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Daily Pivots: (S1) 0.8962; (P) 0.8984; (R1) 0.8999; More…

Intraday bias in USD/CHF remains neutral. Consolidation pattern from 0.9200 might extend with deeper decline. But larger rally is still expected to continue as long as 38.2% retracement of 0.8374 to 0.9200 at 0.8884 holds. On the upside, above 0.9053 will bring retest of 0.9200 resistance. However, sustained break of 0.8884 will indicate bearish reversal, and target 61.8% retracement at 0.8690 instead.

In the bigger picture, decisive break of 0.9223 resistance will argue that whole down trend from 1.0342 (2017 high) has completed with three waves down to 0.8332 (2023 low). Outlook will be turned bullish for 1.0146 resistance next. Nevertheless, rejection by 0.9223 will retain medium term bearishness for another decline through 0.8332 at a later stage.

The German election makes a two-party government between the conservative CDU/CSU and the Social Democrats (SPD) the most likely result (75%), which is a positive outcome for the German economy. Markets have also reacted positively to the news by strengthening the euro by 0.6% during Asian trading hours while DAX futures have climbed 1.1%. The conservative chancellor Friedrich Merz is certain to become the next chancellor as his party emerged as the biggest one with 28.6% of the votes. A majority government with the Social Democrats is possible because two parties fell below the 5% threshold for entering the parliament, namely the FDP at 4.33% and the BSW at 4.97%. This gives 328 seats to the CDU/CSU and SPD, above the 315 needed for a majority. A two-party "Grand coalition" government is a positive outcome because decision making is easier than in a three-party government. A new government will likely take office in two months' time.

The far-right Alternative for Germany (AfD) became the second largest party with 20.8% of the votes, which is double the votes it got in the last election but at the same time in line with election polls. Being the sole party who has certainly refused to change the constitutionally enriched "debt brake" to allow more debt we see the chance of a reform being 60%. Such a reform requires a two-thirds majority and the CDU/CSU, SPD, Greens, and The Left have 76% of the votes. The reform will depend on the CDU as they have given mixed signals, which is the reason we estimate 70% chance of it happening (see next page for details).

In terms of defence spending and support for Ukraine, the election outcome was not the best scenario because the far-right (Afd) and the Left party combined secured 34.3% of the votes. Therefore, they will be able to block off-budget defence funds and legislation that requires two-thirds majority. Yet, with a less fragmented Parliament and a two-party government Germany's presence in the EU will likely be stronger compared to the previous government, which is positive news.

Because the majority for a "Grand coalition" is so slim (13 seats) Merz might want to include the Green party in a coalition to not be pressured by SPD the members who are the least aligned with his policies, so it is 75% certain that we get a Grand coalition and 25% chance of a "Kenya" government. Since the BSW came so close to the 5% threshold there will likely be a recount of the votes to make sure the preliminary result is correct. We must wait for that before the results are 100% final.

Full report in PDF.

Daily Pivots: (S1) 0.6336; (P) 0.6373; (R1) 0.6393; More...

Intraday bias in AUD/USD stays neutral for the moment. On the downside, firm break of 0.6327 support will suggest that the corrective rebound from 0.6087 has completed ahead of 38.2% retracement of 0.6941 to 0.6087 at 0.6413. Intraday bias will be turned back to the downside for retesting 0.6087 low. Nevertheless, sustained break of 0.6413 will pave the way back to 61.8% retracement at 0.6615, even still as a correction.

In the bigger picture, fall from 0.6941 (2024 high) is seen as part of the down trend from 0.8006 (2021 high). Next medium term target is 61.8% projection of 0.8006 to 0.6169 from 0.6941 at 0.5806. In any case, outlook will stay bearish as long as 55 W EMA (now at 0.6505) holds.

Daily Pivots: (S1) 1.4183; (P) 1.4210; (R1) 1.4251; More...

Intraday bias in USD/CAD remains neutral and more consolidations could be seen above 1.4150. Further decline is expected with 1.4378 resistance intact. Fall from 1.4791 is seen as a correction to rally from 1.3418. Break of 1.4150 will target 1.3946 cluster support (61.8% retracement of 1.3418 to 1.4791 at 1.3942).

In the bigger picture, long term up trend is tentatively seen as resuming with prior breach of 1.4667/89 key resistance zone (2020/2015 highs). Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. This will remain the favored case as long as 1.3976 resistance turned support holds (2022 high), even in case of deep pullback.

Daily Pivots: (S1) 0.9370; (P) 0.9403; (R1) 0.9425; More....

