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Daily Pivots: (S1) 149.24; (P) 149.97; (R1) 150.74; More...

Intraday bias in USD/JPY stays neutral for the moment. On the upside, decisive break of 150.87 will resume whole rally from 140.25 to retest 151.89/93 key resistance zone. On the other hand, considering bearish divergence condition in 4H MACD, firm break of 149.20 will confirm short term topping at 150.87. Deeper fall would be seen to channel support (now at 148.33), even as a corrective move.

In the bigger picture, rise from 140.25 is seen as resuming the trend from 127.20 (2023 low). Decisive break of 151.89/.93 resistance zone will confirm this bullish case and target 61.8% projection of 127.20 to 151.89 from 140.25 at 155.50. However, break of 148.79 resistance turned support will delay this bullish case, and extend the corrective pattern from 151.89 with another falling leg.

Daily Pivots: (S1) 0.9529; (P) 0.9545; (R1) 0.9574; More...

EUR/CHF's rally re-accelerates today and breaks through 0.9575 fibonacci resistance. There is no sign of topping yet and intraday bias stays on the upside. Next target will be 161.8% projection of 0.9252 to 0.9471 from 0.9304 at 0.9658 next. For now, further rally is expected as long as 0.9510 support holds, in case of retreat.

In the bigger picture, price actions from 0.9252 are tentatively seen as a correction to the five-wave down trend from 1.0095 (2023 high). 38.2% retracement of 1.0095 to 0.9252 at 0.9574is already met. But overall medium term outlook will remain bearish as long as 0.9683 resistance holds.

Euro rises broadly today even though gains are so far limited. The common currency is lifted by stronger than anticipated Eurozone inflation figures, which suggests that the path to disinflation may be encountering obstacles. This development could providing ammunition to hawks within the ECB Governing Council, to advocate for a cautious approach towards rate cuts.

Governing Council member Robert Holzmann's remarks underscored this sentiment, emphasizing the need for patience and caution in monetary policy decisions: "we have to wait" and "cannot rush to a decision". Holzmann's timing, however, raises eyebrows as it comes during ECB's quiet period before its upcoming meeting less than a week away.

Overall in the currency markets, Yen and Swiss Franc are trailing as the day's underperformers, with Dollar also softening slightly. Conversely, Australian Dollar the second best just behind Euro, followed by Sterling, while Canadian Dollar is mixed in tandem with the New Zealand Dollar.

Technically, as a follow up to the Daily Report today, GBP/CHF's break of 1.1182 resistance confirms resumption of whole rise from 1.0634. Next target is 61.8% projection of 1.0893 to 1.1182 from 1.1114 at 1.1293. Now, a focus is on whether USD/CHF could follow by breaking through 0.8884 resistance.

In Europe, at the time of writing, FTSE is up 0.68%. DAX is up 0.51%. CAC is up 0.01%. UK 10-yaer yield is up 0.0285 at 4.250. Germany 10-year yield is up 0.032 at 2.447. Earlier in Asia, Nikkei surged 1.90%. Hong Kong HSI rose 0.47%. China Shanghai SSE rose 0.39%. Singapore Strait Times fell -0.19%. Japan 10-year JGB yield rose 0.0060 to 0.720.

Eurozone CPI slows to 2.6%, core down to 3.1%, both above expectations

Eurozone CPI slowed from 2.8% yoy to 2.6% yoy in February, above expectation of 2.5% yoy. CPI core (ex-energy, food, alcohol & tobacco) slowed from 3.3% yoy to 3.1% yoy, above expectation of 2.9% yoy.

Breaking down the main components, food, alcohol & tobacco is expected to have the highest annual rate in February (4.0%, compared with 5.6% in January), followed by services (3.9%, compared with 4.0% in January), non-energy industrial goods (1.6%, compared with 2.0% in January) and energy (-3.7%, compared with -6.1% in January).

Eurozone PMI manufacturing finalized at 46.5, one-year industrial recession not ending yet

Eurozone PMI Manufacturing was finalized at 46.5 in February, down slightly from January's 46.6.

Greece, Ireland, and Spain notably marked significant highs in their manufacturing PMI, with Greece reaching a 24-month high at 55.7, Ireland a 20-month high at 52.2, and Spain entering growth territory with a 20-month high at 51.5.

