Sample Category Title

• GBP/USD creates bullish candlestick near 1.2100.
• Technical signals reflect weakening selling appetite.

GBP/USD slumped to a 14-month low of 1.2098 on Monday following five devastating weeks, but a hopeful green doji candlestick emerged at the close of the day, signaling that the bears might be losing their grip.

The RSI and the stochastic oscillator are both flatlining near their oversold levels, and the price itself has dipped below the lower Bollinger band. These signs suggest that the recent bearish cycle might have hit a bottom, though traders will likely want confirmation before committing to buying positions.

The 1.2245 level is currently capping bullish momentum, while slightly higher, the 1.2300 number represents the 50% Fibonacci retracement of the sharp 2021-2022 downtrend and could be symbolic. A move above the latter could allow more increases toward the crucial 20-day simple moving average (SMA) at 1.2450, which rejected the bulls twice recently. From there, the bulls could fight for a close above the tentative resistance trendline from September seen at 1.2550. A successful penetration higher could attract new buyers, delivering an acceleration toward the 1.2700 area,if the 50-day SMA gives way as well.

In the opposite case where the price closes below 1.2165, the spotlight will turn again to the 1.2100 level and if this proves easy to breach this time, the bears could target the October 2023 low of 1.2035 and the 1.2000 psychological number. Additional losses from there could target the 38.2% Fibonacci level of 1.1835 or even the 2023 base around 1.1800.

Overall, GBP/USD is showing signs of a potential recovery after its steep fall, particularly if it manages to break above the 1.2235-1.2300 range. For a more sustained upward move and a brighter outlook, the pair would need to establish a solid base above 1.2550, paving the way for a longer-term bullish trend.

On January 6, while analysing the XBR/USD chart, we:

→ constructed an upward structure using blue trend lines;

→ highlighted the potential for a pullback after the formation of peaks A and B around the $76.20 level.

What happened next?

As shown on the XBR/USD chart, Brent oil prices retreated on January 8 to the lower blue line (point C), where bulls successfully resumed the uptrend, pushing the price close to $81—a level last seen in early October 2024, near a key peak (not shown on the chart).

According to The Wall Street Journal:

→ Demand was supported by sanctions imposed by the outgoing Biden administration on Russia’s oil industry.

→ Jonathan Ng, an OCBC Asean economist, noted that the price range of $78–83 appears to be a “relatively comfortable zone” for Brent oil in the near term.

From a technical analysis perspective, the XBR/USD chart displays price action resembling a rounding top pattern. Therefore, it’s possible that after the bullish momentum triggered by the sanctions, another pullback towards the blue channel could occur in the short term.

Going forward, much will depend on the political and trade policies adopted by the incoming Trump administration.

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Daily Pivots: (S1) 1.4354; (P) 1.4401; (R1) 1.4425; More...

USD/CAD dips ahead of 1.4466 resistance as consolidations pattern from there extends. Intraday bias remains neutral first. Break of 1.4279 support will bring further correction. But downside should be contained by 55 D EMA (now at 1.4166) to bring rebound. On the upside, break of 1.4466 will resume larger up trend to 1.4667/89 long term resistance zone.

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

Speculation surrounding the incoming US administration's tariff strategy continues to rattle global markets. Reports suggest that President-elect Donald Trump’s economic team is exploring a phased approach to tariffs, gradually increasing rates by 2% to 5% per month. This tactic, if adopted, would utilize executive powers under the International Emergency Economic Powers Act to maximize negotiation leverage while reducing immediate inflation risks. However, the proposal is still in its infancy and has not yet even reached Trump for approval, leaving markets to grapple with the uncertainty.

The potential for a measured tariff escalation has brought mixed reactions across asset classes. US equities displayed divergence overnight, with DOW rallying on diminished fears of abrupt trade disruptions. In contrast, NASDAQ underperformed, partly as investors rotated out of tech-heavy growth stocks. Meanwhile, Asian markets presented a fragmented picture—Hong Kong and China posted robust gains, buoyed by optimism surrounding trade resilience, while Japan’s Nikkei suffered steep losses.

