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Key Highlights

• USD/JPY started a major decline below the 145.00 support.
• A major bearish trend line is forming with resistance near 142.10 on the 4-hour chart.
• EUR/USD surged above the 1.1040 and 1.1080 levels.
• GBP/USD retested the 1.2820 resistance, where the bears emerged.

USD/JPY Technical Analysis

The US Dollar failed to remain stable above the 145.00 zone against the Japanese Yen. USD/JPY declined below the 143.20 support zone to enter a bearish zone.

Looking at the 4-hour chart, the pair settled below the 142.50 level, the 100 simple moving average (red, 4 hours), and the 200 simple moving average (green, 4 hours).

The pair even declined below the 141.20 level. A low was formed near 140.24 and the pair is now consolidating losses. On the upside, immediate resistance is near the 141.50 level. The first major resistance is near 142.00.

There is also a major bearish trend line forming with resistance near 142.10 on the same chart. A clear move above the trend line could send the pair further higher toward 142.60.

The next key resistance is near the 143.20 level. A close above the 143.20 zone could open the doors for more upsides. The next stop for the bulls might be 144.00. Any more gains might call for a drift toward the 145.00 level.

If there are more downsides, the pair could drop below the 140.25 level. The next major support is 140.00, below which the pair might decline and test 139.20. Any more losses might send the pair toward the 138.50 support.

Looking at EUR/USD, the pair gained bullish momentum and even climbed above the 1.1100 level before the bears appeared.

Economic Releases

• Chicago Purchasing Manager’s Index for Dec 2023 – Forecast 51.0, versus 55.8 previous.

• AUDUSD reversed from resistance level 0.6865
• Likely to fall to support level 0.6800

AUDUSD currency pair recently reversed down from the major resistance level 0.6865 (which has been reversing the pair from June).

The resistance level 0.6865 was further strengthened by the nearby upper daily Bollinger Band.

Given the strength of the resistance level 0.6865 and the overbought daily Stochastic, AUDUSD currency pair can be expected to fall further to the next support level 0.6800.

Daily Pivots: (S1) 1.1050; (P) 1.1086; (R1) 1.1144; More...

Intraday bias in EUR/USD is turned neutral first with current retreat, and some consolidations could be seen. For now, further rally is expected as long as 1.0929 support holds. Break of 1.1138 temporary top will resume the rise from 1.0447 to retest 1.1274 high. Strong resistance should be seen from there to limit upside, at least on first attempt. Meanwhile, break of 1.0929 will indicate short term topping and turn bias back to the downside for 1.0772 support.

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) 1.2731; (P) 1.2767; (R1) 1.2835; More...

Intraday bias in GBP/USD is turned neutral again with current retreat. For now, further rise is in favor as long as 1.2611 support holds. Above 1.2826 will resume larger rise from 1.2036 to 61.8% projection of 1.2068 to 1.2731 from 1.2499 at 1.2909. Nevertheless, break of 1.2611 will indicate short term topping, and turn bias back to the downside for 1.2499 support.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to rise 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) 0.8377; (P) 0.8463; (R1) 0.8517; More....

Intraday bias in USD/CHF remains on the downside for the moment. Current fall from 0.9243 should target 138.2% projection of 0.9111 to 0.8665 from 0.8819 at 0.8203 next. On the upside, above 0.8438 minor resistance will turn intraday bias neutral first. But outlook will stay bearish as long as 0.8665 support turned resistance holds, in case of recovery.

In the bigger picture, break of 0.8551 support indicates resumption of whole decline from 1.0146 (2022 high). 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) 141.31; (P) 142.08; (R1) 142.61; More...

USD/JPY's break of 140.94 indicates resumption of fall from 151.89. Intraday bias is now on the downside. Next target is 136.63. fibonacci level. On the upside, above 142.84 minor resistance will turn intraday bias neutral gain. But recovery should be limited below 144.94 resistance to bring another decline.

In the bigger picture, fall from 151.89 is seen as the third leg of the corrective pattern from 151.93 (2022 high). Deeper decline would be seen to 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). This will now remain the favored as long as 146.58 resistance holds.

Japanese Yen and Swiss Franc are standing out with significant rallies in otherwise relatively subdued markets today. Yen resumed its near-term rise against the Dollar, reaching its highest level in five months. Simultaneously, Swiss Franc has achieved its highest level in over a decade, excluding the spike seen in 2015.

While Dollar remains the weakest performer for the week, its selloff against currencies like the Sterling, Canadian Dollar, and Australian Dollar appears to be decelerating slightly. Euro remains firm, although it's underperforming against Yen and Franc. But the Sterling is noticeably underperforming compared to its European peers.

