Sample Category Title

Daily Pivots: (S1) 1.0939; (P) 1.0957; (R1) 1.0990; More...

Intraday bias in EUR/USD remains neutral at this point. On the downside break of 1.0876 will resume the fall from 1.1138 short term top to 1.0722 support next. However, 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.

Daily Pivots: (S1) 1.2704; (P) 1.2724; (R1) 1.2762; More...

Range trading continues in GBP/USD and intraday bias stays neutral for the moment. On the upside, decisive break of 1.2826 high will resume whole rally from 1.2036. Nevertheless, 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.

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

No change in USD/CHF and intraday bias stays neutral. Consolidation from 0.8332 is extending. Stronger recovery cannot be ruled out. But outlook will stay 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, the 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) 144.78; (P) 145.31; (R1) 146.29; More...

USD/JPY's rebound from 140.25 resumed by breaking through 145.97. Intraday bias is back on the upside for 61.8% retracement of 151.89 to 140.25 at 147.44. Upside should be limited there to bring reversal. On the downside, below 145.27 minor support will turn intraday bias neutral first.

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.

The financial markets' initial reactions to stronger than expected US CPI readings are relatively subdued. While there was an immediate response with Dollar and yields rising, and stock futures dipping, these movements lacked significant follow-through. The exception in the currency markets was USD/JPY, which broke through last week's high. However, this move is attributed to a combination of Dollar's strength and Yen's ongoing weakness. The restrained market response suggests that traders and investors may require more time to reassess their views on Fed's path toward policy loosening and adjust their market positions accordingly.

As for the week, Euro is currently leading as the strongest currency, followed by British Pound and Dollar. However, the greenback holds potential to surpass others and take the top position. Conversely, Japanese Yen remains the weakest performer, with Australian Dollar and New Zealand Dollar also trailing. Swiss Franc is showing signs of weakness against European majors today, indicating a possible shift down in its relative market position.

Technically, EUR/USD's failure to surpass 1.0997 minor resistance earlier today suggests a mild bias towards a potential break below 1.0876 support level. Should this occur, the decline from 1.1138 should then target 1.0722 support. Ideally, for the bearish scenario to strengthen, GBP/USD and AUD/USD should also follow suit, breaking through their respective supports at 1.2611 and 0.6639.

In Europe, at the time of writing, FTSE is down -0.06%. DAX is up 0.05%. CAC is up 0.17%. Germany 10-year yield is up 0.0049 at 2.220. UK 10-year yield is up 0.018 at 3.845. Earlier in Asia, Nikkei surged 1.77%. Hong Kong HSI rose 1.27%. China Shanghai SSE rose 0.31%. Singapore Strait Times rose 0.67%. Japan 10-year yield rose 0.0189 to 0.606.

US CPI rises to 3.4%, CPI core down to 3.9%, both above expectations

In December, US CPI rose 0.3% mom, up from prior month's 0.1% mom, above expectation of 0.2% mom. CPI core (all items less food and energy) rose 0.3% mom, unchanged from prior month's, above expectation of 0.2% mom. Energy index rose 0.4% mom while food index rose 0.2% mom.

For the 12 months period, CPI accelerated from 3.1% yoy to 3.4% yoy, above expectation of 3.2% yoy. CPI core slowed from 4.0% yoy to 3.9% yoy, above expectation of 3.8% yoy. Energy index fell -2.0% yoy while food index rose 2.7% yoy.

US initial jobless claims down slightly to 202k, vs exp 215k

US initial jobless claims fell -1k to 202k in the week ending January 6, lower than expectation of 215k. Four-week moving average of initial claims fell -250 to 207.75k.

Continuing claims fell -34k to 1834k in the week ending December 30. Four-week moving average of continuing claims fell -8k to 1862k.

BoJ Regional Report: Mixed economic recovery and varied wage hike plans

BoJ's latest Regional Economic Report noted that all nine regions have experienced an uptick in their economies, albeit with variations in pace and extent. This improvement is happening despite challenges posed by the global economic slowdown and domestic price increases. The report categorizes the regional economies as either picking up, recovering moderately, or steadily improving.

Notably, Tokai and Kyushu-Okinawa regions received upgrades in their economic assessments. Kinki region, on the other hand, was downgraded, noted for showing "some weakness in part."

Regarding wages, BoJ report highlights a divergence in approaches among firms. It acknowledges that "some big firms have already announced plans to hike wages this year at or above the pace of last year," suggesting a proactive response to inflation and economic recovery.

However, the situation is not uniform across all business sizes. The report points out that "many firms have yet to firm up their plans on the pace of wage hikes." This uncertainty is particularly pronounced among small and medium-sized enterprises, which remain cautious about increasing wages due to profit constraints.

OECD calls for BoJ rate hike and flexible YCC

OECD has suggested that BoJ should consider implementing a gradual rise in short-term interest rates and introduce more flexibility into its Yield Curve Control policy. This recommendation comes at a time when Japan appears to be at a crucial economic juncture, with inflation trends potentially stabilizing around BoJ's 2% target, a goal set in 2013 but not consistently achieved since then.

In its report, OECD stated, "Japan is at a turning point, with inflation more likely to settle durably around the 2% inflation target than at any time since its inception." To adapt to this changing economic landscape, OECD advised that "greater flexibility in the conduct of yield curve control and a gradual modest increase in the short-term policy interest rate are warranted." This advice is predicated on projections of sustained inflation and evolving wage dynamics in Japan.