Intraday bias in EUR/CHF stays neutral as range trading continues. On the downside, firm break of 0.9359 will revive the case that choppy rise from 0.9204 is merely a correction and has completed. Deeper fall should then be seen back to retest 0.9204 low. However, firm break of 0.9516 and sustained trading above 0.9481 fibonacci level will carry larger bullish implication and extend the rise from 0.9204.

In the bigger picture, sustained trading above 38.2% retracement of 0.9928 to 0.9204 at 0.9481 should confirm that whole fall from 0.9928 has completed at 0.9204. Further rally should then be seen back to 61.8% retracement at 0.9651 and above. However, another rejection by 0.9481 will keep outlook bearish for extending larger down trend through 0.9204 at a later stage.

Daily Pivots: (S1) 187.51; (P) 189.22; (R1) 190.30; More...

Intraday bias in GBP/JPY remains neutral for the moment. Risk will be mildly on the downside as long as 193.04 resistance holds. On the downside, firm break of 187.04 will extend the fall from 199.79 towards 180.00 support.

In the bigger picture, price actions from 208.09 are seen as a correction to rally from 123.94 (2020 low). Strong support should be seen from 38.2% retracement of 123.94 to 208.09 at 175.94 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction.

Daily Pivots: (S1) 155.27; (P) 156.74; (R1) 157.67; More...

Intraday bias in EUR/JPY remains neutral for the moment. On the downside, firm break of 155.72 will be a strong sign that whole fall from 175.41 is resuming. Retest of 154.40 support should be seen next and firm break there should confirm.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). Strong support should be seen from 38.2% retracement of 114.42 to 175.41 at 152.11 to contain downside. However, sustained break of 152.11 will bring deeper fall even still as a correction. Next target will be 100% projection of 175.41 to 154.40 from 166.67 at 145.66.

Daily Pivots: (S1) 1.6402; (P) 1.6436; (R1) 1.6492; More...

Intraday bias in EUR/AUD remains neutral for the moment. Corrective pattern from 1.6800 could still extend and break of 1.6355 will target 61.8% retracement of 1.5963 to 1.6800 at 1.6283. On the upside, firm break of 1.6631 resistance will suggest that the correction has likely completed, and rise from 1.5963 is finally ready to resume.

In the bigger picture, with 1.5996 key support (2024 low) intact, larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 0.8266; (P) 0.8279; (R1) 0.8293; More...

Intraday bias in EUR/GBP is turned neutral first with current recovery. Another fall is expected as long as 0.8308 minor resistance holds. Below 0.8264 will resume the whole decline from 0.8472 to retest 0.8221 low. Nevertheless, firm break of 0.8308 minor resistance will turn bias back to the upside for stronger rebound to 0.8376 resistance instead.

In the bigger picture, the medium term down trend remains intact with EUR/GBP staying well inside the falling channel. Prior rejection by 55 W EMA (now at 0.8431) also affirm bearishness. Decisive break of 0.8201/8221 support zone will resume whole down trend from 0.9449 (2020 high) and carry larger bearish implications.

Euro opened the week slightly higher against all major currencies, as traders reacted positively to the German election results. Conservatives CDU/CSU secured victory, setting Friedrich Merz up as the next chancellor. However, Euro's gains remain limited, as uncertainty over coalition talks persists, with negotiations potentially dragging on until Easter.

While Merz’s CDU/CSU emerged as the largest party, winning 28.5% of the vote, it was far from a decisive mandate, leaving him in a weakened position for coalition negotiations.

The far-right AfD secured second place, marking its best-ever result. However, Merz has ruled out coalition talks with AfD, meaning a broader, more traditional coalition will be needed.

It remains unclear whether Merz will require one or two partners to form a government. Given the complexity of the negotiations, analysts expect haggling could last until Easter, prolonging political uncertainty in Europe's largest economy.

For now, Euro is the best-performing currency of the day so far, followed by Aussie and Sterling. On the other hand, Dollar is the weakest performer, followed by Yen and Swiss Franc, indicating a mild risk-on market sentiment. Kiwi and Loonie are trading in the middle of the pack.

Looking ahead, market focus will shift back to economic data, particularly Tuesday's US Conference Board consumer confidence report. While markets still weighing tariff concerns and geopolitics, the US consumer outlook could be more important for setting the near-term tone for forex markets and broader risk sentiment.

Technically, EUR/USD's outlook is unchanged with today's mild bounce. Price actions from 1.0176 are seen as a corrective pattern only. Fall from 1.1213 is expected to continue as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. Break of 1.0400 support will suggest that the correction has completed and bring retest of 1.0176 low.

In Asia, at the time of writing, Hong Kong HSI is down -0.55%. China Shanghai SSE is down -0.11%. Singapore Strait Times is up 0.31%. Japan is on holiday.

