Fri, Feb 03, 2023 @ 17:01 GMT
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Dollar Fighting Back in Pre-Holiday Trading

Dollar is trying to strike back as traders are likely starting to light up their positions ahead of holidays. But for now, Yen and Euro are so far the more resilient ones. Sterling is sold off broadly earlier today but it’s not worse the Kiwi. Aussie is also quickly paring back earlier gains.

Technically, GBP/CHF is extending the decline from 1.1543 today. Such fall is seen as the third leg of the corrective pattern from 1.1574. Strong support should be seen from 1.1045, (38.2% retracement of 1.0183 to 1.1574) to bring rebound. Above 1.1297 minor resistance will be the first sign of stabilization. However, EUR/GBP is now pressing a key near term resistance level at 0.8827. Strong break there could shoot EUR/GBP further higher towards 0.9267 high. If happens, that might be accompanied by a strong break of 1.1045 in GBP/CHF.

In Europe, at the time of writing, FTSE is up 0.33%. DAX is down -0.45%. CAC is down -0.25%. Germany 10-year yield is up 0.059 at 2.370. Earlier in Asia, Nikkei rose 0.46%. Hong Kong HSI rose 2.71%. China Shanghai SSE dropped -0.46%. Singapore Strait Times rose 0.41%. Japan 10-year JGB yield dropped -0.0809 to 0.399, back below 0.4% handle.

US initial jobless claims rose to 216k, below expectation

US initial jobless claims rose 2k to 216k in the week ending December 17, below expectation of 220k. Four-week moving average of initial claims dropped -6k to 222k.

Continuing claims dropped -6k to 1672k in the week ending December 10. Four-week moving average of continuing claims rose 30k to 1657k.

Also released, Q3 GDP growth was finalized at 3.2% annualized. Price index was finalized at 4.4%.

ECB de Guindos: 50bps is the new norm for a period of time

ECB Vice President Luis de Guindos said in an interview with Le Monde, “increases of 50 basis points may become the new norm in the near term”. He added, “we should expect to raise interest rates at this pace for a period of time” and “enter into restrictive territory.”

He expects inflation will be “somewhere around its current level” at 10% “over the course of the next two or three months”. Inflation will then drop to “hover around 7% by middle of the year. As it’s “still clearly above” ECB’s target of 2%, “We have no choice but to act.”

Regarding the economy, he said, “our projections therefore expect the euro area to fall into a mild recession in the last quarter of this year and in the first quarter of 2023, when GDP is expected to contract by 0.1%.”

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9241; (P) 0.9266; (R1) 0.9292; More

USD/CHF recovers ahead of 0.9214 support as range trading continues. Intraday bias remains neutral first. Further decline is in favor with 0.9378 resistance intact. On the downside, break of 0.9214 will resume the fall and target 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056. However, break of 0.9378 resistance will indicate short term bottoming and turn bias back to the upside for 0.9545 resistance instead.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 might be a medium term down trend itself. Sustained break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 0.9545 resistance holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
07:00 GBP Current Account (GBP) Q3 -19.4B -20.0B -33.8B
07:00 GBP GDP Q/Q Q3 F -0.30% -0.20% -0.20%
13:30 USD Initial Jobless Claims (Dec 16) 216K 220K 211K 214K
13:30 USD GDP Annualized Q3 F 3.20% 2.90% 2.90%
13:30 USD GDP Price Index Q3 F 4.40% 4.30% 4.30%
15:30 USD Natural Gas Storage -91B -50B

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