However, OECD also issued a cautionary note regarding the uncertainty surrounding Japan's inflation outlook, which it described as "exceptionally large." This uncertainty presents a significant challenge for BoJ as it navigates toward its inflation target. OECD emphasized the delicate balance BoJ must maintain, stating, "The key challenge facing the BoJ is how to durably achieve its inflation target without significantly overshooting."

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 144.78; (P) 145.31; (R1) 146.29; More...

USD/JPY's rebound from 140.25 resumed by breaking through 145.97. Intraday bias is back on the upside for 61.8% retracement of 151.89 to 140.25 at 147.44. Upside should be limited there to bring reversal. On the downside, below 145.27 minor support will turn intraday bias neutral first.

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.

Economic Indicators Update

US initial jobless claims fell -1k to 202k in the week ending January 6, lower than expectation of 215k. Four-week moving average of initial claims fell -250 to 207.75k.

Continuing claims fell -34k to 1834k in the week ending December 30. Four-week moving average of continuing claims fell -8k to 1862k.

Full US jobless claims release here.

In December, US CPI rose 0.3% mom, up from prior month's 0.1% mom, above expectation of 0.2% mom. CPI core (all items less food and energy) rose 0.3% mom, unchanged from prior month's, above expectation of 0.2% mom. Energy index rose 0.4% mom while food index rose 0.2% mom.

For the 12 months period, CPI accelerated from 3.1% yoy to 3.4% yoy, above expectation of 3.2% yoy. CPI core slowed from 4.0% yoy to 3.9% yoy, above expectation of 3.8% yoy. Energy index fell -2.0% yoy while food index rose 2.7% yoy.

Full US CPI release here.

Market picture

The US Securities Commission (SEC) has announced the approval of the Bitcoin-ETP. The initial fake announcement of this created a spike in volatility. This is a stark reminder of how short-term traders are vulnerable to volatility from the news.

Bitcoin soared to $48K before returning below $45K. Technically, these moves fit into a trend formed back in late October last year and gained new momentum after December’s sideways consolidation. It’s worth preparing for a scenario where altcoins, currently appearing undervalued compared to the leading cryptocurrency, start taking centre stage. But that doesn’t negate the potential for BTCUSD to reach $50-51K before a significant correction.

Ethereum is obviously attracting the attention of speculators, adding over 13% in less than 36 hours, as it is the next favourite for ETP approval. Potentially, these expectations could drive the price of ETH up in the next couple of months all the way to the $3500 area – the peak in April 2022.

News background

According to CoinMarketCap, traders lost nearly $1 billion due to a fake tweet about ETF approval. According to Bitfinex, the liquidation of positions in the futures market was the largest since August 2023.

About a dozen fund companies in Hong Kong are exploring the possibility of launching spot bitcoin ETFs, HashKey reported. Potential issuers include firms with Chinese capital, as well as from other Asian and European countries.

Robert Kiyosaki, author of the best-selling book “Rich Dad, Poor Dad”, suggested the price of the first cryptocurrency to rise to the $150K level after the ETF was approved. According to him, he will “buy more gold, silver and bitcoin with fake dollars”.

• US CPI expected to edge higher to 3.2%
• UK GDP projected to rebound to 0.2%

The British pound is unchanged on Thursday, trading at 1.2741 in Europe. We could see some movement from the pound in the North American session following the release of the US inflation report. On Friday, the UK releases GDP, which is expected to show a 0.2% gain in November, after a 0.3% decline a month earlier.

US inflation expected to inch higher

US inflation fell dramatically in 2023 and we’ll get a look at the December inflation report later today. Inflation was running at a 6.5% clip a year ago and the Federal Reserve has done an admirable job in slashing the inflation rate in half. US CPI is expected to have edged up to 3.2% y/y in December, compared to 3.1% in November which marked a five-month low. Monthly, CPI is expected to have inched up to 0.2%, following a 0.1% gain in November.

The Fed will be more concerned with core CPI, which is a better gauge of inflation than the headline reading. Core CPI is projected to have eased to 3.8% in December, after two straight gains of 4.0%. Monthly, Core CPI is expected to remain at 0.3%. If the inflation readings are wide of the estimates, we could see some volatility from GBP/USD.

The Bank of England was in the spotlight on Wednesday, as Governor Bailey testified before a parliamentary committee regarding the country’s financial stability. Bailey didn’t offer any clues about monetary policy but expressed satisfaction that mortgage rates have been falling. The markets are confident that the BoE’s rate-tightening cycle is over and that the central bank will start cutting interest rates in mid-2024. Bailey has stuck to a ‘higher for lower’ stance on rates but there is pressure on the BoE to consider rate cuts as inflation fell sharply in November to 3.9%, down from 3.6% a month earlier. Bailey may prefer to keep rates in restrictive territory until inflation falls closer to the 2% target before lowering rates.

GBP/USD Technical

• GBP/USD is testing resistance at 1.2722. Above, there is resistance at 1.2753
• There is support at 1.2678 and 1.2647

USDTRY breached psychological 30 barrier and hit new record high on Thursday, extending gains between two full figures (29 and 30) in less than a month.

Steady and slow-paced ascend, interrupted by minor corrections, suggest that bigger gains are possible.

Once the break of 30 pivot is verified, bulls will shift focus towards next targets at 30.0575 (Fibo projection) and 30.10 (round figure).

Overbought technical studies so far did not cause any stronger impact on bulls, with fundamentals likely to play a key role in the near future.

Change of expectations for Fed’s monetary policy may increase pressure on dollar, while lira could appreciate if financial conditions in Turkey start to improve and foreign investments start to return, which could lead to stronger correction

Res: 30.05; 30.06; 30.10; 30.20.
Sup: 29.67; 29.52; 29.38; 28.82.