These figures contrast starkly with the larger economies within such as Germany and France, where manufacturing activity continued to contract, with Germany hitting a 4-month low at 42.5, and France at 11-month high at 47.1.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated the Eurozone's "industrial recession" extends beyond a year without signs of abating. The continued decline in output, particularly in the region's economic powerhouses Germany and France, underscores the persistent challenges facing the manufacturing sector.

Despite the overall contraction, there's a "glimmer of hope" as the pace of decline in new orders across Eurozone has softened. This slight improvement suggests that demand conditions could be stabilizing, potentially laying the groundwork for a gradual recovery in the manufacturing sector.

UK PMI manufacturing finalized at 47.5, impacts of Red Sea crisis continue

UK PMI Manufacturing was finalized at 47.5 in February, up from January's 47.0. This marks the highest reading since April 2023, yet the sector has been contracting for 19 consecutive months.

Rob Dobson, Director at S&P Global Market Intelligence, said the impact of the Red Sea crisis was particularly pronounced, causing delays in raw material deliveries, inflating purchase prices, and impairing production capabilities. This crisis also had a knock-on effect on demand, with new export orders suffering due to supply chain disruptions and escalated shipping costs.

The crisis has exerted considerable pressure on both prices and supplies. Input cost inflation reached an 11-month high, necessitating further increases in selling prices, while average supplier lead times extended to the greatest extent since mid-2022.

Dobson suggests that this inflationary pressure may prompt policymakers to reconsider the timing of anticipated interest rate cuts, hinting at the broader economic implications of the manufacturing sector's current challenges.

BoJ's Ueda stays cautious on achieving sustainable inflation

Bank of Japan Governor Kazuo Ueda reiterated that Japan has not yet achieved sustainable 2% inflation. "I don't think we are there yet," he said after G20 finance ministers' meeting.

A significant focus for BoJ in the near term will be the outcome of upcoming annual wage negotiations between companies and unions. Ueda pointed out the importance of these negotiations in determining the potential for a positive wage-inflation cycle in Japan.

"We need to confirm whether a positive wage-inflation cycle would kick off and strengthen," he noted, acknowledging the rising demands from unions for pay increases exceeding last year's and the apparent willingness among many firms to comply.

However, Ueda also stressed the need for a comprehensive review of the collective results of these wage negotiations, alongside other economic data, to gauge whether wages and inflation will sustainably rise in tandem.

Japan's PMI manufacturing finalized at 47.2, worst since Aug 2020

Japan's PMI Manufacturing was finalized at 47.2 in February, down from January's 48.0. This marks the ninth consecutive month of contraction, presenting the most significant downturn since August 2020.

According to S&P Global, the decline was characterized by sharper falls in both output and new orders. Additionally, the sector experienced the most substantial decline in employment seen in over three years, indicating that the downturn is having a tangible impact on workforce. Furthermore, rate of increase in output prices slowed to the lowest level since June 2011, suggesting that price pressures are easing amid weakened demand.

China's NBS PMI manufacturing falls slightly to 49.1, Caixin manufacturing rises to 50.9

China's manufacturing sector continued its contraction for the fifth consecutive month in February, with official NBS PMI decreasing slightly from 49.2 to 49.1, matched expectations.

New orders subindex remained steady at 49, indicating stagnant demand. New export orders fell further from 47.2 to 46.3, reflecting ongoing pressures on the export front.

NBS PMI Non-Manufacturing rose from 50.7 to 51.4 , surpassing the anticipated 50.8. PMI Composite remained unchanged at 50.9.

In parallel, Caixin PMI Manufacturing, which focuses more on small and medium-sized enterprises, edged up from 50.8 to 50.9 , slightly above expectations of 50.7.

Caixin noted sustained increase in output and new orders, with firms expressing improved business optimism for the second consecutive month. Additionally, input cost inflation declined to a seven-month low, while selling prices fell.

RBNZ's Orr: Restrictive policy to stay, expects normalization next year

RBNZ Governor Adrian Orr affirmed today that the economy is "evolving as anticipated", with inflation expectations declined. However, he reiterated inflation "is still too high".

The governor emphasized the necessity of maintaining a restrictive monetary policy stance "for some time." He added that he expects to "begin normalizing policy in 2025."

EUR/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9529; (P) 0.9545; (R1) 0.9574; More...

EUR/CHF's rally re-accelerates today and breaks through 0.9575 fibonacci resistance. There is no sign of topping yet and intraday bias stays on the upside. Next target will be 161.8% projection of 0.9252 to 0.9471 from 0.9304 at 0.9658 next. For now, further rally is expected as long as 0.9510 support holds, in case of retreat.

