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Market movers today

The main event today is the January ECB meeting. Attention from financial markets will be on the timing of when forward guidance will be revisited on the back of the ECB's December account, which stated that the forward guidance 'could be revisited early in the coming year [2018]'. We believe these changes will relate to QE and not the forward guidance on policy rate early in the year. We expect no change in forward guidance next week.

German IFO expectations are being released today. We saw a sharp decline in expectations from 111.0 in November to 109.5 in the December release, although the current situation indicator edged slightly upwards. In January, we expect the IFO expectations to take another step downwards to 108.9, while uncertainty remains around the CDU/SPD coalition in Germany.

In Norway , we do not anticipate any new signals from Norges Bank at today's rate setting meeting. At its meeting last month, the central bank signalled that its key rate would be unchanged until late this year, with a first hike most likely coming in December. Since then, developments in the Norwegian economy have been more or less as assumed, while inflation has been marginally higher than projected. The housing market also appears to be performing as foreseen. On the other hand, the krone has been rather weaker than expected, and oil prices higher. Add in slightly higher interest rates abroad than assumed last month, and it looks like the chances of a hike in December have increased somewhat.

In Sweden , focus is on NIER data, not least price plans, but also the sentiment in the construction sector. Labour market data and PPPI are also due for release.

Selected market news

US Treasury secretary Steven Mnuchin accelerated the USD sell-off yesterday with his endorsement of a weaker dollar and thus broke the longstanding tradition of the Treasury's 'strong dollar' policy. Meanwhile, US Commerce Secretary Wilbur Ross, in a panel at the World Economic Forum in Davos, defended the Trump administration's America First policy saying that 'any protectionist agenda in the U.S. pales in comparison to China's' and that 'the US would protect its exporters'. While we do not expect Trump's protectionist step against China to evolve into a full-blown trade war, as this would come at a cost for both sides, it bares close watching, as a tit-for-tat escalation is sometimes the result of conflicts of any kind. See Flash Comment - Trump makes first move on trade - more to come , 23 January, for more details.

The broad-based dollar index, the DXY index, slipped more than 1% yesterday to a three year low, while EUR/USD broke above 1.24. The USD has fallen into uncharted territory and with the US stepping up 'trade war' efforts and abandoning its 'strong dollar' policy, the case for a higher EUR/USD has improved substantially.

A weaker USD and concerns about the US stepping up 'trade war' efforts is weighing on Asian markets this morning. The Japanese Nikkei index leads the sell-off with a 1% decline as a stronger JPY is weighing on Japanese exporters.

GBPUSD Short Term Elliott Wave view suggests that the rally from 16 December 2017 low is unfolding as 5 waves impulse Elliott Wave structure. Up from 16 December 2017 low (1.33), Minor wave 1 ended at 1.3613, Minor wave 2 ended at 1.3456, Minor wave 3 ended at 1.3943, and Minor wave 4 ended at 1.3797. Minor wave 5 is currently in progress also as an impulse Elliott Wave structure.

Up from 1.3797, Minute wave ((i)) of 5 ended at 1.3945 and Minute wave ((ii)) of 5 ended at 1.3838. As far as pivot at 18 January 2018 low (1.3797) stays intact, expect the pair to extend higher a few more legs within Minor wave 5 of (3). Afterwards, pair should pullback in Intermediate wave (4) to correct cycle from 15 December 2017 low (1.33) in 3, 7, or 11 swing before the rally resumes. We do not like selling the pair.

GBPUSD 1 Hour Elliott Wave Chart

Currency pair GBP/USD

The GBP/USD bullish breakout above the resistance trend line (dotted orange) and 1.40 round level has been very strong so far. The Cable gained 300 pips in just a couple of 4 hour bars and is not showing any signs of weakness as yet. The current bullish wave is probably a wave 3 (light green)

The GBP/USD bullish breakout is probably building an expansion of the wave 5 (grey) with an internal 5 wave (gold). Once the 3rd wave (gold) has been completed, a retracement towards and a bounce at the Fibonacci levels of wave 4 (gold) seems likely.

Currency pair EUR/USD

The EUR/USD bullish breakout is indeed sending price towards the next targets at 1.24 and 1.25. The bullish looks strong and could make one more push towards the next Fibonacci target. At the moment the current bullish push is probably part of a wave 3 (purple).

The EUR/USD is moving higher in a bullish channel marked by support (blue) and resistance (red) trend lines. Price is now probably in a wave 5 (brown) of wave 3 (orange). Once this wave is completed, price could make a retracement as part of a wave 4 (orange) and use the Fibonacci levels of wave 4 vs 3 as support.

Currency pair USD/JPY

The USD/JPY is in a bearish momentum which is probably part of a wave 2 or B (light purple).

The USD/JPY downtrend channel broke below the -27.2% Fibonacci target and could be moving towards the next Fibonacci level at 108.34.

Daily Pivots: (S1) 154.49; (P) 155.09; (R1) 156.07; More...

