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Australia’s NAB Business Confidence rose from -7 to -4 in Q4, reflecting a slight improvement in sentiment. However, Business Conditions remained unchanged at 3, as trading conditions slipped from 6 to 5, and profitability turned negative from 0 to -1. Employment conditions as steady at 3.

Forward-looking indicators showed a mixed picture. Expected business conditions for the next three months edged lower, but sentiment for the 12-month horizon improved by five points, aligning with a three-point increase in capital expenditure plans, suggesting firms are cautiously optimistic about long-term prospects.

Cost pressures moderated, with labor cost growth slowing to 0.9% qoq from 1.2%, and purchase costs easing to 0.7% qoq from 1.0%. Retail price growth also softened to 0.5% qoq from 0.7%, though overall product price growth remained stable at 0.4% qoq, indicating ongoing margin pressure despite easing input costs. Wage costs remained the top concern for businesses, while demand constraints and labor shortages persisted as key challenges.

Full Australia quarterly NAB Business Confidence release here.

Chicago Fed President Austan Goolsbee cautioned that a "series of new challenges to the supply chain", ranging from natural disasters to trade policy shifts, could create fresh inflationary pressures.

He highlighted the increasing risks from events like tariffs and trade wars, hurricanes, port closures, geopolitical tensions, and labor strikes, all of which could complicate the inflation outlook in 2025.

A key concern for Fed, Goolsbee noted, is differentiating between inflation stemming from economic overheating versus price increases caused by new tariffs. This distinction will be critical in determining the Fed’s policy response.

Goolsbee also compared the current situation to the 2018 trade tensions under President DonaldTrump, noting that while companies previously shifted production out of China, further adjustments could be more challenging this time. The remaining imports from China may be less replaceable.

"In that case, the impact on inflation might be much larger this time," Goolsbee noted.

Separately, Fed Vice Chair Philip Jefferson signaled that the central bank is in no rush to adjust its policy stance as it assesses the economic impact of the Trump administration’s policy policies on tariffs, immigration, deregulation and taxes. "We can be patient and wait to see the net effect of any policy changes by the current administration," he said.

• Ethereum reversed from the key support level 2200.
• Likely to rise to resistance level 2890.00

Ethereum cryptocurrency recently reversed sharply from the key support level 2200.00, which has been reversing the price since the start of August, as can be seen below.

The upward reversal from the support level 2200.00 created the daily Japanese candlestick reversal pattern Hammer.

Ethereum cryptocurrency can be expected to rise to the next resistance level, 2890.00 (the former monthly low from January).

• Nasdaq-100 reversed from pivotal support level 20800.00
• Likely to rise to resistance level 21800.00

Nasdaq-100 index previously reversed up from strongly the pivotal support level 20800.00, which has been steadily reversing the price from the end of December.

The support level 20800.00 was further strengthened by the lower daily Bollinger Band, support trendline of the daily up channel from September and the 61.8% Fibonacci correction of the upward impulse from October.

Given the clear daily uptrend, Nasdaq-100 index can be expected to rise to the next resistance level 21800.00 (top of the previous waves B and 1).

• NZDUSD reversed from strong support level 0.5500
• Likely to rise to resistance level 0.5800

NZDUSD currency pair recently once again reversed up from the strong support level 0.5500, which stopped the previous sharp weekly downtrend at the end of 2022.

The previous upward reversal from the support level 0.5500 created the daily Japanese candlesticks reversal pattern Morning Star – reflecting the strength of the support level 0.5500.

Given the oversold weekly Stochastic, NZDUSD currency pair can be expected to rise to the next resistance level 0.5800.

The USDCHF pair continues to drop, trading near 0.9030 on Wednesday as the US Dollar weakens for the third day. The US Dollar Index (DXY) remains under pressure while traders look ahead to Friday’s US job report, which could impact the Federal Reserve’s decisions. Meanwhile, tensions between the US and China have increased, with both countries imposing new tariffs on each other’s goods, boosting demand for the safe-haven Swiss Franc. In other news, Switzerland’s manufacturing sector slightly improved in January but fell short of expectations. Investors are now waiting for Switzerland’s unemployment data on Thursday for more insight into the country’s labor market.

AUDCHF – D1 Timeframe

Technically speaking, when the price breaks out of a consolidation pattern, it often returns to the last broken trendline for a retest. In the case of AUDCHF, on the daily timeframe chart, we see the price currently reaching the trendline resistance. At the moment, the trendline itself overlaps the rally-base-drop of an SBR pattern. This gives the initial basis for bearish intervention.