In the bigger picture, price actions from 0.9252 are tentatively seen as a correction to the five-wave down trend from 1.0095 (2023 high). 38.2% retracement of 1.0095 to 0.9252 at 0.9574is already met. But overall medium term outlook will remain bearish as long as 0.9683 resistance holds.

Economic Indicators Update

Market picture

The cryptocurrency market has corrected by 2%, dropping below $2.3 trillion in market capitalisation. Now, this looks like a technical correction, with the biggest coins pulling back from Thursday night’s highs and holding their positions at the start of Friday’s trading. Bitcoin and Ether are drawing their seventh consecutive daily growth candle, albeit at a distance from the previous two days’ highs.

Bitcoin rose 44.7% in February, the strongest monthly gain since December 2020. This coming March is not considered favourable from a seasonal perspective.

Over the past 13 years, bitcoin has ended March with eight declines and only five gains. The average decline was 15%, while the average gain was 17.5%.

Altcoins such as Uniswap and Theta have gained around 90% in the last 30 days, including +50% in the last seven days. The same can be said for Dogecoin, which has added around 50% over the month and 42% over the last seven days.

Is this the season for altcoins? We doubt it, given that the first cryptocurrency still accounts for over 50% of total market capitalisation and that this figure has been rising since the beginning of 2023.

News background

According to data from Bloomberg and BitMEX Research, net daily inflows into bitcoin ETFs reached a record $673 million, of which $612.1 million came from BlackRock’s IBITs. The previous high of $655.2 billion was set on the instrument’s first day of trading on 11 January.

ETF demand for bitcoin (2,800 BTC per day) is three times greater than its mining (900), according to CoinShares. The resulting demand shock contributed to a further decline in bitcoin balances on centralised exchanges.

The Coinbase exchange suffered a technical failure due to the frenzy of demand for cryptocurrencies. The problem occurred amid a “huge” influx of users.

The Gemini exchange will pay a $37m fine for “serious compliance violations” and refund $1.1bn to users of its Earn staking programme as part of a settlement with the New York State Department of Financial Services.

Two top Binance executives were arrested in Nigeria as the country cracks down on cryptocurrency exchanges.

El Salvador’s unrealised profit from bitcoin investments was 40%, or about $41.6 million, according to the country’s president, Nayib Bukele. The country’s leaders do not yet intend to sell the coins.

Eurozone CPI slowed from 2.8% yoy to 2.6% yoy in February, above expectation of 2.5% yoy. CPI core (ex-energy, food, alcohol & tobacco) slowed from 3.3% yoy to 3.1% yoy, above expectation of 2.9% yoy.

Breaking down the main components, food, alcohol & tobacco is expected to have the highest annual rate in February (4.0%, compared with 5.6% in January), followed by services (3.9%, compared with 4.0% in January), non-energy industrial goods (1.6%, compared with 2.0% in January) and energy (-3.7%, compared with -6.1% in January).

Full Eurozone CPI release here.

UK PMI Manufacturing was finalized at 47.5 in February, up from January's 47.0. This marks the highest reading since April 2023, yet the sector has been contracting for 19 consecutive months.

Rob Dobson, Director at S&P Global Market Intelligence, said the impact of the Red Sea crisis was particularly pronounced, causing delays in raw material deliveries, inflating purchase prices, and impairing production capabilities. This crisis also had a knock-on effect on demand, with new export orders suffering due to supply chain disruptions and escalated shipping costs.

The crisis has exerted considerable pressure on both prices and supplies. Input cost inflation reached an 11-month high, necessitating further increases in selling prices, while average supplier lead times extended to the greatest extent since mid-2022.

Dobson suggests that this inflationary pressure may prompt policymakers to reconsider the timing of anticipated interest rate cuts, hinting at the broader economic implications of the manufacturing sector's current challenges.

Full UK PMI manufacturing release here.

Eurozone PMI Manufacturing was finalized at 46.5 in February, down slightly from January's 46.6.

Greece, Ireland, and Spain notably marked significant highs in their manufacturing PMI, with Greece reaching a 24-month high at 55.7, Ireland a 20-month high at 52.2, and Spain entering growth territory with a 20-month high at 51.5.

