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Daily Pivots: (S1) 121.76; (P) 122.21; (R1) 122.76; More...

Intraday bias in EUR/JPY stays neutral as consolidation from 124.08 extends. Rebound from 109.20 is not finished yet. Break of 124.08 will extend such rise and target 126.09 key resistance next. Meanwhile, below 120.54 will target 118.45 cluster support (38.2% retracement of 109.20 to 124.08 at 118.39). We'd expect strong support from there to contain downside.

In the bigger picture, price actions from 109.20 medium term bottom are seen as part of a medium term corrective pattern from 149.76. There is prospect of another rise towards 126.09 key resistance level before completion. But even in that case, we'd expect strong resistance between 126.09 and 141.04 to limit upside, at least on first attempt. Sustained trading below 55 day EMA will pave the way to retest 109.20.

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Daily Pivots: (S1) 0.8456; (P) 0.8495; (R1) 0.8519; More...

EUR/GBP's recovery from 0.8303 has likely finished at 0.8851 already. Break of 0.8449 support will confirm this case and target 0.8303. Break will extend the whole corrective fall from 0.9304 and target 0.8116 support. In case of another rise, we'd now expect strong resistance at 61.8% retracement of 0.9304 to 0.8303 at 0.8922 to limit upside and bring near term reversal.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. Deeper fall cannot be ruled out yet. 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. Overall, the corrective pattern would take some time to complete before long term up trend resumes at a later stage. Break of 0.9304 will pave the way to 0.9799 (2008 high).

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Daily Pivots: (S1) 1.4148; (P) 1.4187; (R1) 1.4216; More...

Intraday bias in EUR/USD remains neutral for the moment. Near term outlook stays bearish as the corrective decline from 1.6587 is still in progress. Below 1.4025 will target 1.3671 key support level. We'd expect downside to be contained there to bring reversal. Meanwhile, above 1.4251 minor resistance will turn focus back to 1.4721 resistance.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a consolidative pattern. 50% retracement of 1.1602 to 1.6587 at 1.4095 was already met. While further fall cannot be ruled out, we'd expect strong support above 1.3671 to contain downside and bring rebound. Up trend from 1.1602 should not be finished and will resume later. Break of 1.4721 resistance will be the first sign of resumption of up trend from 1.1602 and target retesting of 1.6587 high first.

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Daily Pivots: (S1) 1.0653; (P) 1.0698; (R1) 1.0728; More...

The break of 1.0677 support in EUR/CHF suggests down trend resumption. Intraday bias is now on the downside for 1.0620 key support level next. Break will confirm resumption of whole fall from 1.1198. On the upside, break of 1.0749 resistance is now needed to indicate near term reversal. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, the decline from 1.1198 is seen as a corrective move. Such correction is still in progress and retest of 38.2% retracement of 0.9771 to 1.1198 at 1.0653 could be seen. Sustained trading below 1.0653 will target 50% retracement at 1.0485. Meanwhile, break of 1.0897 resistance will argue that the larger up trend is finally resuming for above 1.1198.

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Global Markets:

• Asian stock markets: Nikkei up 0.20 %, Shanghai Composite gained 0.30 %, Hang Seng rose 0.10 %, ASX 200 rallied 0.75 %
• Commodities: Gold at $1183 (-0.55 %), Silver at $16.73 (-0.70 %), WTI Oil at $53.80 (+0.05 %), Brent Oil at $56.20 (-0.10 %)
• Rates: US 10 year yield at 2.51, UK 10 year yield at 1.51, German 10 year yield at 0.48

News & Data:

• Japan National CPI (YoY) Dec: 0.3% (est. 0.20%, prev. 0.50%)
• Japan National CPI Ex-Fresh Food (YoY) Dec: -0.2% (est. -0.30%, prev. -0.40%)
• Tokyo CPI (YoY) Jan: 0.1% (est. 0.00%, prev. 0.00%)
• Tokyo CPI Ex-Fresh Food (YoY) Jan: -0.3% (est. -0.40%, prev. -0.60%)
• Australia Export Price Index (QoQ) Q4: 12.4% (est. 12.10%, prev. 3.50%)
• Australia Import Price Index (QoQ) Q4: 0.2% (est. 0.40%, prev. -1.00%)
• Australia PPI (YoY) Q4: 0.7% (prev. 0.50%)
• Australia PPI (QoQ) Q4: 0.5% (prev. 0.30%)
• U.S. new home sales fall; weekly jobless claims rise – RTRS
• Asia shares steady, dollar and oil extend gains on renewed optimism – RTRS

Markets Update:

The US Dollar strengthened overnight, especially against the Yen. USD/JPY opened around 114.40 in Tokyo and rallied to a high of 115.06. The market is expecting the large tax cuts and infrastructure spending that US President Trump promised, and which have driven US stock markets to fresh record highs as well. From a technical perspective, the pair faces strong resistance at 115.50-70, followed by 116.90, while support lies at 114.00.

The Pound had quite a rally this week, but ran out of momentum yesterday. Support is now seen at 1.2540, and a break would signal a retracement back to 1.24. The Euro has come under pressure as well, and a break below the 1.0620 support level would confirm the short-term top at 1.0770 and pave the way for a deeper retracement. The next notable support level would then lie at 1.05.

Gold extended losses in Asia, as the strong dollar and rising equity markets are weighing on the precious metals. Support is noted at $1176, and a break below would switch the technical outlook to bearish.

Upcoming Events:

• 13:30 GMT – US GDP
• 15:00 GMT – US Michigan Consumer Sentiment

Key Points:

• AUDNZD trading within a descending channel.
• Price action nearing lower channel constraint.
• RSI Oscillator enters a reversal zone.

