FX Daily: Here’s why the dollar sell-off could stall in Daily Currencies Ratings 27/01/2026 USD: Dollar licks its wounds After two days of heavy selling, the dollar has started to find some stability. USD/JPY is drifting a little higher as investors gather their thoughts on what they have seen. Japanese money market data suggests that if the Bank of Japan did intervene on Friday above 159, it did so in negligible amounts. And the wall of silence coming out of Washington regarding Fed rate checks on Friday evening suggests the US administration is happy for the ambiguity to linger. After Friday’s shock, we see a decreasing marginal impact of this activity unless both Japan and the US formally confirm joint intervention – the first since 2011. USD/JPY has an upside gap to 155.60, which could be the direction of travel in the short term. Yen performance around the results of a 40-year JGB auction in early Asia tomorrow (poor auction equals weak yen) could be a catalyst here. As for the broad dollar trend, we appreciate that strong flows into emerging markets are a mild dollar negative. But US data is holding up well and we can see tomorrow’s FOMC meeting as a mildly dollar-positive event risk. Running into February, dollar seasonals turn more positive and again, we do not see the European buy-side as underhedged US assets as they were heading into ‘Liberation Day’ last April. Unlike last year, if foreigners were to start selling their underlying US assets, that would be different. Risks here are poor five or seven-year US Treasury auctions this week, or some big earnings miss from four of the Magnificent Seven, who report Wednesday and Thursday this week. For today, the only US data of note is the weekly ADP jobs numbers. Barring a negative print here, we think DXY can work its way higher to fill Monday’s gap to 97.42. Chris Turner EUR: 1.19 could be the range high EUR/USD remains bid. Yesterday’s release of German IFO business sentiment was not as strong as it could have been and is a missed opportunity for Europe to present the pull factor for portfolio capital away from the US. Remember this time last year, EUR/USD was doing well on the rotation of funds into Europe and then the game-changing decisions taken on fiscal stimulus in Germany. Like other FX pairs, EUR/USD has some lively technical chart patterns this week. There is a downside gap to 1.1834 which should now act as support if EUR/USD is preparing to break above range highs at 1.1910/20. At present, we think those highs can hold and that EUR/USD can end the quarter somewhere near 1.17. But let’s see. There seem to be plenty out there who are looking for a breakout and the fact that the 10 delta one-year EUR/USD butterfly option has gone very bid again – just like it did last April – suggests some investors want to be positioned for sizeable moves. The eurozone calendar is light, with just a couple of ECB speakers today. The ADP jobs data looks to be the sole-scheduled catalyst for a move today. Chris Turner GBP: Short squeeze is back on Sterling’s outperformance this week may well be down to the fact that asset managers were very short GBP/USD positions, which have been left exposed by this week’s dollar sell-off. As above, we are not big fans of chasing the dollar lower just yet and suspect these levels in GBP/USD – the high 1.36s/low 1.37s – could be the best levels of the quarter and perhaps of the year as well. UK politics may well take its toll on sterling again over the c