Technically, GBP/CHF's decline accelerates further to as low as 1.0667 so far. 61.8% projection of 1.1502 to 1.0779 from 1.1153 at 1.0706 is take out. Near term outlook will stay bearish as long as 1.0879 resistance holds. Next target is 100% projection at 1.0430.

In Europe, at the time of writing, FTSE is up 0.05%. DAX is down -0.19%. CAC is down -0.41%. Germany 10-year yield is up 0.035 at 1.931. UK 10-year yield is up 0.062 at 3.497. Earlier in Asia, Nikkei fell -0.42%. Hong Kong HSI rose 2.52%. China Shanghai SSE rose 1.38%. Singapore Strait Times rose 1.38%. Japan 10-year JGB yield fell -0.0056 to 0.593.

US initial jobless claims rises to 218k, vs exp 204k

US initial jobless claims rose 12k to 218k in the week ending December 23, above expectation of 204k. Four-week moving average of initial claims fell -250 to 212k.

Continuing claims rose 14k to 1875k in the week ending December 16. Four-week moving average of continuing claims fell -12.5k to 1865k.

US goods trade deficit widens slightly to USD -90.3B in Nov

US goods export fell -3.6% mom to USD 165.1B in November. Goods imports fell -2.1% mom to USD 255.4B. Goods trade deficit widened from USD -89.6B to USD -90.3B, slightly larger than expectation of USD -89.5B.

Wholesale inventories fell -0.2% mom to USD 895.7B. Retail inventories fell -0.1% mom to USD 794.9B.

ECB's Holzmann cautions against expectations of 2024 rate cuts

ECB Governing Council member Robert Holzmann emphasized there should be no presumption of rate reductions in the coming year.

Holzmann stated, "Even if the ECB is past an unprecedented series of ten consecutive rate increases, there is also for the year 2024 no guarantee of rate reductions."

Further reinforcing this cautious approach, Holzmann remarked on the current status of inflation and the ECB's policy measures, "Monetary policy normalization is already showing its impact on slowing inflation, but it would still be premature to think about rate cuts."

Japan's industrial production down -0.9% mom, continues to seesaw indecisively

Japan's industrial production fell -0.9% mom in November, marking the first decrease in three months. This drop, however, was less severe than the expected -1.6% mom decline. A notable factor in the contraction was -2.5% mom fall in motor vehicle production. Among the 15 sectors surveyed, 11 reported decreased production, while four sectors experienced increases.

Index of industrial shipments also dropped by -1.3% mom, aligning with overall decline in industrial production. Conversely, Index of inventories saw a marginal increase of 0.1% mom.

The Ministry of Economy, Trade and Industry maintained its assessment of industrial output as "fluctuating indecisively." Looking ahead, manufacturers expect a rebound in output by 6.0% mom in December, followed by -7.2% mom decrease in January 2023.

An METI official said, "We'll continue to monitor the impact of the global economic downturn and rising prices".

In separate release, retail sales data painted a more positive picture. Sales in November rose 5.3% yoy, exceeding forecast of 5.0% yoy, and marked the 21st consecutive month of expansion since March 2022. On a month-on-month basis, retail sales grew 1.0%, following 1.7% growth in October.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 141.31; (P) 142.08; (R1) 142.61; More...

USD/JPY's break of 140.94 indicates resumption of fall from 151.89. Intraday bias is now on the downside. Next target is 136.63. fibonacci level. On the upside, above 142.84 minor resistance will turn intraday bias neutral gain. But recovery should be limited below 144.94 resistance to bring another decline.

In the bigger picture, fall from 151.89 is seen as the third leg of the corrective pattern from 151.93 (2022 high). Deeper decline would be seen to 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). This will now remain the favored as long as 146.58 resistance holds.

Economic Indicators Update

US initial jobless claims rose 12k to 218k in the week ending December 23, above expectation of 204k. Four-week moving average of initial claims fell -250 to 212k.

Continuing claims rose 14k to 1875k in the week ending December 16. Four-week moving average of continuing claims fell -12.5k to 1865k.

Full US jobless claims release here.

US goods export fell -3.6% mom to USD 165.1B in November. Goods imports fell -2.1% mom to USD 255.4B. Goods trade deficit widened from USD -89.6B to USD -90.3B, slightly larger than expectation of USD -89.5B.

Wholesale inventories fell -0.2% mom to USD 895.7B. Retail inventories fell -0.1% mom to USD 794.9B.

Full US goods trade balance release here.