Sample Category Title

• USDJPY tries to switch medium-term outlook to bullish
• Prices hold within Fibonacci levels
• Technical signals are positive

USDJPY is looking to resume its bullish trend, having softly pivoted near the 50.0% Fibonacci retracement level of the down leg from 151.90 to 140.20 at 146.07.

To attract new buyers, the bulls will have to surpass the aforementioned resistance of 146.07 and move beyond the 146.60 barrier. In this case, the price could pick up steam towards the important resistance at 148.50. Another successful battle there could see the price jumping towards the 149.70 line, taken from the highs at the end of November.

Nevertheless, a downside correction could still be possible in the coming sessions. If the pair slumps below the 38.2% Fibonacci of 144.70 ahead of the 200-day simple moving average (SMA) at 143.70, it could stabilize near the 143.40 support, which coincides with the 20-day SMA. Otherwise, the sell-off could expand towards the 23.6% Fibonacci of 143.00. However, only a clear close below 140.90 would disappoint medium-term traders.

The technical oscillators seem to be able to convince traders of the bullish scenario. The RSI is pointing upwards in the bullish region, while the MACD is standing above its trigger line and is ready for a cross above the zero level.

Summing up, USDJPY has not eliminated downside risks yet, despite marking a positive start to the week. To boost buying confidence, the pair will need to crawl above the 61.8% Fibonacci of 147.40.

Daily Pivots: (S1) 144.32; (P) 144.95; (R1) 145.54; More...

Intraday bias in USD/JPY stays neutral and outlook is unchanged. Rebound from 140.25 could extend through 146.40, but upside should be limited by 61.8% retracement of 151.89 to 140.25 at 147.44. On the downside, break of 143.41 will turn bias back to the downside for retesting 140.25 low.

In the bigger picture, for now, fall from 151.89 is still seen as the third leg of the corrective pattern from 151.89. Another decline through 140.25 will target 61.8% retracement of 127.20 to 151.89 at 136.63. Sustained break there will pave the way to 127.20 support (2022 low). However, firm break of 147.44 fibonacci resistance will dampen this view and bring retest of 151.89 instead.

Daily Pivots: (S1) 0.8498; (P) 0.8518; (R1) 0.8528; More....

Intraday bias in USD/CHF remains neutral as consolidation from 0.8332 is extending. Also, outlook stays bearish as long as 0.8665 support turned resistance holds. On the downside, break of 0.8332 will resume larger fall from 0.9243 to 0.8257 projection level.

In the bigger picture, down trend from 1.0146 (2022 high) is in progress. Next target is 61.8% retracement of 1.0146 to 0.8551 from 0.9243 at 0.8257. Sustained break there could prompt downside acceleration to 100% projection at 0.7648. This will now remain the favored case as long as 0.8819 resistance holds.

Daily Pivots: (S1) 1.2721; (P) 1.2753; (R1) 1.2787; More...

GBP/USD is extending consolidation from 1.2826 and intraday bias remains neutral. On the upside, decisive break of 1.2826 will resume whole rally from 1.2036. Nevertheless, another fall and break of 1.2611 will bring deeper correction to 1.2499 support instead.

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 that's in progress. 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.

Euro trades mildly higher today after two known ECB hawks raised skepticism about a near term rate cut. Yet, upside momentum is somewhat tempered by weak trade and production data. Also, Euro is outshone slightly by Dollar, but the latter is also struggling to break out from familiar range other major currencies. Subdued trading could continue for the rest of the day with US on holiday.

Meanwhile, Sterling, Australian Dollar, and New Zealand Dollar are trading on the softer side. Overall markets in Europe are mildly on the risk-off side. Yen is also among the worst performers, apparent on speculations that BoJ isn't ready to hike yet, which also boosts Nikkei. Swiss Franc and Canadian Dollar are mixed like pedestrians.

Technically, EUR/AUD is trying to resume the rebound from 1.6127 today, with sight set on 1.6478 resistance. Decisive break there will strength the case that whole correction from 1.7062 has completed with three waves down. Further rise should then be seen to 1.6844 resistance for confirmation. However, any significant movesmight only materialize following the release of China's economic data on Wednesday or Australia's employment data on Thursday.