In the currency markets, Dollar is taking a breather as it consolidates recent gains. The greenback has been the weakest performer of the week so far, as traders await critical US economic data, including today’s PPI and tomorrow’s CPI. Sterling remains under significant pressure, ranked as the second weakest currency, weighed down by ongoing fiscal concerns in the UK. The Swiss Franc is close behind as third worst.

Conversely, commodity-linked currencies are leading the charge. Kiwi is the top performer, benefiting from improved risk sentiment, followed by Aussie and Loonie. Yen and Euro are mixed in middle positions.

Technically, EUR/GBP is worth some attention in the coming days. Rebound from 0.8221 is starting to lose momentum ahead of 0.8446 near term resistance, as seen in 4H MACD. Break of 0.8364 minor support will indicate short term toping and bias deeper pull back. Such a development could hint at stabilization in sentiment following the recent fiscal "mini-crisis". The relative medium term strength of Sterling against Euro would remain intact after near term jitters.

BoJ’s Himino signals rate hike possible in upcoming meeting

In remarks today, BoJ Deputy Governor Ryozo Himino signaled that a rate hike remains a tangible possibility at the upcoming policy meeting. He said the board "will discuss whether to raise interest rates next week, base its decision on thee projections detailed in the quarterly outlook report.

Himino stated, “When the appropriate timing comes, we must shift policy without delay, as the effect of monetary policy is said to show up with a lag of one to one-and-a-half years.”

The Deputy Governor clarified that BoJ does not rely on a predefined "checklist" for rate decisions. Instead, the board intends to thoroughly analyze the economic outlook and inflation expectations to determine the next steps.

Australian Westpac consumer sentiment dips again, RBA easing unlikely before May

Australia’s Westpac Consumer Sentiment fell -0.7% mom in January, settling at 92.1, reflecting a second consecutive decline. However, Westpac noted a divergence within the data: current conditions sub-indexes weakened, while forward-looking measures were flat or showed slight gains.

RBA faces a mixed picture as it prepares for its next policy meeting on February 17–18. While the central bank appears increasingly confident about bringing inflation back within its 2–3% target range, labor market “stopped easing” in the latter half of 2024 and subdued consumer surveys highlighted “mixed signals”.

According to Westpac, RBA is likely to keep interest rates unchanged in February, with an easing cycle more probable to commence in May.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4354; (P) 1.4401; (R1) 1.4425; More...

USD/CAD dips ahead of 1.4466 resistance as consolidations pattern from there extends. Intraday bias remains neutral first. Break of 1.4279 support will bring further correction. But downside should be contained by 55 D EMA (now at 1.4166) to bring rebound. On the upside, break of 1.4466 will resume larger up trend to 1.4667/89 long term resistance zone.

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

In remarks today, BoJ Deputy Governor Ryozo Himino signaled that a rate hike remains a tangible possibility at the upcoming policy meeting. He said the board "will discuss whether to raise interest rates next week, base its decision on thee projections detailed in the quarterly outlook report.

Himino stated, “When the appropriate timing comes, we must shift policy without delay, as the effect of monetary policy is said to show up with a lag of one to one-and-a-half years.”

The Deputy Governor clarified that BoJ does not rely on a predefined "checklist" for rate decisions. Instead, the board intends to thoroughly analyze the economic outlook and inflation expectations to determine the next steps.

Australia’s Westpac Consumer Sentiment fell -0.7% mom in January, settling at 92.1, reflecting a second consecutive decline. However, Westpac noted a divergence within the data: current conditions sub-indexes weakened, while forward-looking measures were flat or showed slight gains.

RBA faces a mixed picture as it prepares for its next policy meeting on February 17–18. While the central bank appears increasingly confident about bringing inflation back within its 2–3% target range, labor market "stopped easing" in the latter half of 2024 and subdued consumer surveys highlighted "mixed signals".

According to Westpac, RBA is likely to keep interest rates unchanged in February, with an easing cycle more probable to commence in May.

Full Australia Westpac consumer sentiment release here.