These figures contrast starkly with the larger economies within such as Germany and France, where manufacturing activity continued to contract, with Germany hitting a 4-month low at 42.5, and France at 11-month high at 47.1.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated the Eurozone's "industrial recession" extends beyond a year without signs of abating. The continued decline in output, particularly in the region's economic powerhouses Germany and France, underscores the persistent challenges facing the manufacturing sector.

Despite the overall contraction, there's a "glimmer of hope" as the pace of decline in new orders across Eurozone has softened. This slight improvement suggests that demand conditions could be stabilizing, potentially laying the groundwork for a gradual recovery in the manufacturing sector.

Full Eurozone PMI Manufacturing release here.

• GBPJPY breaks below key support area after new high
• Technical signs weaken, but 20-day EMA comes to the rescue again

GBPJPY extended its pullback from an eight-and-a-half-year high of 191.30 for the third consecutive day on Thursday to find support around the 20-day exponential moving average (EMA) at 189.50. The line had protected the market at the end of January, though with the pair having crossed below a short-term ascending trendline, the odds for a continuation lower might be larger despite the current bullish action in the price.

The negative reversal in the momentum indicators is a sign that buying interest is fizzling out. A bounce back above the 190.20-191.14 is now required to improve sentiment and trigger an advance towards the 193.32-194.00 zone, where the broken support trendline from March 2023 and the resistance line from May 2021 are positioned. Breaking above that wall, the uptrend could stretch towards the 2015 ceiling of 195.30-195.87.

Otherwise, a step below the 20-day EMA at 189.50 could squeeze the price towards the 50-day EMA at 187.50. Additional losses from there could initially retest the 186.00 base and then the 184.00-184.50 region.

All in all, GBPJPY could experience more downside movements, unless the current recovery mode in the market drives the price successfully back above the 191.14 level. 

• Japanese yen falls below 150
• BoJ’s Tanaka urges changes to monetary policy
• US PCE price index falls to 2.4%

BoJ’s Tanaka hints at tighter monetary policy

After close to two weeks of little movement, the Japanese yen is showing some volatility. The yen climbed as much as 1% on Thursday before paring much of those gains. USD/JPY has reversed directions on Friday and is trading in Europe at 150.59, up 0.40%.

The yen’s strong movement has come in the aftermath of comments from Bank of Japan board member Hajime Takata on Thursday. Takata said that the BoJ must overhaul is ultra-loose monetary policy, including an end to negative rates and removing bond yield control. Takata added that the BoJ was “seeing prospects of achieving our 2% inflation target”.

Takata’s hawkish comments are the latest sign that the central bank is close to unwinding its ultra-loose policy which could have a massive impact on the currency markets. The BoJ hasn’t provided any timelines for a change in policy, but the markets expect the Bank to lift rates out of negative territory at the April meeting.

Let’s not forget that when the yen trades around the 150 level, there are rumblings out of Tokyo that it may have to intervene to prop up the yen. Sure enough, Japan’s top currency diplomat, Masato Kanda, said on Thursday that policy makers were concerned with recent currency moves and stood “ready to ready to respond appropriately if we see excessively volatile moves.”

In the US, the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures Price index, slowed to 2.4% in January, matching the market estimate. This was down from 2.6% in December and the lowest rate since February 2021, further evidence that inflation continues to fall. Monthly, the PCE price index rose 0.3%, up from a revised 0.1% in December and matching the market estimate. The upswing was a result of higher services prices.

USD/JPY Technical

• USD/JPY is putting pressure on resistance at 150.74. Above, there is resistance at 151.47
• There is support at 149.97 and 149.24

• AUDUSD was recovering from its lowest level since November
• But is on the retreat again as 200-day SMA repels advance
• Momentum indicators are tilted to the downside

AUDUSD had been in a steady decline after peaking at 0.6870 in December, violating both its 50- and 200-day simple moving averages (SMAs). Although the pair managed to find its feet and rotate back above its descending trendline, it has been losing ground again following its repeated rejection at the 200-day SMA.

Should the pair extend its slide, the February support of 0.6467 could act as the first line of defence. A break below that level might pave the way for the 2024 bottom of 0.6441. Sliding beneath that floor, the pair may descend towards the August low of 0.6363.

On the flipside, bullish actions could propel the price towards 0.6525, a region that provided both support and resistance in recent months. Further advances could then cease at the recent peak of 0.6593 ahead of the January resistance of 0.6623. Even higher, the pair may challenge the 0.6689 hurdle.

In brief, AUDUSD has begun a new round of weakness following its persistent inability to claim the 200-day SMA.