In Europe, at the time of writing, FTSE is down -0.34%. DAX is down -0.43%. CAC is down -0.67%. Germany 10-year yield is up 0.032 at 2.238. UK 10-year yield is up 0.009 at 3.809. Earlier in Asia, Nikkei rose 0.91%. Hong Kong HSI fell -0.17%. China Shanghai SSE rose 0.15%. Singapore Strait Times rose 0.24%. Japan 10-year yield fell -0.0331 to 0.558.

ECB's Nagel signals caution, rate cuts possible after summer break

In an interview with Bloomberg TV, ECB Governing Council member and Bundesbank President Joachim Nagel hinted at the possibility of delaying interest rate cuts until after the summer, stating, "Maybe we can wait for the summer break." However, he was cautious not to delve into speculation, emphasizing, "I don't want to speculate." He also empahsized, "it's too early to talk about cuts."

Further elaborating on the current market expectations, Nagel addressed the speculations of six 25 basis points rate cuts by ECB this year. He noted, "The markets from time to time are optimistic. Sometimes they are overly optimistic." This acknowledgment highlights a divergence between market expectations and the ECB's internal assessments. Nagel's observation, "I have a different view," underscores a more cautious and less aggressive approach towards monetary easing.

ECB's Holzmann cautions against premature rate cuts amid uncertainty

During the World Economic Forum in Davos, ECB Governing Council member Robert Holzmann expressed skepticism about the possibility of rate cuts in the near term. He told CNBC, "I cannot imagine that we'll talk about cuts yet, because we should not talk about it."

His asserted, "Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year."

"Unless we see a clear decline towards 2%, we won't be able to make any announcement at all when we're going to cut," he explained.

Holzmann also highlighted the potential for structural changes in the economy, which could have longer-term implications for pricing. He mentioned, "Prices on a day-to-day basis may increase, but it may also risk to change the way we do business." This comment points to the possibility of enduring economic shifts that could affect pricing dynamics and, consequently, ECB's monetary policy decisions.

Eurozone goods exports fell -4.7% yoy in Nov, imports down -16.7% yoy

Eurozone goods exports to the rest of the world fell -4.7% yoy to EUR 252.5B in November. Goods imports fell -16.7% yoy. A EUR 20.3B goods trade surplus was recorded. Intra-Eurozone trade fell -9.4% yoy to EUR 227.2B.

In seasonally adjusted term, goods exports rose 1.0% mom to EUR 236.8B. Imports fell -0.6% mom to EUR 222.1B. Trade surplus widened from prior month's EUR 11.1B to EUR 14.8B, above expectation of EUR 11.2B.

Eurozone industrial production down -0.3% mom in Nov, EU down -0.2% mom

Eurozone industrial production fell -0.3% mom in November, match expectations. Industrial production fell by -2.0% mom for durable consumer goods, by -0.8% mom for capital goods and by -0.6% mom for intermediate goods, while production grew by 0.9% mom for energy and by 1.2% mom for non-durable consumer goods.

EU industrial production fell -0.2% mom. Among Member States for which data are available, the largest monthly decreases were registered in Greece (-4.1%), Slovakia (-4.0%) and Belgium (-3.8%). The highest increases were observed in Denmark (+9.1%), Slovenia (+3.7%) and Portugal (+3.4%).

Contrary to market expectations, PBoC maintains MLF rate but increases liquidity

Despite the anticipation of a rate cut to bolster the weakening economy, currently grappling with deflation for the past three months, PBoC held firm, keeping the rate on CNY 995B worth of one-year medium-term lending facility loans steady at 2.50%. This decision defied the general expectation of a 0.1% cut to 2.40%.

Opting not to alter the policy rate, the central bank instead chose to enhance liquidity in the banking system. This is seen from the net injection of CNY 216B of fresh funds, following the expiration of CNY 779B worth of MLF loans this month. Moreover, PBoC also infused CNY 89B yuan through seven-day reverse repos, maintaining a stable borrowing cost at 1.80%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0929; (P) 1.0958; (R1) 1.0980; More...

No change in EUR/USD's outlook as it's staying in very tight range. Intraday bias stays neutral at this point. Further fall is in favor as long as 1.0997 minor resistance intact. Break of 1.0876 will resume the fall from 1.1138 to 1.0722 support next. Nevertheless, firm break of 1.0997 will turn bias back to the upside for retesting 1.1138 high instead.

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 below.