The embattled AUDNZD has been on a largely downward trajectory over the past few months as markets have reacted to deteriorating Australian domestic economic conditions. Subsequently, we have witnessed the pair trading within a relatively tight descending channel that has largely constrained the pair's price action. However, despite the AUDNZD's bearish disposition, the pair is getting ready to rally, albeit in the short term.

Assessing the pair from the technical perspective provides some enticing evidence of a potential setup for a rally. The past few days has seen price action moving steadily towards the lower channel constraint which has been a key reversal zone in past periods. In addition, the RSI Oscillator is nearing oversold territory and there is some historical evidence of some sharp reversals from this level. Subsequently, there is building evidence that we may indeed see a relatively strong bounce for the Australian Dollar in the coming days.

In contrast, the fundamental outlook for the Australian economy is relatively murky at best as the antipodean nation faces diminished growth in the coming few quarters. There is already evidence of an uptick in the unemployment rate as well as slipping inflationary pressures. Although the Australian economy may indeed avoid a technical recession, there is likely to still be plenty of negative aspects that will impact currency valuations in the coming months.

Ultimately, despite their being plenty of reasons to take a bearish view on the pair in the long run, the short term outlook is decidedly more bullish. Subsequently, the most likely scenario for the next few days is one where price action discovers support around the bottom of the channel before moving rapidly higher to challenge the 61.8% retracement level around the 1.0422 mark. The upside target would likely fall around the 1.0554 level, especially considering that there is currently little chance of a break out of the short term channel. Subsequently, keep a close watch on the pair in the early part of next week as it could be setting up to fly, albeit in the short run.

Key Points:

• RBNZ will need to raise rates to combat rising inflationary pressures.
• Inflation will largely stem from a tightening job market.
• CPI data suggests we may already have entered a high inflation period.

After being trapped in a low-interest rate environment for such an extended period, talk of real normalisation can, at times, seem more like wishful thinking than anything else. However, for one country at least, the data is beginning to put pressure on its central bank to finally begin the process of lifting rates back to historic norms. Specifically, New Zealand could see a slew of hikes moving forward as the RBNZ attempts to keep inflation in check and within its mandated band.

First and foremost, the question has to be asked, are inflationary pressures really building? In short, yes they are and there are a number of key drivers which are contributing to this uptick. Primarily however, blame can be laid at the feet of a tightening job market as, at 4.9%, unemployment is below the widely accepted natural rate for the country. As a result of this low unemployment rate, wage inflation is almost certain to be on the rise this year and general inflation should follow suit.

In addition to wage inflation, the property bubble in the nation’s largest city will be contributing to overall inflationary pressures. Specifically, rental prices have skyrocketed by around 7.1% over the past 12 months due to the lack of housing supply. What’s more, the mere presence of the bubble provides an incentive for the RBNZ to step in with some hikes as increasing rates would help to cool off the red hot property market.

Regardless of what is causing inflation to spike, the fact remains that we are already beginning to see the start of this period of higher inflation as was made quite clear in the latest CPI results. Coming in at 1.3% q/q, the figure was in stark contrast to the historically low inflation seen across the ditch in Australia which took most of the market by surprise. Further upticks of this magnitude will see the nation’s inflation rate move above the 3% upper limit targeted by the RBNZ which will necessitate at least a 25bps hike in the OCR.

Ultimately, we will have to wait and see whether or not the central bank will take this first move towards seeing rates back to their normal levels. However, faced with strong GDP growth of 3.5% y/y, recovering dairy prices, robust retail sales, and the other factors mentioned above, the RBNZ will be fairly loath to keep rates on hold. As a result, keep an eye on the February OCR announcement as it could be the first step in a road towards normalised rates.

Daily Pivots: (S1) 1.3055; (P) 1.3092; (R1) 1.3133; More...

Intraday bias in USD/CAD stays neutral for the moment. At this point, we're still slightly favoring the case that consolidation pattern from 1.3588 is completed with three waves down to 1.3017. Above 1.3387 will target 1.3598 resistance. Break there will extend the whole choppy rise from 1.2460 to next fibonacci level at 1.3838. However, break of 1.3017 will indicate completion of rise from 1.2460 and turn outlook bearish.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg is still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. As rise from 1.2460 is seen as a corrective move, we'd look for reversal signal above 1.3838. Meanwhile, break of 1.3017 will likely start the third leg to 1.2460 and below.

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Daily Pivots: (S1) 0.7507; (P) 0.7546; (R1) 0.7570; More...

Intraday bias in AUD/USD is neutral with a temporary top at 0.7608. Above 0.7608 will extend the rise from 0.7158. But we'd expect upside to be limited by 0.7777/7833 resistance zone to bring near term reversal. On the downside, break of 0.7448 will indicate that rebound from 0.7158 is completed and turn bias back to the downside for 0.7144 key support level.

In the bigger picture, AUD/USD is staying inside long term falling channel and it's likely that the down trend from 1.1079 is still in progress. Break of 0.6826 low will confirm this bearish case. We'll be looking for bottoming sign again as it approaches 0.6008 key support level. Meanwhile, sustained break of 0.7833 resistance will be a strong sign of medium term reversal.

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Daily Pivots: (S1) 1.0636; (P) 1.0701 (R1) 1.0744; More.....

Intraday bias in EUR/USD stays neutral for the moment. As noted before, choppy rise from 1.0339 is seen as a corrective move. Break of 1.0588 minor support will argue that it's completed and turn bias back to the downside for 1.0339 support. In case of another rise, upside should be limited by 1.0872 resistance.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

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