AUDCHF – H4 Timeframe

The lower timeframe reveals more details regarding the highlighted supply zone on the 4-hour timeframe chart of AUDCHF, with the 76% region of the Fibonacci retracement tool further confirming the likelihood of a bearish outcome. When you compare the lower timeframe condition to the higher price action, the sentiment settles in favor of the bears.

Analyst’s Expectations:

• Direction: Bearish
• Target: 0.56075
• Invalidation: 0.57313

The ISM Services index fell 1.2 points to 52.8 in January, slightly short of the 54.0 consensus was expecting. However, fourteen industries out of eighteen reported growth, up from nine in December and back in line with November.

Business activity tumbled last month, falling 3.5 points to 54.5, more than giving back last month's improvement and registering its lowest level since August. New order growth also slowed (51.3 vs. 54.4 in December) and, apart from a contraction in June 2024, registering its weakest reading in two years.

The employment sub-index ticked up 52.3, suggesting that payrolls continued to expand in January.

The prices paid sub-component fell sharply (-4.0 points to 60.4). However, when excluding the jump last month, the index is at its highest level since January of last year, suggesting growing price pressures.

Key Implications

Some give back in the services sector to start 2025, but not a bad report on the whole. The share of industries expanding rose last month and employment continued to tick higher. The waning momentum in new demand is a fly in the ointment, but the report cited poor weather conditions as impacting business in January, so there may be room for recovery next month.

The outlook for the rest of the year is clouded by uncertainty. Momentum in the services sector has carried through to the start of 2025, but the prospect of tariffs on inputs continues to loom. Another leg higher in input prices, coupled with a still tight labor market could work to sustain inflationary pressure. All eyes now turn to Friday's update on the labor market.

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Navigating the Signal Landscape – Risks, Due Diligence, and the Path to Success

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Conclusion:

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• USD/JPY is testing a crucial support level.
• BOJ rate hike expectations are growing on the back of strong data.
• Key support levels are at 151.53 and 150.00, while resistance levels are at 153.91, 155.00, and 156.27.

USD/JPY has found some support following a 150 pip drop during the Asian and early European sessions. The pair has found some support at a key confluence level where both the 100 and 200-day MA rests.

Will we get a break or bounce off this key level?

Japanese PMIs and Fundamental Backdrop

After Tokyo’s core CPI hit 2.5%, the BOJ raised interest rates by 25bps and hinted at more hikes to curb Yen weakness against the Dollar. Since then the Yen has made a steady move higher with another positive coming from the services PMI data which kept growing in January, hitting its highest point since September 2024 and staying in the growth zone for three months in a row. Employment and prices charged also went up, showing strong job conditions and steady inflation ahead.

The Yens renewed strength today however came courtesy of strong wage growth data which further supports Bank of Japan rate hikes moving forward.

Workers’ cash earnings went up more than expected in December, and November’s numbers were revised higher. If Shunto wage talks match last year’s strong results, there is a growing belief that the Bank of Japan might raise interest rates by 25 basis points as early as May.

Economic Data Ahead

The major data release left for this week will come on Friday with the US NFP jobs report and average earnings data.

There is a possibility that the US jobs market may start to tighten if companies see uncertainties from potential trade wars continue to grow. For now though I do not expect any significant surprise from the NFP data on Friday.

Technical Analysis USD/JPY

From a technical standpoint, USD/JPY is currently trading at a key confluence level where both the 100 and 200-day MAs rest.

A daily candle close below this level could be a precursor for further downside which is further enforced by the growing belief in further rate hikes from the BoJ.

USD/JPY Daily Chart, February 5, 2025

Source: TradingView (click to enlarge)

Dropping down to the four-hour chart (H4) and there is further support which rests at 151.53 before the psychological 150.00 handle comes into focus.

There are some concerns here for bears with the RSI 14-day on the H4 chart in oversold territory.

Also from a price action perspective, the selloff was quick and does leave the pair with a possibility of a short term pullback toward immediate resistance at 153.911 before the 155.00 handle comes back into view.

USD/JPY Four-Hour (H4) Chart, February 5, 2025

Source: TradingView (click to enlarge)

Support

• 151.53
• 150.00 (psychological level)
• 148.64

Resistance

• 153.91
• 155.00
• 156.27