Economic Indicators Update

Daily Pivots: (S1) 1.0929; (P) 1.0958; (R1) 1.0980; More...

No change in EUR/USD's outlook as it's staying in very tight range. Intraday bias stays neutral at this point. Further fall is in favor as long as 1.0997 minor resistance intact. Break of 1.0876 will resume the fall from 1.1138 to 1.0722 support next. Nevertheless, firm break of 1.0997 will turn bias back to the upside for retesting 1.1138 high instead.

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 below.

The euro is showing limited movement on Monday. In the European session, EUR/USD is trading at 1.0948, down 0.02%.

German inflation is on the rise

Germany’s inflation rate climbed to 3.7% y/y in December, up from 3.2% in November, which was a two-year low. We’ll get the final estimate on Tuesday. The main contributor to the upswing was a base effect due to a one-time government subsidy for energy expenses in December 2022. The subsidy cooled inflation in December 2022 and resulted in the upswing in December 2023. Core inflation, which excludes energy and food prices, rose 4.5% y/y in the preliminary estimate, down sharply from 5.5% in November. The eurozone releases final CPI for November on Wednesday.

ECB policy makers can point to impressive progress in the battle to bring down inflation. In November, CPI fell to 2.4%, down sharply from 2.9% in October. A year ago, inflation was running at a clip of 10.1%. With inflation closing in on the 2% target, the burning question is the timing of rate cuts. The markets have priced in a first rate cut as early as March but the ECB, unlike the Federal Reserve, isn’t jumping on the rate-cut bandwagon just yet.

ECB Chief Economist Philip Lane said on Friday that lowering rates would not be high on the ECB’s agenda until the ECB was convinced that “we are firmly on our way back to 2% inflation”. This stance echoed comments from ECB President Lagarde a day earlier. Lane had a warning for the markets, saying that cutting rates too fast could trigger higher inflation. The markets have priced in at least 150 basis points in cuts and expect the first cut in March.

EUR/USD Technical

• EUR/USD is putting pressure at resistance at 1.0954. Above, there is resistance at 1.0996
• 1.0908 and 1.0866 are the next support levels

During the World Economic Forum in Davos, ECB Governing Council member Robert Holzmann expressed skepticism about the possibility of rate cuts in the near term. He told CNBC, "I cannot imagine that we'll talk about cuts yet, because we should not talk about it."

His asserted, "Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year."

"Unless we see a clear decline towards 2%, we won't be able to make any announcement at all when we're going to cut," he explained.

Holzmann also highlighted the potential for structural changes in the economy, which could have longer-term implications for pricing. He mentioned, "Prices on a day-to-day basis may increase, but it may also risk to change the way we do business." This comment points to the possibility of enduring economic shifts that could affect pricing dynamics and, consequently, ECB's monetary policy decisions.

In an interview with Bloomberg TV, ECB Governing Council member and Bundesbank President Joachim Nagel hinted at the possibility of delaying interest rate cuts until after the summer, stating, "Maybe we can wait for the summer break." However, he was cautious not to delve into speculation, emphasizing, "I don't want to speculate." He also empahsized, "it's too early to talk about cuts."

Further elaborating on the current market expectations, Nagel addressed the speculations of six 25 basis points rate cuts by ECB this year. He noted, "The markets from time to time are optimistic. Sometimes they are overly optimistic." This acknowledgment highlights a divergence between market expectations and the ECB's internal assessments. Nagel's observation, "I have a different view," underscores a more cautious and less aggressive approach towards monetary easing.

The dollar index keeps positive tone in holiday-thinned Monday’s trading and attempting again through pivotal Fibo barrier at 102.27 (50% retracement of 104.27/100.29 bear-leg), where the action failed several times recently.

Sustained break here to improve near-term picture and shift focus to the upside for potential attack at key barriers at 102.74/84 (recent range top / double-Fibo barrier) violation of which to signal continuation of recovery leg from 100.30 (Dec 28 low).

Positive momentum on daily chart and converging daily Tenkan / Kijun-sen, in attempt to form a bull-cross, underpin near-term action, though risk of extended sideways mode would persist as long as the price remains within the range.

Holding above rising 10DMA (102.12) is a minimum requirement to keep near-term bias positive.

Res: 102.50; 102.74; 102.84; 103.21.
Sup: 102.12; 101.75; 101.60; 101.23.