Forex market experiences increased volatility amid global risks
published at 01.26.2026
EUR/USD is trading slightly lower on Monday, hovering around 1.1855 after reaching fresh four-month highs at 1.1875 earlier in the session. The pair lost momentum due to mild risk aversion and weak German business confidence data. Even so, the Euro remains close to recent highs following a strong early move, mainly driven by broad US Dollar weakness linked to concerns over a possible Japanese Yen intervention.
The US Dollar came under pressure after reports that the Federal Reserve conducted USD/JPY exchange rate checks with major US banks on Friday. Such actions often signal a potential currency intervention, prompting investors to scale back long Dollar positions. This pushed the Greenback lower across markets and helped lift EUR/USD to its highest level since last September. However, the rally lost steam as market sentiment turned more cautious.
Risk appetite weakened further after President Donald Trump reignited trade tensions by threatening to impose 100% tariffs on Canadian goods. These remarks increased uncertainty surrounding US trade policy and encouraged a risk-off environment, limiting gains in the Euro. At the same time, fears of a coordinated US-Japan intervention to support the Yen kept traders cautious, weighing on both the Dollar and the Euro and keeping EUR/USD relatively stable near recent highs.
In the United States, attention is focused on November Durable Goods Orders, which are expected to rise by 0.5% after a sharp decline in October. Orders excluding transportation are forecast to increase by 0.3%. However, the key event of the week will be the Federal Reserve’s monetary policy decision on Wednesday, which could set the direction for the US Dollar going forward.
The Japanese Yen strengthened for a second consecutive day, becoming the best-performing G8 currency. EUR/JPY fell to around 182.25 after hitting a five-week low earlier in the session. The Yen received additional support after Japanese Prime Minister Sanae Takaichi reiterated that authorities are ready to act against speculative market movements, reinforcing expectations of intervention and adding pressure to Yen crosses.
USD/CAD remained weak near 1.3690, extending its losing streak as rising oil prices supported the Canadian Dollar. WTI crude climbed to around $61.10, driven by falling Russian fuel exports, reduced Venezuelan shipments to China, and supply disruptions in the United States. While rising geopolitical tensions and trade risks may help the US Dollar recover some losses, strong commodity prices continue to underpin the CAD.
Ongoing uncertainty surrounding the US Dollar and geopolitical risks point to continued volatility in major currency pairs. EUR/USD may remain supported near recent highs but could struggle to extend gains without stronger Eurozone data. Yen strength could persist as long as intervention concerns remain, favoring downside risks for EUR/JPY. For USD/CAD, elevated oil prices may cap upside potential, making range-based strategies more suitable in the near term.
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