The dominant theme heading into Thursday’s session is a broadly softer US dollar. Markets parsed President Trump’s State of the Union address on Tuesday and found little to shift the macro narrative — tariff rhetoric was already priced in, and the speech offered no surprise policy acceleration. With markets now pricing in three Fed rate cuts in 2026 (June, September, and December), the interest-rate differential that long underpinned greenback strength continues to erode.

Fed Governor Bowman has held the funds rate at 3.50–3.75% and continues to signal data dependency. A speech from Bowman today at approximately 3:00 pm GMT could generate volatility if she tips her hand on how the Fed is balancing sticky services inflation (core PCE near 3%) against a labour market that is beginning to show cracks — unemployment ticked down to 4.3% last reading but the broader trend is softening.

Across the Pacific, Australia’s January CPI came in at 3.8% YoY, unchanged from December but above the 3.7% consensus. Critically, trimmed mean CPI rose to 3.4%, eclipsing both the prior and the forecast. The RBA recently hiked by 25 bps, reversing its August cut, and this data fuels expectations of further tightening — supporting the AUD. In Japan, the Bank of Japan is expected to raise rates approximately twice annually through 2026–2027, with former governor Kuroda suggesting ¥157 per dollar represents an excessive level of weakness, keeping JPY appreciation on the agenda.

In Europe, the euro area saw annual inflation confirmed at 1.7% in January — below the ECB’s 2% target — but Germany’s landmark €1 trillion fiscal expansion package continues to anchor EUR upside potential. The ECB has paused its easing cycle, standing in contrast to the still-cutting Fed.

EUR/USD has been steadily climbing since the January 13th reversal and is currently consolidating just below the key 1.1850 resistance. A falling wedge formation — a classically bullish reversal structure — resolved to the upside this week. The current pullback-and-hold at 1.1790–1.1800 is textbook post-breakout retest behaviour. As long as the pair holds above 1.1750, the path of least resistance remains upward. The ECB’s pause contrasting with Fed cut expectations, combined with Germany’s fiscal expansion narrative, provides structural tailwinds.

Candlestick Watch: Traders should watch for a Bullish Engulfing or Morning Star pattern on the H4 chart around 1.1790–1.1800 as a high-conviction buy signal. On the flip side, a Bearish Pin Bar or Shooting Star at 1.1855–1.1880 would confirm the range top and set up a short to 1.1750.

GBP/USD is arguably the cleanest trend trade in the majors right now. The pair has printed a series of higher highs and higher lows since mid-January and reached near 42-day highs on Wednesday as the dollar weakened in the wake of Trump’s State of the Union address. Cable is currently the strongest G10 currency vs the USD this week, which is notable given that UK economic data has been somewhat mixed — the pound is riding the USD weakness trade more than any UK-specific catalyst.

UK GDP tomorrow (Thursday, Q4 2025 final) is a pivotal event. A confirmation of 0.3% q/q growth would be neutral-to-mildly supportive. A downside miss could briefly pressure GBP and give bears a window. However, any UK-driven weakness is likely to be a buying opportunity as long as the broader USD downtrend remains intact. Candlestick cue: A Three White Soldiers or Marubozu bullish candle on the daily close through 1.3550 would be a very strong signal.

USD/JPY is the most complex trade in today’s landscape. The pair is caught between two major forces: residual USD strength from carry trade dynamics and elevated US rates, and the BoJ’s credible normalisation path that is steadily narrowing the yield differential. Former BoJ governor Kuroda’s comment that ¥157 per dollar is “somewhat too weak” is the key level to monitor — above this, intervention risk rises sharply.

The near-term path depends heavily on tomorrow’s Tokyo CPI and the longer-term direction hinges on the US Core PCE report (also tomorrow). Hot Tokyo CPI → yen buying → push toward 155. Soft Core PCE → dollar selling → same directional result. On the daily chart, the candlestick action near 156 has produced a series of Doji and Spinning Top candles — a textbook indecision pattern that often precedes a trend resolution. Experienced traders should wait for a clean break and close below 155 or above 157 before committing to a position.

AUD/USD is the cleanest fundamental play today. Australia’s January CPI beat (3.8% YoY, trimmed mean 3.4%) has solidified the RBA’s hawkish tilt — the central bank already reversed its August cut by hiking 25 bps and is now actively warning of further tightening. This stark contrast with the dovish Fed path makes AUD/USD a compelling buy-on-dips candidate.

Technically, the pair has broken above a multi-month downtrend resistance line and RSI is sustaining above 62 with ADX near 43 — both hallmarks of a strong, trending market. The preferred pattern to look for on entry is a Bullish Hammer or Bullish Engulfing on the H4 chart on any retrace to 0.7040–0.7060. The road to 0.7147 and potentially 0.7157 (2023 ceiling) is increasingly well-supported. Watch iron ore prices as a secondary confirmation signal — a rally in iron ore typically correlates with AUD strength.