New Zealand retail sales rises 0.9% qoq in Q4, ex-auto sales jumps 1.4% qoq

New Zealand's Q4 retail sales volume rose 0.9% qoq to NZD 25B, surpassing expectations of 0.6% qoq. Excluding autos, sales jumped 1.4% qoq, well above the 0.3% qoq forecast.

Sales volume growth was broad-based, with 10 of 15 industries posting gains. The largest increases came from electrical and electronic goods (+5.1%), department stores (+4.2%), and accommodation (+7.6%). Meanwhile, food and beverage services rose 2.3%, but pharmaceutical and other retailing declined -3.4%.

Retail sales value climbed 1.4% qoq to NZD 30B, with 11 of 15 sectors reporting gains. Price effects were evident, particularly in accommodation (+11%), food and beverage services (+3.3%), and department stores (+2.9%).

ECB’s Escriva advises caution; Villeroy sees rate at 2% by summer

Spanish ECB Governing Council member Jose Luis Escriva stressed caution in an interview published Sunday, highlighting uncertainty in the economic outlook. He stated that it is "very difficult to gauge the impact of events that are unfolding", emphasizing the need to "wait for doubts around certain issues to be cleared" before making monetary policy adjustments.

Escriva reinforced ECB’s meeting-by-meeting approach, stating there “isn’t a pre-established future path for interest rates.” He also noted that Eurozone demand remains weak, with "notable differences among countries."

Separately, French ECB Governing Council member Francois Villeroy de Galhau offered a more direct outlook on interest rate, stating that “seen from where we are today, we could be at 2% by the coming summer.”

US consumer confidence, ECB accounts, and inflation reads

US consumers came into sharp focus last week, with deteriorating U of Michigan sentiment triggering a late selloff in stock markets. This week, the Conference Board’s consumer confidence report will be a key data point, as investors will be watching for any further signs of consumer strain.

Additionally, the personal income and outlays report, including PCE inflation data, will be closely watched—particularly the core inflation trend, which is Fed’s preferred gauge of price pressures. While Fed is unlikely to cut rates at its next two meetings barring a major shock, traders remain divided between June and July for the first rate cut, making incoming data critical in shaping expectations.

In Europe, ECB’s meeting accounts will be a major focus, though they are unlikely to change the bank’s current message of gradual easing. German Ifo business climate index and Gfk consumer sentiment survey will also provide insights into economic conditions in Europe’s largest economy. However, these releases will likely take a backseat to the outcome of Germany’s weekend elections, as coalition government negotiations could have a more immediate impact on market sentiment.

Beyond the US and Europe, a range of regional economic data will also be in focus, including Australia’s monthly CPI, Japan’s Tokyo CPI, and Swiss GDP.

While Australian monthly CPI release lacks the depth of the quarterly inflation report that the RBA relies on for policy decisions, it will still offer important clues on inflation trends and could influence rate-cut expectations.

Similarly, Japan’s Tokyo CPI serves as a leading indicator for the broader national inflation trend. However, it remains insufficient to shift BoJ policy stance, as the central bank is expected to wait for the results of the Shunto wage negotiations before considering its next move.

Here are some highlights for the week:

• Monday: New Zealand retail sales; Germany Ifo business climate; Eurozone CPI final.
• Tuesday: Japan corporate service price index; Germany GDP final; US house price index, consumer confidence.
• Wednesday: Australia monthly CPI; Germany Gfk consumer sentiment; US new home sales.
• Thursday: New Zealand ANZ business confidence; Swiss GDP; Eurozone M3 monthly supply; ECB meeting accounts; US GDP revision, jobless claims, durable goods orders, pending home sales.
• Friday: Japan Tokyo CPI, industrial production, retail sales; Germany import prices, retail sales, unemployment, CPI flash; Swiss retail sales, KOF economic barometer; Canada GDP; US personal income and spending, PCE inflation, goods trade balance.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8266; (P) 0.8279; (R1) 0.8293; More...

Intraday bias in EUR/GBP is turned neutral first with current recovery. Another fall is expected as long as 0.8308 minor resistance holds. Below 0.8264 will resume the whole decline from 0.8472 to retest 0.8221 low. Nevertheless, firm break of 0.8308 minor resistance will turn bias back to the upside for stronger rebound to 0.8376 resistance instead.

In the bigger picture, the medium term down trend remains intact with EUR/GBP staying well inside the falling channel. Prior rejection by 55 W EMA (now at 0.8431) also affirm bearishness. Decisive break of 0.8201/8221 support zone will resume whole down trend from 0.9449 (2020 high) and carry larger bearish implications.