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Europe continues to surprise with statistics, suggesting more room for a hawkish tone from the ECB next week. In addition to hawkish inflation readings, data from Germany today highlighted a continued recovery in industrial orders.

Destatis reported a 1% rise in manufacturing orders in January, after +3.4% in the previous month. This sharply contrasts the expected 0.6% m/m correction and adds to market optimism. The new orders index has returned to the level of August last year, although it is still down 10.9% year-on-year. However, the worrying pattern of year-on-year declines is primarily a high base effect. The post-squeeze recovery coincides with a rush to place orders on fears that the military conflict in Ukraine could soon disrupt supplies.

Strong Eurozone data strengthens the hawkish case for the ECB Governing Council, which meets next week for another policy decision. Options for a 50 or 25-basis-point rate hike will likely be on the table for the ECB. On Monday, Holzmann said four more 50-point hikes and an accelerated sell-off of assets from the balance sheet would be needed. Such a scenario is hardly a base case, but the general tone of commentary continues to shift in favour of further tightening.

This is probably the most critical driver for the FX market. Throughout 2021 and 2022, the dollar has rallied as the Fed’s tone has become more hawkish round after round. Now it is the ECB’s turn, and the fundamentals are in place for EURUSD to rise.

Daily Pivots: (S1) 1.3587; (P) 1.3608; (R1) 1.3634; More....

USD/CAD's rally resumed by breaking through 1.3664 and intraday bias is back on the upside. Further rise should be seen to retest 1.3976 high next. Decisive break there will resume larger up trend. For now, outlook will remain bullish as long as 1.3554 support holds, in case of retreat.

In the bigger picture, outlook stays bullish with 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) intact. Break of 1.3976 resistance will resume larger up trend from 1.2005 (2021 low) to 61.8% projection of 1.2401 to 1.3976 from 1.3261 at 1.4234.

Dollar soars on hawkish comments from Fed Chair Jerome Powell. He indicated that ultimate level of interests is "likely to be higher than previously anticipated". Fed is also "prepared to increase the pace of rate hikes". He also warned against "prematurely loosening policy.

"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said in the prepared remarks for the semi-annual testimony to Congress.

Additionally, "if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he added.

"Our overarching focus is using our tools to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored," Powell emphasized. "Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run."

"The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done," he said.

Full remarks here.

AUDUSD slipped today, breaking below the 0.6695 support (now turned into resistance) barrier, and confirming a lower low on the 4-hour chart. In the bigger picture, the pair is printing lower peaks and lower troughs below the downtrend line drawn from the high of February 2, as well as below all three of the plotted moving averages. This paints a negative short-term outlook for now.

The case for further declines is also supported by the short-term momentum indicators. The RSI fell below 30 and is pointing down, while the MACD is running below both its zero and trigger lines, pointing south as well.

If the bears are willing to stay in the driver’s seat, they could challenge the 0.6630 territory soon, the break of which might pave the way towards the 0.6550 barrier, marked as support by the inside swing high of November 8. If there are no buyers to be found there, another break could see scope for larger bearish extensions, perhaps all the way down to the low of November 10 at 0.6380.

For a bullish reversal scenario to start being examined, a move above 0.6810 may be needed. Such a move could confirm the break above the aforementioned trendline and may set the stage for advances towards the peak of February 21 at 0.6920. If that zone gets violated as well, the bulls may then extend their march towards the 0.7030 area, defined as resistance by the high of February 14.

Wrapping things up, AUDUSD traded lower today, confirming a lower low and thereby signaling the continuation of the prevailing short-term downtrend that’s been in place since February 2. For the outlook to change, a clear break above 0.6810 may be needed.

Daily Pivots: (S1) 1.5763; (P) 1.5824; (R1) 1.5932; More...

EUR/AUD's break of 1.5976 resistance confirms resumption of rise from 1.4281. Intraday bias remains on the upside. Current rally should target 61.8% projection of 1.4281 to 1.5976 from 1.5254 at 1.6302. On the downside, below 1.5840 minor support will turn intraday bias neutral and bring consolidations first, before staging another rise.

