Sample Category Title

Daily Pivots: (S1) 1.0446; (P) 1.0475; (R1) 1.0532; More...

EUR/USD is still bounded in consolidation from 1.0176 and intraday bias stays neutral. Stronger rebound might be seen but outlook will remain bearish as long as 38.2% retracement of 1.1213 to 1.0176 at 1.0572 holds. On the downside, break of 1.0176 will resume whole fall from 1.1213. However, decisive break of 1.0572 will raise the chance of reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, immediate focus is on 61.8 retracement of 0.9534 (2022 low) to 1.1274 (2024 high) at 1.0199. Sustained break there will solidify the case of medium term bearish trend reversal, and pave the way back to 0.9534. However, reversal from 1.0199 will argue that price actions from 1.1274 are merely a corrective pattern, and has already completed.

Daily Pivots: (S1) 148.85; (P) 150.17; (R1) 150.93; More...

Intraday bias in USD/JPY is turned neutral first with current recovery. Some consolidations might be seen, but outlook will stay bearish as long as 154.79 resistance holds. Fall from 158.86 is currently seen as the third leg of the pattern from 161.94 high. Break of 149.26 will target 61.8% retracement of 139.57 to 158.86 at 146.32 next.

In the bigger picture, price actions from 161.94 are seen as a corrective pattern to rise from 102.58 (2021 low). In case of another fall, strong support should be seen from 38.2% retracement of 102.58 to 161.94 at 139.26 to bring rebound. However, sustained break of 139.26 would open up deeper medium term decline to 61.8% retracement at 125.25.

Daily Pivots: (S1) 1.2552; (P) 1.2597; (R1) 1.2631; More...

GBP/USD's rally from 1.2099 extended higher and intraday bias is now on the upside for 1.2810 resistance. Firm break there should target 61.8% retracement of 1.3433 to 1.2099 at 1.2923 next. On the downside, below 1.2562 minor support will turn intraday bias neutral again first. But another rise will remain in favor as long as 1.2331 support holds, in case of retreat.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433 (2024 high), and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move. However, firm break of 1.2810 will dampen this bearish view and bring retest of 1.3433 high instead.

Daily Pivots: (S1) 0.8953; (P) 0.9003; (R1) 0.9031; More…

USD/CHF is still bounded in consolidation from 0.9200 and intraday bias remains neutral. While deeper pull back might be seen, outlook will stay mildly bullish as long as 38.2% retracement of 0.8374 to 0.9200 at 0.8884 holds. On the upside, firm break of 0.9223 key resistance will carry larger bullish implication. 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.

Daily Pivots: (S1) 0.6351; (P) 0.6378; (R1) 0.6428; More...

Immediate focus is now on 38.2% retracement of 0.6941 to 0.6087 at 0.6413 as rebound from 0.6087 resumed through 0.6373. Strong resistance is expected from 0.6413 to complete the corrective rise. Break of 0.6327 minor support will turn bias 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 just 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 0.6504) holds.

UK retail sales volumes surged 1.7% mom in January, far exceeding market expectations of 0.3% m/m, marking a strong recovery from December’s -0.6% mom decline.

This sharp rebound pushed monthly sales index levels to their highest since August 2024.

However, the broader trend remains mixed. Over the three months to January 2025, sales volumes declined by -0.6% compared to the previous three months. On a year-over-year basis, sales volumes rose 1.4%, showing some improvement in spending patterns compared to early 2024.

Despite the monthly rebound, UK retail sales volumes remain -1.3% below pre-pandemic levels from February 2020.

Full UK retail sales release here.

In focus today

The key PMI index for February is scheduled for release today across most major economies. Our focus will be on the data from the euro area in particular. The rise in euro area manufacturing PMI from 45.1 to 46.6 in January was welcome news after the weak second half of 2024. We expect the February PMIs to show roughly unchanged manufacturing PMI at 46.8 while activity is expected to have continued to rise in the service sector, with services PMI projected at 51.6.

In Denmark, we receive the business sentiment indicator for February. Despite a decrease in sentiment in January, the outlook still pointed towards moderate progress in 2025, with a clear expectation of increased hiring. We also receive payrolls data for December 2024. This data has shown growth throughout 2024, and the business sentiment indicator suggest that this continues in December.

Over the weekend, the German federal election takes place. A key theme is how to revive the ailing economy, meaning the outcome could have substantial implications for future growth. The most likely result of the German election is a coalition between the conservative CDU/CSU and the Social Democrats (SPD) 'Grand Coalition' or the Greens 'Black-Green'. In both cases with CDU's Friedrich Merz as chancellor. We estimate a 50% probability of a reform of the 'debt brake', which could allow an increased structural deficit, potentially boosting GDP growth over the coming years significantly. In absence of a reform, similar fiscal stimulus would likely come from targeted off-budgets funds. For details, see Research Germany - Limited economic impact of German election, 6 February.

