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Last week's financial markets were characterized by a mix of resilience, speculation, and divergent central bank signals.

In the US, the narrative remained steadfast with Fed officials emphasizing a patient approach towards monetary policy, firmly pushing back against the market's eager anticipations for imminent rate cuts. This cautious did little to dampen the spirits of investors, who propelled S&P 500 past the landmark 5000 level for the first time, a testament to the enduring optimism surrounding US economy's resilience.

The ascent of S&P 500 was coupled with slight uptick in 10-year yield. While Dollar Index made strides, reflecting some progress, the greenback's performance was notably middling when juxtaposed with its global counterparts.

In Europe, Swiss Franc bore the brunt of the market's recalibrations, finding itself at the bottom of the performance ladder. This position was influenced by similar cautionary messages from ECB and BoE regarding premature rate cut expectations. Nevertheless, Euro and Sterling ended the week on a slightly softer note against others.

Over to Asia, Japan presented a contrasting scenario, where a top BoJ official attempted to moderate expectations for aggressive policy tightening. This effort led to widespread sell-off in Yen, positioning it as the week's second weakest. But at the time same, Nikkei also soared to new 34-year highs, buoyed by anticipation of continued loose monetary policy.

Commodity currencies emerged as the clear frontrunner amidst this global backdrop. New Zealand Dollar, in particular, stood out, riding high on the wave of speculation that RBNZ would implement further rate hikes. Australian Dollar, while also firming, trailed in the wake of RBA's noncommittal stance on future rate adjustments. Canadian Dollar, despite a fleeting post-employment data rally, settled into the third spot

Market Optimism Prevails as S&P 500 Breaks 5000 Mark

US stock market soared remarkably again last week, marking its fifth consecutive winning streak and the 14th positive week out of the last 15, reflecting investor confidence in the resilience of the US economy. Despite Federal Reserve officials tempering expectations for an early interest rate cut, indicating rates might hold steady at least until Q2, market participants remain unfazed. The question now arises: will the ongoing bullish runs in stocks trigger fear of missing out sentiment, fueling further risk-on rallies?

Minneapolis Fed President Neel Kashkari introduced an interesting perspective with his essay, arguing that current monetary policy might not be as restrictive as previously thought. He attributed the rapid decline in inflation primarily to supply-side improvements rather than deceleration in economic activity (as seen in the strong consumption and labor market data). This interpretation allows for more extended period to assess the economy's health before starting rate cut, without the risk of overly tight policy hindering growth.

Overall, Fed officials emphasized the need for further evidence of disinflation progress, particularly more broadening slowdown in price growth, before considering gradual easing of policy. At the same time, factors such as resilient consumer spending, robust job market, and global tensions present risks to inflation outlook.

S&P 500 closed at record high at 5026.61 last week. There might be some brief struggles to sustain above 5000 psychological level initially. But near term outlook will stay bullish as long as 4845.15 support holds. Next target is 138.2% projection of 3808.86 to 4607.07 from 4103.78 at 5206.91.

10-year yield extended the near term rebound to close at 4.187 last week. At this point, strong resistance is still expected from 38.2% retracement of 4.997 to 3.785 at 4.247 to limit upside. Price actions from 3.785 are seen as a sideway consolidation pattern that would extend for a while before downside breakout happens.

However, sustained break of 4.247 would indicate some important change in the fundamental outlook, probably on expectations that Fed's interest rate would settle at a higher level during the upcoming rate cut cycle. In this case, 10-year yield could rally further to 61.8% retracement at 4.534.

Dollar index's rally from 100.61 progressed as expected, even though just a small step. Further rise is expected as long as 102.90 support holds. Rise from 100.61 is seen as the third leg of the consolidation pattern from 99.57. Next target is 107.34 resistance.

BoJ's Dovish Stance Catapults Nikkei to New Heights, Yen Continues to Weaken

Japan's stock market also jumped last week, with Nikkei hitting a new 34-year high. The surge, fueled by strong corporate earnings and expectations of continued loose monetary The robust optimism was partly driven by impressive earnings from major companies like SoftBank, Nintendo, and Toyota. Meanwhile, anticipation of continuous loose monetary policy and the persistently weak Yen also played an import part.