GBP/JPY's rally resumed after brief consolidations. Intraday bias is back on the upside. Current rise should now target 100% projection of 139.29 to 152.82 from 146.96 at 160.49. On the downside, break of 153.66 resistance turned support is needed to signal short term topping. Otherwise, outlook will remain bullish in cas of retreat.

In the bigger picture, as long as 146.96 key support holds, medium term outlook remains bullish. Rise from 122.36 is in favor to extend to 61.8% retracement of 195.86 to 122.36 at 167.78. However, break of 146.96 support will indicate trend reversal. And there would be prospect of retesting 122.36 in that case.

Daily Pivots: (S1) 135.06; (P) 135.35; (R1) 135.80; More....

Intraday bias in EUR/JPY remains neutral and more consolidation would be seen in range of 133.03/136.63. But after all, outlook stays bullish with 133.03 support intact. Break of 136.63 will resume medium term up trend. However, on the downside, break of 133.03 will have 55 day EMA and medium term channel support firmly taken out. Also, considering bearish divergence condition in daily MACD too, that will suggest medium term reversal. Deeper fall should then be seen to 132.04 support for confirmation.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). It should be targeting 141.04/149.76 resistance zone. On the downside, break of 132.04 support is needed to indicate medium term reversal. Otherwise, outlook will stay bullish in case of deep pull back.

Daily Pivots: (S1) 0.8764; (P) 0.8780; (R1) 0.8798; More...

Intraday bias in EUR/GBP remains on the downside for 0.8688 support. Break there will resume whole decline from 0.9305. As 61.8% retracement of 0.8312 to 0.9305 should then be taken out too. Deeper decline would be seen to retest 0.8303/8312 support zone. On the upside, above 0.8761 minor resistance will turn intraday bias neutral first. But outlook will remain bearish as long as 0.8928 resistance holds, even in case of recovery.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of deeper fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

Daily Pivots: (S1) 1.5308; (P) 1.5353; (R1) 1.5427; More....

EUR/AUD is still staying in range of 1.5153/5446 and intraday bias remain neutral for the moment. On the upside, break of 1.5446 resistance will revive the case that correction from 1.5770 has completed at 1.5153. In that case, intraday bias will be turned back to the upside for retesting 1.5770 first. However, break of 1.5153 will resume the fall from 1.5770 to 1.4949 cluster support (38.2% retracement of 1.3624 to 1.5770 at 1.4950).

In the bigger picture, price actions from 1.5770 so far suggests that it's corrective in nature. That is, medium term rise from 1.3624 is not completed yet. Break of 1.5770 will extend the rise to retest 1.6587 (2015 high). However, considering bearish divergence condition in daily MACD, sustained break of 1.4949 cluster support (38.2% retracement of 1.3624 to 1.5770 at 1.4950) will indicate medium term reversal. And there is prospect of retesting 1.3624 low in that bearish case.

Daily Pivots: (S1) 1.1764; (P) 1.1780; (R1) 1.1793; More...

Intraday bias in EUR/CHF stays neutral as range trading continues. As long as 1.1683 support holds, near term outlook stays bullish for further rally. Again, considering relatively weak upside momentum, in case of another rise, we'd expect strong resistance below 1.2 handle to bring medium term reversal. Break of 1.1683 support will be a early sign of reversal and turn focus to 1.1602 support.

In the bigger picture, while a medium term top could be around the corner, there is no change in the larger outlook. That is, long term rise from SNB spike low back in 2015 is still in progress and would extend. As long as 1.1198 resistance turned support holds, we'll hold on to this bullish view and expect further rise to prior SNB imposed floor at 1.2000 and above. Though, we'll reassess the outlook if 1.1198 is firmly taken out.

Daily Pivots: (S1) 0.8010; (P) 0.8047; (R1) 0.8100; More...

Intraday bias in AUD/USD remains on the upside for 0.8124 resistance. Break there will resume whole medium term rebound from 0.6826 and target key fibonacci level at 0.8451. On the downside, break of 0.7956 support is needed to indicate short term topping. Otherwise, outlook will remain bullish in case of retreat.

In the bigger picture, current development suggests that medium term rebound from 0.6826 is still in progress and could be resuming. Such rise could target 38.2% retracement of 1.1079 (2011 high) to 0.6826 (2016 low) at 0.8451. As such rise is seen as a corrective move, we'd expect strong resistance from 0.8451 to limit upside and bring reversal.

Daily Pivots: (S1) 1.2296; (P) 1.2362; (R1) 1.2408; More...

Intraday bias in USD/CAD remains on the downside. Fall from 1.2919 is in progress and should target to retest 1.2061 low. On the upside, break of 1.290 minor resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, rebound from 1.2061 is likely completed completed at 1.2919, rejected by 55 week EMA (now at 1.2850) and kept below 38.2% retracement of 1.4689 to 1.2061 at 1.3065. The development also suggests that long term fall from 1.4689 is not completed yet. Decisive break of 1.2061 low will target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. This will now be the favored case as long as 1.2919 resistance holds.