Markets

Friday’s stellar payrolls and possible consequences for the direction of future US (and global) monetary policy continued to set the tone at the start of this trading week amid an empty eco calendar, tightening financial conditions. US Treasuries lost some further ground in Asian trading and stuck near the intraday lows for most of the European and US session. In the end, US yields added up to 2 bps across the curve. Technical resistance levels came into play at longer tenors. The US dollar faced similar fatigue, though not without setting a fresh correction low at EUR/USD 1.0178. The pair nevertheless ended the session above key support (1.0201; 62% retracement on 2022-2023 comeback). Both European and US stock markets finished off the intraday lows with the Brent crude rally topping off around $81/b for now.

Market settings improved further overnight on talk that members of president-elect Trump’s incoming economic team are discussing a gradual approach in lifting tariffs aimed at boosting negotiating leverage while avoiding a spike in inflation. One idea would be to gradually increase tariffs by 2% to 5% each month instead of installing the floated minimum tariff of 10% to 20% on all imported goods and 60% or higher on shipments from China by stealth. Last week, the Washington Post ran an article suggesting that tariffs would only apply to critical sectors. Markets rallied in response, but rapidly retraced after president-elect Trump called the report false. Given that the economic team didn’t pitch the idea with Trump himself and with comments on social media expected within the next couple of hours, it’d be fair to err on the side of caution for now when it comes to this kind of stories. In general, we do believe that the worst of the tariff treat is by and large discounted, suggesting asymmetric risks when they will eventually be applied especially if watered-down. From next week on, the uncertainty factor could rapidly shrink as Trump finally takes office. Today’s eco agenda is interesting with US producer price inflation as amuse-gueule ahead of tomorrow’s CPI numbers. An upward surprise could bring back Friday’s chilly market vibes. It’s too soon to fight the reigning market trends.

News & Views

Consumer inflation expectations for the year ahead were at an unchanged 3%, the NY Fed’s December survey showed yesterday. Those for the 3-yr and 5-yr horizon picked up to 3% (from 2.6%) and declined to 2.7% (from 2.9%) respectively. Home price growth stayed firmly within the 3-3.3% range in place since August 2023 by increasing 0.1 ppts to 3.1% last month. Turning to the labor market, US households believe earnings growth to slow down to its 12-month trailing average of 2.8% in the upcoming year. The probability of a higher unemployment rate over the same time frame fell to 34.6%. Respondents saw the smallest chance since January 2024 of losing their job in the next 12 months (11.9%) while simultaneously believing that, if it were to happen, finding a new one would be less easy (probability fell sharply from 54.1% to 50.2%). US households expect income growth to decline 0.3 ppts to 2.8%, the lowest since May 2021 but above the pre-pandemic level. Spending growth would accelerate to 4.8% nevertheless. Fewer reported being worse off and more reported being better off in terms of their current financial situations. The year-ahead expectations were more or less unchanged.

The head of the Brazilian central bank’s economic policy department Diogo Guillen said the fiscal outlook of its country still requires attention, despite having met the 2024 primary budget target. The government had set a zero-deficit goal (+/- 0.25 ppts tolerance range on either side). But Guillen said the uncertainties related to achieving the fiscal targets in the next years remain. Fiscal deterioration was perhaps the key reason for the central bank’s decisive 100 bps rate hike and strong guidance of follow-up moves on the next meetings through March. Looking ahead, Guillen said it’s important to assess the impact of upcoming US president Trump’s policies on the economy, exchange rate, expectations and inflation dynamics. Since mid-September when Trump made his comeback in the election polls and combined with the domestic developments, the Brazilian real lost sharply against the USD. USD/BRL hit a record high around 6.3 end-December before paring some gains to 6.09 currently.

The bond selloff continues. The US 2-year yield on Monday spiked to 4.42% - the highest level since July – before easing, the US 10-year yield hit 4.80% for the first time in more than a year before easing. As such, the bond yields in the US on average returned to their pre-subprime crisis levels and bond world’s heavyweights expect the 10-year yield to reach the 5% mark sooner rather than later. In Europe, the German 10-year yield advanced to the highest levels since summer and the French 10-year yield spiked past 3.45%. In Japan, the Japanese 10-year yield jumped to 1.25% - a level that hasn’t been seen since 2011.