A key factor contributing to Nikkei's surge was the speech by BoJ Deputy Governor Shinichi Uchida, who suggested that the central is unlikely to engage in aggressive interest rate hikes even after the cessation of its negative interest rate policy. Uchida's remarks underscore the distinct economic conditions in Japan compared to the US and Europe, arguing against drawing parallels in interest rate outlooks among these regions.

Uchida highlighted the divergence in inflation levels, noting that while Fed and ECB initiated interest rate increases in 2022 amidst inflation rates above 8%, Japan's inflation scenario is markedly different. Additionally, He emphasized the need for continued accommodative monetary policy to elevate medium- to long-term inflation expectations, which is still in the process of climbing to 2%.

Technically, near term outlook in Nikkei will now stay bullish as long as 35854.62 support holds. Next near term target is 161.8% projection of 30538.28 to 33853.46 from 32205.38 at 37651.22. Next medium term target is 100% projection of 16358.19 to 30714.52 from 24681.74 at 39119.32, which is close to 39260 record high made in 1990.

Yen, meanwhile, emerged as the second-worst performer last week, influenced by delayed rate cut expectations among major central banks and the anticipation of gradual tightening by BoJ. Rising yields globally and the prevailing risk-on sentiment have further pressured Yen. Despite this, Japan's verbal interventions have been moderate so far. However, any intensification in the Yen's decline could prompt more assertive responses from Japanese authorities.

NZD/JPY was one of the biggest movers last week, losing -2%. The strong break of 91.50 resistance confirmed long term up trend resumption. Outlook will now stay bullish as long as 90.70 resistance turned support holds. Next target is 61.8% projection of 80.42 to 89.67 from 86.75 at 92.46.

Considering bearish divergence condition in D MACD. Strong resistance could be seen from 92.46 projection level to limit upside, at least on first attempt. However, decisive break through could prompt upside acceleration to 100% projection at 96.00.

NZD Rallies Amid Rate Hike Buzz, Orr's Upcoming Remarks to Set the Tone

Talking about New Zealand Dollar, it was surprisingly the standout currency last week, buoyed by anticipations of two more rate hikes by RBNZ in February and April, as suggested by ANZ's forecasts. Chief Economist Sharon Zollner highlighted a series of "small but pretty consistent" economic data surprises that, in her view, bolster the case for further monetary tightening.

Contrastingly, Westpac presented a more cautious perspective, pointing to softer-than-anticipated GDP and inflation figures since RBNZ's November Monetary Policy Statement. They argue for a pause by RBNZ throughout 2024, positing that the upcoming statement could set the stage for a possible rate increase within the next six months, contingent upon core inflation pressures subsiding sufficiently.

The stage is set for an intriguing development on Monday when RBNZ Governor Adrian Orr and Deputy Governor Christian Hawkesby are scheduled to speak before the parliament's Finance and Expenditure Committee. Though the session's official agenda focuses on the Financial Stability Report, it inadvertently provides a platform for Orr to directly address the evolving market expectations regarding monetary policy. The remarks made during this session have the potential to significantly sway market sentiment, either reinforcing the bullish momentum behind New Zealand Dollar or introducing a note of caution that tempers market enthusiasm.

NZD/USD's decline from 0.6368 halted after hitting 0.6037, but recovery is capped below 0.6172 resistance so far. Another decline remains in favor, and break of 0.6037 would resume the fall towards 0.5771 low, as part of the whole down trend from 0.6537.

However, considering bullish convergence condition in 4H MACD, strong break of 0.6172 will dampen the above bearish view, and argue that the decline from 0.6368 has completed. Stronger rebound would then be seen back towards this resistance. We'd probably know which way it goes on Monday.

EUR/CHF Weekly Outlook

EUR/CHF's rebound last week suggests that pull back from 0.9471 has completed at 0.9304 already. Initial bias remains on the upside this week for 0.9471. Firm break there will resume whole rebound from 0.9252 to 100% projection of 0.9252 to 0.9471 from 0.9304 at 0.9523. On the downside, below 0.9395 minor support will turn intraday bias neutral first.