Economic and market news

What happened overnight

In Japan, Core Nationwide Consumer Prices Index (CPI) Ex Fresh Food came in slightly above expectations at 3.2% y/y (cons: 3.1% y/y). The increase in CPI is welcome news for further rate hikes, as BoJ Governor Kazuo Ueda mentioned additional rate cuts are contingent on continued improvements in the price outlook. He also indicated that the central bank is prepared to increase its purchase of government bonds if there is a significant rise in long-term interest rates.

What happened yesterday

In Denmark, consumer confidence data for February dropped to -14.5 from -11.7 in January. The weak data is likely due to concerns about the Danish economy and uncertainty surrounding President Trump's impact. Despite this, Danes view their personal finances more positively, thanks to rising real wages, a strong job market, and a stable housing market.

GDP rose by 1.6% in Q4 and 3.6% overall for 2024, largely driven by the pharmaceutical industry. Excluding pharmaceuticals, growth would have been 1.8%, with private consumption up by only 0.9%. Despite modest underlying growth similar to Europe, optimism for 2025 is buoyed by rising real wages and falling interest rates.

In the euro area, consumer confidence rose to -13.6 (cons: -14.0) in February from -14.2 in January. This marks the second month in a row with slightly improving consumer confidence, a positive development following the large decline we saw in November and December. Still, confidence remains significantly lower than in October. Consumers are likely concerned about the potential impact of President Trump's policies on Europe, which could negatively affect consumption this year. This is despite improving economic fundamentals for households, such as rising real incomes, higher employment, and declining interest rates.

Equities: Risk appetite continued to fade on Thursday. Europe started the session higher but came down at the US opening bell. S&P and Stoxx -0.5%, small cap Russell 2000 -0.9%. This takes European equities lower week-to-date for the first time since early January. As noted earlier this week, European outperformance is now consensus which means we need solid macro evidence that Europe is indeed turning around, in order for the rally to continue. In this respect, PMIs later today are crucial. Defensives outperformed cyclicals with health care and utilities in the lead, financed by cyclicals and banks. Chinese equities against the tide this morning with strong Alibaba earnings lifting the Hang Seng index 3%. US futures a notch lower.

FI: Last night, Fed's Kugler was hawkish as she said that downside risks to employment have diminished and that there is 'some way to go' on inflation with upside risks remaining. Today's highlight is the PMIs. We do not expect them to change the March ECB decision, albeit with the positioning ahead of the Q2 and later ECB meetings, we take note on those meetings on strong PMI deviations.

FX: Yesterday saw broad USD weakness across the G10 space despite a risk-off backdrop. EUR/USD edged higher toward 1.05 as markets shift their focus to today's PMI figures. USD/JPY set new YTD lows below 150, with JPY emerging as the clear outperformer in G10 so far this week. EUR/GBP continues to consolidate below 0.83. In the Scandies, EUR/SEK remains well below 11.20, while EUR/NOK edged higher to 11.65.

Short Term Elliott Wave View in Light Crude Oil (CL) suggests the metal ended cycle from 1.16.2025 high. Decline from 1.16.2025 high unfolded as a 5 waves with wave ((i)) ended at 77.87 and wave ((ii)) ended at 79.44. Wave ((iii)) lower ended at 72.38 and wave ((iv)) rally ended at 75.18. Final leg wave ((v)) ended at 70.12 which completed wave A in higher degree.

Oil is now looking to correct cycle from 1.16.2025 high in wave B. Internal subdivision of wave B is unfolding as a zigzag Elliott Wave structure. Up from wave A, wave i ended at 72.07 and pullback in wave ii ended at 70.89. Wave iii higher ended at 73.04 and pullback in wave iv ended at 71.85. Final leg wave v ended at 73.25 which completed wave (i). Due to the 5 swing rally from 2.17.2025, the structure suggests further upside is more likely. Pullback in wave (ii) is in progress to correct cycle from 2.17.2025 low before it resumes higher. Near term, as far as pivot at 70.11 low stays intact, expect dips to find buyers in 3, 7, or 11 swing for further upside.

Light Crude Oil (CL) 60 Minutes Elliott Wave Chart

CL Video

https://www.youtube.com/watch?v=tpEBsY0eqX8

Key insights from the week that was.

As expected, the RBA delivered a 25bp rate cut on Tuesday, bringing the cash rate down to 4.10%. While the Board cited “welcome progress on inflation” as a determinant of the decision, communications were hawkish overall. In particular, the decision statement highlighted the Board’s caution over easing policy “too much too soon”. In the subsequent press conference, Governor Bullock also made an effort to temper expectations, referring to market pricing for another three rate cuts as “far too confident” and “unrealistic”. This path, taken as an assumption for the RBA’s latest forecasts, ultimately sees trimmed mean inflation hold above the mid-point of the target range through to June 2027. Deputy Governor Hauser reiterated these points in an appearance with Bloomberg later in the week, but added that, in a forecast scenario where the cash rate remained unchanged, trimmed mean inflation would instead be projected to undershoot the mid-point of the target range.