The global bond selloff is fueled by concerns over soaring debt levels leading to political turmoil and uncertainty in developed economies. This is compounded by major central banks' struggles to bring inflation down to their 2% target, amid various economic and political developments that could trigger a reversal in consumer prices worldwide. Consequently, the yields are rising and the expectations of further rate cuts from some major central banks are melting putting equities under pressure. The S&P500 plunged below the 100-DMA yesterday to the level it ended on November 5th just before Donald Trump’s nomination as the next US president. The selloff below the 100-DMA attracted some dip buying and led to a meagre 0.16% gain at the end of the session, but the Trump gains are now fully wiped away. Nasdaq 100 extended losses below the 50-DMA and is aiming to test the 100-DMA to the downside as well. The Dow Jones, however, is better bid near the levels it was trading when Trump got elected, supported by a rally in energy stocks on the back of rising energy prices and a rebound in financial stocks ahead of the upcoming bank earnings announcements. The American mid caps are near the Trump election levels while the small caps are already below. In Europe, the Stoxx 600 dived below its 50-DMA, while the FTSE 100 slid despite a rise in energy and bank stocks.

Are optimistic market bets already out of the window?

For the stock market rally to broaden beyond the tech companies and beyond the US, the yields must come down and let the lower borrowing costs benefit to more cyclical and non-tech pockets of the market. But the yields’ positive direction today puts that forecast at risk. If yields continue to climb and remain high, the rally is unlikely to extend beyond the tech sector, and even within tech, it could falter due to already high valuations. Magnificent 7 companies can not afford bad press at the current levels, but the news on the wire weren’t great yesterday. ‘Information’ reported that Nvidia’s customers face delays in getting their chips and have even cut some orders. The stock fell 2% yesterday. Apple’s iPhone sales dropped 5% globally this year, the Chinese rivals increase their market share, the AI applications are not coming fast enough and the upcoming trade war between the US – and the rest of the world – is not painting a rosy picture for the iPhone maker. Apple shares traded below the 50-DMA for the second day and tipped a toe below the 100-DMA yesterday.

Data sensitivity to rise

Markets’ sensitivity to major economic data will likely rise as policy uncertainties mount and appetite weakens. Due today, the US will release its latest PPI numbers, and the headline PPI may have risen from 3% to 3.4% in December and core PPI is seen rising from 3.4% to 3.7% during the same month. Rising price pressures are not good news for the Federal Reserve (Fed) doves. Stronger-than-expected inflation figures could further accelerate the US treasury selloff and support the US dollar.

The EURUSD remains under a decent selling pressure below the 1.03 mark, while Cable is in a freefall mode on another round of appetite loss in the government’s fiscal plans and amid rising bets for a further selloff. Positions in the options market suggest that some investors are betting that sterling could slip to 1.12 level against the US dollar if Rachel Reeves can’t restore confidence rapidly.

This being said, there is an increasing amount of triggers for the contrarians to join the game, slow and eventually reverse the dollar rally. Hedge funds, for example, have increased their bullish US dollar positions to the highest levels since 2019. Meanwhile, net speculative shorts in the euro appear stretched. Therefore, we could see some major currencies regain field against the dollar. But the data will say the last word for price moves.

In focus today

From the US, the December PPI data will provide markets with an early sense of what to expect when the key December CPI is released tomorrow afternoon. We will also keep an eye on the NFIB's December small business optimism index after a notable uptick in November following the election results. In the evening, Kansas City Fed's Schmid (voter) and NY Fed's Williams (voter) will be on the wires.

In Sweden, Riksbank Governor Aino Bunge is participating in a seminar at the Stockholm Chamber of Commerce where she will discuss the outlook for the Swedish and Global economies. There may be the odd snippet of monetary policy discussions as well.

Economic and market news

What happened overnight

In Sweden, the house price data from this morning reveals that the Swedish housing market concluded 2024 with decreasing prices in December, showing -1.1% m/m for condominiums and -0.8% for houses. However, for the full year 2024, we saw an uptick of 5.9% and 5.0% y/y, respectively, fully in line with our in-house housing indicator.