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). Further rise would be seen to 38.2% retracement of 1.0095 to 0.9252 at 0.9574. But overall medium term outlook will remain bearish as long as 0.9683 resistance holds.

In the long term picture, fall from 1.2004 (2018 high) is part of the multi-decade down trend. Firm break of 1.0095 resistance is needed to be the first sign of long term bottoming. Otherwise, outlook will remain bearish.

EUR/USD fell further to 1.0722 last week but recovered since then. Initial bias remains neutral this week for more consolidations. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 1.0896 resistance holds. On the downside, sustained break of 1.0722 will argue that whole rise from 1.0447 has completed. Deeper fall would then be seen to target this low.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern to rise from 0.9534 (2022 low). Rise from 1.0447 is seen as the second leg. While further rally could cannot be ruled out, upside should be limited by 1.1274 to bring the third leg of the pattern. Meanwhile, sustained break of 1.0722 support will argue that the third leg has already started for 1.0447 and possibly below.

In the long term picture, a long term bottom is in place at 0.9534 on bullish convergence condition in M MACD. It's still early to call for bullish trend reversal with the pair staying inside falling channel in the monthly chart. Nevertheless, sustained trading above 55 M EMA (now at 1.1059) and break of 1.1274 resistance will raise the chance of reversal and target 1.2348 resistance for confirmation.

USD/JPY's rally from 140.25 resumed by breaking through 148.79 last week. Initial bias remains on the upside for retesting 151.89/93 key resistance zone. Decisive break there will confirm resumption of larger up trend. For now, downside, outlook will remain cautiously bullish as long as 145.88 support holds, in case of retreat.

In the bigger picture, fall from 151.89 is seen as a correction to the rally from 127.20, which might have completed at 140.25 already. Firm break of 151.89/93 resistance zone will confirm up trend resumption, and next target will be 61.8% projection of 127.20 to 151.89 from 140.25 at 155.50. This will now remain the favored case as long as 140.25 support holds.

In the long term picture, as long as 125.85 resistance turned support holds (2015 high), up trend from 75.56 (2011 low) is still in favor to continue through 151.93 (2022 high) at a later stage.

GBP/USD rebounded after initial dip to 1.2517 last week, but upside was capped by 55 4H EMA. Initial bias remains neutral this week first. On the upside, firm break of 1.2641 resistance will affirm the case that correction from 1.2826 has completed at 1.2517, after drawing support from 1.2499. Intraday bias will be back on the upside for retesting 1.2826. Nevertheless, decisive break of 1.2499 will argue that whole rise from 1.2036 has completed and turn near term outlook bearish.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to up trend from 1.0351 (2022 low). Rise from 1.2036 is seen as the second leg, would could be still in progress. But upside should be limited by 1.3141 to bring the third leg of the pattern. Meanwhile, break of 1.2499 support will argue that the third leg has already started for 38.2% retracement of 1.0351 (2022 low) to 1.3141 at 1.2075 again.

In the long term picture, a long term bottom should be in place at 1.0351 on bullish convergence condition in M MACD. But momentum of the rebound from 1.3051 argues GBP/USD is merely in consolidation, rather than trend reversal. Range trading is likely between 1.0351/4248 for some more time.

USD/CHF's rise from 0.8332 resumed by breaking 0.8727 resistance last week. Initial bias stays on the upside this week despite loss of upside momentum. Next target is 61.8% retracement of 0.9243 to 0.8332 at 0.8995. On the downside, below 0.8687 minor support will turn intraday bias neutral first. But near term outlook will stay cautiously bullish as long as 0.8550 support holds.

In the bigger picture, there is prospect of medium term bottoming at 0.8332 considering possible bullish convergence condition in W MACD, and the support from 0.8317 long term fibonacci support. Sustained trading above 55 D EMA (now at 0.8681) will affirm this case, and bring stronger rise back towards 0.9243 resistance, even as a corrective move.

