During his visit to the World Economic Forum in Davos, Donald Trump softened his stance on claims over Greenland. According to media reports, the US President pledged not to use military force against NATO allies and also withdrew threats to impose tariffs on goods from several European countries. This eased geopolitical tensions, leading not only to a recovery in US equities but also to a strengthening of the US dollar.

The USD/JPY chart, for example, shows the US dollar gaining ground against the yen (marked by the orange arrow), which is under pressure ahead of the Bank of Japan’s interest rate decision scheduled for tomorrow.

Technical Analysis of the USD/JPY Chart

In late December, when analysing movements in the dollar–yen exchange rate, we identified a long-term ascending channel that remains valid (with a slight adjustment to reflect January data).

The lower boundary of this channel continues to act as solid support, but it is under threat because:

→ as indicated by the red arrow, bears are asserting control over the lower internal trendlines within the channel;
→ today’s peak (B) only marginally exceeds the high of 15 January (A). This resembles a bull trap, and a failed attempt to move higher could trigger renewed bearish pressure.

How the situation develops next will largely depend on a dense and rapidly changing news backdrop. In addition to the drivers already mentioned, attention should be paid to the release of US GDP data and initial jobless claims (scheduled for today at 16:30 GMT+3), which could have a significant impact on USD/JPY dynamics.

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