Progress in Gaza ceasefire talks: Negotiations for a ceasefire in Gaza have taken a step forward as outgoing US president Biden said that parties were on the brink of reaching an agreement (see Reuters). While the deal would include the release of 33 hostages and phased withdrawal of Israeli troops, it reportedly still lacks concrete plan for the future governance of Gaza.

FX top trades 2025: This morning, we published our annual FX Top Trades for 2025, in which we discuss both tactical and strategic drivers of currency markets with 8 trade ideas.

What happened yesterday

The continuous rise in bond yields slowed down yesterday amid quiet macro data calendar. Looking ahead, we still expect yields to move lower over the coming year in our updated forecasts out yesterday. We anticipate an ECB depo rate of 1.5% by September and a Fed Funds target of 3-3.25% by March 2026. Our 12-month forecast for the 10Y US Treasury yield remains at 4.20%, but we have increased the 10Y Bund target from 2.00% to 2.25%. See Yield Outlook - The Pendulum has swung too far, 13 January.

Equities: Global equities were lower yesterday; however, sentiment improved significantly during the day, with most US indices ending higher. This is a classic example of how a negative reaction to a strong labour market report is typically not a long-lasting response for investors. This is also why we emphasise that the macro data we have received lately from the US has been very positive from an equity perspective, despite equities not having performed particularly well. That said, it is important to note that it was not just cyclicals making a strong comeback yesterday. Some growth stocks, which are sensitive to yields, are attracting increased awareness from investors. In the US yesterday, the Dow rose by 0.9%, the S&P 500 increased by 0.2%, the Nasdaq fell by 0.4%, and the Russell 2000 rose by 0.2%. Most Asian markets are higher this morning, with the exception of Japan. Both European and US futures are higher this morning.

FI: With very little news to trade on, markets yesterday extended the upward move in yields following Friday's super strong NFP figures. The 10Y US Treasury yield rose a couple of basis points, getting closer to the 4.80% mark, which added renewed pressure on risky assets. Long-end EGB yields also edged up with peripherals such as Italy underperforming. In the inflation space, yesterday's US announcement of aggressive sanctions on Russian oil added to the upward trend in energy prices. For the first time since October, Brent closed above 80 USD/barrel.

FX: Yesterday's session was characterised by a slight rally in treasuries, a stabilisation in risk appetite and a further rally in oil. This lead oil FX incl. NOK to be among the outperformers while the USD saw a slight setback with EUR/USD rebounding back to the 1.0250 level on tighter rate spreads. EUR/GBP also edged lower during the US hours while USD/JPY moved sideways. Finally, EUR/SEK moved back above 11.50.

Key Highlights

• GBP/USD declined heavily below the 1.2350 and 1.2250 support levels.
• A key bearish trend line is forming with resistance at 1.2480 on the 4-hour chart.
• EUR/USD extended losses below the 1.0220 support.
• Gold prices climbed above the $2,650 and $2,660 levels.

GBP/USD Technical Analysis

The British Pound remained in a bearish zone below 1.2500 against the US Dollar. GBP/USD started another decline below the 1.2350 and 1.2250 levels.

Looking at the 4-hour chart, the pair settled below the 1.2200 level, the 100 simple moving average (red, 4-hour), and the 200 simple moving average (green, 4-hour). The pair tested the 1.2100 zone and is currently consolidating losses.

On the upside, the pair is facing hurdles near the 1.2180 level. The first major resistance is near the 1.2210 level. The next major resistance is near the 1.2280 level.

A close above the 1.2280 level could set the tone for another increase. In the stated case, the pair could rise toward the 1.2350 resistance. The main hurdle could be a key bearish trend line with resistance at 1.2480 on the same chart.

On the downside, immediate support sits near the 1.2080 level. The next key support sits near the 1.2050 level. Any more losses could send the pair toward the 1.2000 level.

Looking at EUR/USD, the pair started another decline and the bears were able to push the pair below the 1.0220 support.

Upcoming Economic Events:

• Fed's Schmid speech.