Chief Economist Luci Ellis also took time this week to outline the RBA’s perspective on the labour market and its significance for policy. In short, the RBA now anticipates the unemployment rate will hold at 4.2% until June 2027, below the Bank’s current NAIRU estimate of around 4.5%, resulting in annual nominal wages growth between 3.0% and 3.5% over the forecast horizon. With weak productivity, wage growth at this rate is seen as a material risk to inflation holding sustainably at the mid-point of the target range.

We also received updates on wages growth and the labour market. The former came in a touch softer than expected in Q4 at 0.7% as the latter showcased strong growth in employment, trends evident over the past six months. While assessing the true degree of tightness in the labour market in real time is very difficult, we continue to believe, on balance, that the upside risks posed to inflation by the labour market are not as significant as implied by the RBA’s baseline forecasts. We remain of the view therefore that three more rate cuts will be delivered over the next three quarters to a terminal rate of 3.35%. Before the House of Representative Standing Committee on Economics this morning, the Governor and senior staff kept the focus on the key themes above.

Across in New Zealand, the RBNZ announced another 50bp cut, taking cumulative easing to date to 175bps. A further 50bps of easing is expected in coming months, but this should trigger a robust growth recovery through 2025 and 2026. The decision and updated forecasts of the RBNZ are discussed in depth by our New Zealand Economics team in their bulletin.

Further afield, in the US, the January FOMC meeting minutes emphasised that, with appropriate monetary policy, the Committee continue to believe inflation will decelerate to target and the labour market remain balanced. Still, potential changes to US trade and immigration policy means the risks to this baseline view are high. Many participants therefore "emphasized that additional evidence of continued disinflation would be needed to support the view that inflation was returning sustainably to 2 percent". A few also noted "the federal funds rate may not be far above its neutral level", an additional reason for caution.

It will be some time before the new administration's policies are fully known, let alone the implications understood, so these risks are likely to persist. Making this clear, while at Mar-a-Lago, President Donald Trump announced he will impose a tariff on imports of automobiles, pharmaceuticals and semiconductors on 2 April at an initial rate of "25%... and it'll go substantially higher over a course of a year". Reports suggests these tariffs would be in addition to country tariffs already announced.

Canada’s CPI meanwhile accelerated to 1.9%yr in January, reintroducing risks around inflation. The acceleration of median and trimmed mean inflation to 2.7%yr could imply there are underlying pressures. Despite considerable slack in the economy, a pickup in price pressures may require the Bank of Canada to shift their focus from supporting growth to restraining inflation.

Across the pond, UK data pointed to inflation risks remaining present, justifying the Bank of England's 'gradual' approach to monetary easing. Wages (ex. bonus) accelerated to 5.9%yr for December 2024, in line with expectations. This comes despite softer labour market conditions as reported by the ONS. Official LFS data showed a 107k gain in employment, and the official three-month unemployment rate remained unchanged at 4.4%. While it is uncertain how these risks will evolve, one silver-lining comes from the Decision Maker Panel survey which showed that businesses' wage expectations are starting to tick down, and that they are most likely to compress profit margins in response to the increase in the National Insurance contributions rather than raise prices or reduce labour demand. This would help to contain risks to services inflation from wage growth. The BoE also had the January CPI to digest, down 0.1%mth but with base effects lifting the annual figure to 3.0%. A reacceleration in headline inflation was expected by the BoE and is unlikely to prompt a change of approach to policy.

Finally to Japan where Q4 GDP surprised on the upside, rising 2.8%qtr annualised against a consensus expectation of 1.1%qtr. Much of the growth came from an improved trade position – exports rose 1.1%qtr, likely reflecting activity front running tariff risks, while imports decreased 2.1%. There was also a notable 0.5% gain in private investment. Household consumption meanwhile rose 0.1%qtr, leaving it, in level terms, below the recent peak of Q1 2023 and immediately prior to COVID. While data is moving in the right direction, caution is still warranted. Consumer confidence is necessary to sustain a recovery in consumer demand in real terms and justify further rate hikes by the BoJ.

Daily Pivots: (S1) 1.4147; (P) 1.4196; (R1) 1.4225; More...

Intraday bias in USD/CAD remains neutral as consolidations continue above 1.4150. Deeper decline is expected as long as 1.4378 resistance holds. Fall from 1.4791 is correcting whole rise 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 holds (2022 high), even in case of deep pullback.