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Daily Pivots: (S1) 0.9170; (P) 0.9215; (R1) 0.9239; More...

No change in USD/CHF's outlook and intraday bias stays neutral. On the upside, firm break of 0.9287/9 resistance will confirm short term bottoming at 0.9058, and bring stronger rise to 0.9407 resistance. On the downside, however, sustained break of 0.9058 will resume larger decline from 1.0146 instead.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall from 1.0146 should be a medium term down trend itself. Next target is a test on 0.8756 low. Strong support should be seen there to bring rebound. Still, further decline will now be expected as long as 0.9407 resistance holds, in any case.

Daily Pivots: (S1) 1.0677; (P) 1.0704; (R1) 1.0751; More...

EUR/USD failed to break through 1.0790 resistance decisively and intraday bias stays neutral. On the downside, break of 1.0654 will resume the corrective fall from 1.1032 to 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support should be seen around there to bring rebound, at least on first attempt. On the upside, firm break of 1.0790 minor resistance will turn bias back to the upside for retesting 1.1032 high instead.

In the bigger picture, the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.

The Consumer Price Index increased 0.5% month-on-month (m/m) in January, meeting expectations. The 12-month change edged lower to 6.4% (down from 6.5% in December).

Energy prices increased by 2.0% m/m, as rising gasoline prices (+2.4% m/m) and energy services (+2.1% m/m) each notched similar gains on the month. Food prices rose 0.5% m/m and were up 10.1% y/y.

Core inflation (excludes food & energy) rose 0.4% m/m – matching December's gain. Compared to last January, prices were up 5.6% – a tick lower than the 5.7% recorded in December.

Price growth across services (+0.5% m/m) saw a modest deceleration from December. Gains were concentrated in the shelter component (+0.7% m/m) with both rents and owner's equivalent rent each notching similar gains. Lodging away from home (+1.2% m/m) was also higher in January.

• Stripping out shelter, "super" core service inflation rose 0.3% m/m – a modest deceleration from the 0.4% m/m gain in December – and is up 6.4% y/y.

Core goods prices (0.1% m/m%) recorded a modest gain – ending what had been three prior months of declines. Price growth was seen across most categories including household furnishings (+0.5% m/m), apparel (+0.8% m/m), recreation commodities (+0.1% m/m) and other goods (+0.8% m/m). Transportation goods (-0.7% m/m) were lower on the month, as used vehicle prices (-1.9% m/m) recorded another sizeable decline, while new vehicle prices (+0.2% m/m) were higher.

Key Implications

Despite core inflation matching December's month-on-month gain, favorable base effects meant that inflation continued to lose speed on a year-over-year basis. That said, the three-month annualized change rose to 4.6% (previously 4.3%) – ending what had been two consecutive months of declines.

A big reason for the sustained upward pressure on price growth last month was the result of goods prices no longer being a source a deflation as it had been in each of the prior three months. Indeed, used vehicle prices recorded another month of solid declines, however, that was more than offset by stronger price growth across most other consumer goods categories. With more recent wholesale car price data – as measured by the Manheim UVPI – showing used vehicle prices having turned higher, further declines from this component are unlikely. Unless we see price growth across other goods turn lower, goods inflation will again make positive contributions to core inflation.

Today's inflation numbers reinforce Chair Powell's recent messaging that we are only in the very earlier stages of the disinflationary process. The adjustment is unlikely to occur in a linear fashion, and it certainly can't make meaningful progress in an environment where the economy continues to add +500k jobs per-month. We expect that the FOMC will need to raise the Fed funds rate at each of its next two meetings by 25 basis points in order to make the policy stance sufficiently restrictive to cool the economy and return inflation to 2%.

Daily Pivots: (S1) 1.2064; (P) 1.2108; (R1) 1.2184; More...

