH Rebounds Weakly, Faces Short-term Test at $3000

Ethereum is currently priced at $1.92K, up 4.87% in 24 hours. Despite signs of a rebound, the technical outlook remains challenging. ETH has fallen back below the Gann 2/1 line, indicating that the downward trend since last year may still be ongoing.

$3000 remains a key psychological level. If ETH cannot effectively recover this level in the short term, further downside testing toward $2680 is likely, with significant risk. To turn the rebound around, a clear break above $3000 resistance is necessary.

ETH Support Levels: 2860, 2600, 2400

ETH Resistance Levels: 3000, 3230, 3600

USD/JPY, AUD/USD, gold, and ETH are all at critical junctures. Traders should closely monitor the breaking of these technical levels, while also paying attention to central bank policies, geopolitical risks, and macro factors, and exercise caution in USD/JPY directional decisions.