In the long term picture, price action from 0.7065 (2011 high) are seen as a corrective pattern to the multi-decade down trend from 1.8305 (2000 high) . Strong rebound from 61.8% retracement of 0.7065 to 1.0342 (2016 high) will start the third leg as a medium term rally. But there will be no sign of long term reversal until firm break of 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

AUD/USD edged lower to 0.6468 last week but turned sideway since then. Initial bias remains neutral this week for more consolidations. While stronger recovery cannot be ruled out, outlook will stay bearish as long as 0.6621 resistance holds. Break of 0.6468 will resume the decline from 0.6870 to 61.8% projection of 0.6870 to 0.6524 from 0.6621 at 0.6407.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which might still be in progress. Overall, sideway trading could continue in range of 0.6169/7156 for some more time. But as long as 0.7156 holds, an eventual downside breakout would be mildly in favor.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen the second leg of the pattern. Hence, in case of deeper decline, strong support should emerge above 0.5506 to bring reversal.

USD/CAD rebounded strongly last week but failed to break through 1.3540 resistance decisively. Initial bias remains neutral this week for more consolidations first. Further rise is mildly in favor as long as 1.3357 support holds. On the upside, decisive break of 1.3540/3 will resume the rise from 1.3176. That will also revive that case that whole fall from 1.3897 has completed, and target this resistance. Nevertheless, firm break of 1.3357 support will argue that rebound from 1.3176 has completed, and target this low for resuming whole fall from 1.3897.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.2947 resistance turned support holds.

GBP/JPY's rise last week indicates that pull back from 188.90 has completed at 185.21 already. Initial bias remains on the upside this week. Decisive break there will confirm larger up trend resumption. Next near term target will be 61.8% projection of 178.71 to 188.90 from 185.21 at 191.50. For now, near term outlook will stay bullish as long as 185.21 support holds, in case of retreat.

In the bigger picture, up trend from 123.94 (2020 low) in in progress. Medium term outlook will stay bullish as long as 178.32 support holds. Next target is 195.86 long term resistance (2015 high).

In the longer term picture, rise from 122.75 (2016 low) is seen as the third leg of the pattern from 116.83 (2011 low). Further rally will remain in favor as long as 172.11 resistance turned support holds. Break of 195.86 (2015 high) is possible. But strong resistance could be seen from 61.8% retracement of 251.09 (2007 high) to 116.83 at 199.80 to limit upside.

EUR/JPY's rebound last week suggests that corrective pull back from 161.84 has completed at 158.06 already. Initial bias remains on the upside for 161.84 resistance first. Firm break there will rebound whole rise from 153.15 to retest 161.84. For now, further rally is expected as long as 158.06 support holds, in case of retreat.

In the bigger picture, price actions from 164.29 medium term top are seen as a correction to rise from 139.05 only. As long as 148.38 resistance turned support holds (2022 high), larger up trend from 114.42 (2020 low) is expected to resume through 164.29 at a later stage. Next target would be 169.96 (2008 high).

In the long term picture, rise from 114.42 (2020 low) is seen as the third leg of the whole up trend from 94.11 (2012 low). Next target is 100% projection of 94.11 to 149.76 from 114.42 at 170.07 which is close to 169.96 (2008 high). This will remain the favored case as long as 148.38 resistance turned support holds.

EUR/GBP stayed in consolidation above 0.8512 last week and outlook is unchanged. Initial bias remains neutral this week first. While another recovery cannot be ruled out, outlook will stay bearish as long as 0.8591 resistance holds. On the downside, break of 0.8512 will resume the decline from 0.8713 to 0.8491, and then 0.8464 projection level. However, firm break of 0.8591 will turn bias back to the upside for stronger rebound.

In the bigger picture, fall from 0.8764 is seen as another leg in the whole down trend from 0.9267 (2022 high). Outlook will stay bearish as long as 0.8713 resistance holds. Break of 0.8491 will target 61.8% projection of 0.8977 to 0.8491 from 0.8764 at 0.8464.

In the long term picture, price action from 0.9499 (2020 high) is seen as part of the long term range pattern from 0.9799 (2008 high). Fall from 0.9267 is the third leg of the pattern from 0.9499. Break of 0.8201 (2022 low) will target 100% projection of 0.9499 to 0.8201 from 0.9267 at 0.7969.