FTSE, USD/JPY Forecast: Two trades to watch

FTSE rises to fresh record highs

• Attention is on Trump’s policy changes
• Rightmove data shows strong house price growth
• GBP/USD remains bellow 1.22
• FTSE rises to 8515

The Betsy has risen to a new record high, rising about Friday and closing at 8505, the previous record. The index was led higher by a broad range of sectors, including miners, banks, and utilities.

The FTSE 100 is supported after soft data last week, which reassured expectations that the Bank of England could cut interest rates more aggressively than the 1 cut the market had priced in.

GBP/US struggles below 1.22 at the multi-year low, which fits the multinationals that make up the large majority of the FTSE index.

Attention is on Donald Trump's second inauguration and the measures he will implement immediately. While the UK isn't necessarily in line for a direct hit from trade tariffs, it will likely be impacted indirectly should Trump adopt an aggressive stance. The US stock market is closed today.

The UK economic calendar is quiet, and figures from Rightmove have failed to buoy the house-building sector. Average asking prices for newly listed homes in the UK have seen the biggest start-of-the-year increase since 2020. According to Rightmove, the average price rose by 1.7% between December 8th and January 11th compared to the same period a year ago.

While the housing market gained some momentum on hopes that borrowing costs would continue to fall, the uncertainties surrounding BoE could limit gains going forward. The market is pricing two 25 basis point cuts this year, up from one at the start of last week. However, the BoE has guided towards four rate cuts.

FTSE forecast – technical analysis

The FTSE has broken out of range, rising above 8490 to fresh all-time highs. With blue skies above, buyers could consider the 8600 round number.

However, the RSI is very overbought, so buyers should be cautious some consolidation could be on the cards. Immediate support is at 8490 and 8400 below here. Should sellers take out 8325, the price returns to the familiar range within which it traded for much of the past 9-months.

USD/JPY holds steady in cautious trade ahead of Trump’s inauguration

• Attention is squarely on Trump’s inauguration
• BoJ could cut rates this week
• USD/JPY recovers from 155 support

USD/JPY is holding steady at the start of the new week as investors await cautiously ahead of chumps inauguration. President-elect Donald Trump is expected to make a flurry of policy announcements in the first hours of his second presidency. Meanwhile, the Bank of Japan is expected to hike interest rates at the end of the week.

Trump will take the oath at noon Eastern Time (19:00 GMT). He is expected to sign a slew of executive orders that will set the tone for his presidency. Monday is a US holiday, with stock markets closed for Martin Luther King Day. So, the forex market will see an immediate reaction to his inauguration pledges, while the stock markets will likely react when they open on Tuesday.

Where the US dollar goes from here greatly depends on how aggressively Trump implements trade tariffs and tax cuts. These measures are inflationary.  The USD has rallied on expectations of few rate cuts since Trump’s victory. Any sense of a more relaxed approach could pull the US dollar lower.

The USD fell last week after weaker-than-expected underlying US inflation saw the market ramp up Fed rate cut expectations. Dovish comments from Federal Reserve governor Christopher Waller also weighed on the USD.

The yen rallied last week on hints from the BoJ that a rate hike could be discussed at this week’s BoJ rate meeting.

Before the BoJ meeting on Friday, Japanese inflation data will be released.

USD/JPY forecast -technical analysis

USD/JPY eased back from a six-month high of 158.90 reached last week before finding support at 155.00, around the 50 SMA. The price holds steady around 156.20, while the RSI gives away few clues at its neutral level.

Buyers will need to rise above 156.20 and 157.00, the 78.6% Fib retracement level, to bring 158.90 into focus. A rise above here is needed to create a higher high and turn attention to 160.00.

Support is seen at 155.00, ahead of 154, the rising trendline dating back to 2022, and 153.30, the 61.8% fib retracement.