In the bigger picture, the strong support from 55 week EMA (now at 1.5396) is raising the chance of bullish trend reversal. On break of 1.5976, focus will be on 1.6434 cluster resistance (38.2% retracement of 1.9799 to 1.4281 at 1.6389). Sustained break there should confirm that whole down trend form 1.9799 (2020 high) has completed. However, rejection by this cluster resistance will make medium term outlook neutral at best.

Daily Pivots: (S1) 0.8844; (P) 0.8866; (R1) 0.8905; More...

EUR/GBP's rise form 0.8753 resumed by breaking 0.8895 temporary top and intraday bias is back on the upside. Current development suggests that correction from 0.8977 has completed with three waves down to 0.8753. Further rally should be seen to retest 0.8977 high next. Firm break there will resume the whole rally from 0.8545.

In the bigger picture, outlook is rather mixed for now, except that price actions from 0.9267 (2022 high) are part of the long term range pattern from 0.9499 (2020 high). With 0.8720 support intact, rise from 0.8545 is in favor to continue through 0.8977. However, firm break of 0.8720 will argue that such rebound has completed, and open up deeper fall through this support level.

Daily Pivots: (S1) 0.6708; (P) 0.6739; (R1) 0.6762; More...

AUD/USD's break of 0.6693 confirms resumption of the decline from 0.7156. The development also argues that rise from 0.6169 has finished. Intraday bias is back on the downside. Next target is 161.8% projection of of 0.6854 to 0.7028 from 0.6854 at 0.6539. For now, break of 0.6782 resistance is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, the break of 0.6721 structural support suggest that rise from 0.6169 (2022 low) has completed at 0.7156, after rejection by 55 month EMA (now at 0.7164). Deeper decline would then be see back to 61.8% retracement of 0.6169 to 0.7156 at 0.6546, even as a corrective fall. Sustained break there will bring retest of 0.6169 low.

Daily Pivots: (S1) 1.0638; (P) 1.0667; (R1) 1.0711; More...

At this point, the favored case is still that correction from 1.1032 has completed at 1.0532 already. Further rise is expected to 1.0803 resistance first. However, on the downside, break of 1.0575 support will dampen this bullish view again and turn bias back to the downside.

In the bigger picture, as long as 1.0482 support holds, rise from 0.9534 (2022 low) should continue to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. However, sustained break of 1.0482 will bring deeper fall to 61.8% retracement of 0.9534 to 1.1032 at 1.0106, even as a corrective pull back.

Daily Pivots: (S1) 1.1996; (P) 1.2023; (R1) 1.2052; More...

Intraday bias in GBP/USD stays neutral at this point. On the downside, break of 1.1914 will resume the decline from 1.2446, as the third leg of the corrective pattern from 1.2445, for 1.1840 support and possibly below. On the upside, break of 1.2142 resistance will turn bias back to the upside for further rebound to 1.2269 and above.

In the bigger picture, as long as 1.1840 support holds, rise from 1.0351 medium term bottom (2022 low) should still continue to 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. However, decisive break of 1.1840 will complete a double top pattern (1.2445, 1.2446) after rejection by 55 week EMA (now at 1.2243). Deeper decline should be seen back to 38.2% retracement of 1.0351 to 1.2445 at 1.1645.

Daily Pivots: (S1) 135.47; (P) 135.83; (R1) 136.29; More...

Intraday bias in USD/JPY remains neutral and outlook is unchanged. On the downside, break of 135.24 support will indicate short term topping, after rejection by 38.2% retracement of 151.93 to 127.20 at 136.64. Intraday bias will be turned back to the downside for 55 day EMA (now at 134.05) first. Sustained break of 55 day EMA will indicate that whole rebound from 127.20 has completed. On the upside, however, sustained break of 136.64 will indicate that fall from 151.93 has completed, and bring further rally to 61.8% retracement at 142.48.

In the bigger picture, focus remains on 38.2% retracement of 151.93 to 127.20 at 136.64. Sustained break there will indicate that price actions from 151.93 medium term are merely a corrective pattern. Such development will maintain long term bullishness. Rejection by 136.64 will, on the other hand, extend the fall from 151.93 to 61.8% retracement of 102.58 to 151.93 at 121.43 at a later stage.