GBP/USD's rebound from 1.1960 resumed by breaking 1.2192 minor resistance and intraday bias is back on the upside. The development revived the case that corrective pattern from 1.2445 has already completed at 1.1960. Further rise should be seen to retest 1.2445/6 next. On the downside, however, below 1.2123 will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Dollar is rather indecisive in early US session. US consumer inflation slowed less than expected in January, support Fed to continue tightening, probably for longer. However, positive risk sentiment is offsetting the boost to the greenback. Sterling, on the hand, was lifted by solid job data while FTSE hitting new record high. Elsewhere, Euro Swiss Franc and Aussie are on the firmer side. Yen, Canadian and Kiwi are on the weaker side.

Technically, GBP/CAD's break of 4 hour 55 EMA is a positive sign. Immediate focus is now on 1.6338 resistance. Decisive break there will argue that whole corrective pattern from 1.6846 has completed with three waves to 1.6075. Stronger rally would then be seen back to 1.6690/6846 resistance. Tomorrow's UK CPI data could be the trigger.

In Europe, at the time of writing, FTSE is up 0.24%. DAX is up 0.26%. CAC is up 0.36%. Germany 10-year yield is up 0.017 at 2.388. Earlier in Asia, Nikkei rose 0.64%. Hong Kong HSI dropped -0.24%. China Shanghai SSE rose 0.28%. Singapore Strait Times dropped -0.20%. Japan 10-year JGB yield closed flat at 0.504.

US CPI slowed to 6.4% yoy in Jan, Core CPI down to 5.6% yoy

US CPI rose 0.5% mom in January while CPI core rose 0.4% mom. Both matched expectations. Food index rose 0.5% mom while energy index rose 2.0% mom.

Over the last 12 months, CPI slowed from 6.5% yoy to 6.4% yoy, above expectation of 6.2% yoy. That's nonetheless the lowest reading since October 2021. CPI core slowed from 5.7% yoy to 5.6% yoy, above expectation of 5.5% yoy, but was the lowest since December 2021. Energy index rose 8.7% yoy while food index rose 10.1% yoy.

ECB Makhlouf: I'm open to acting forcefully to bring inflation down

ECB Governing Council member Gabriel Makhlouf told WSJ, "I'm open to acting forcefully to get inflation down to our target." He noted that interest rate could rise to above 3.5% and stay there.

Regarding speculations that ECB would cut interest this year, Makhlouf said, "I think that really is going too far... We'll reach a point where we're going to, then plateau."

"I see the ECB as putting up interest rates after the March meeting...Even though inflation is coming down it's still way above our target," Makhlouf added.

UK payrolled employees rose 102k in Jan, unemployment rate at 3.7% in Dec

In January, UK payrolled employees rose 0.3% mom or 102k. Comparing with the same month a year ago, payrolled employees rose 2.6% yoy or 768k. Median monthly pay rose 6.8% yoy. Claimant count dropped -12.9k, versus expectation of 9k rise.

In the three months to December, unemployment rate came in at 3.7%, 0.1% higher than the three-month period. Employment rate was at 75.6%, 0.2% higher than the previous three-month period. Economic inactivity rate was at 21.4%, 0.3% lower than the previous three-month period. Average earnings excluding bonus was up 6.7% 3moy, above expectation of 6.5%. Average earnings including bonus was up 5.9% 3moy, below expectation of 6.2%.

Japan GDP grew 0.2% in Q4 only, missed expectations

Japan GDP grew 0.2% qoq in Q4, below expectation of 0.5% qoq. In annualized term, GDP rose 0.6%, below expectation of 2.0%. GDP deflator rose 1.1% yoy, matched expectations. For the full year of 2022, GDP expanded 1.1%, slowed from 2021's 2.1%.

Economy Minister Shigeyuki Goto said after the release, "Rising inflation and the global slowdown are risks... But corporate spending appetite hasn't cooled ... we're not too pessimistic about the outlook."

Finance Minister Shunichi Suzuki said, "With global monetary tightening continuing, the slowdown in overseas economies could still drag on Japan's economy as well. We also need to pay attention to the impact from inflation, supply constraints, volatility in financial markets and the spread of Covid cases in China."

Separately, it's confirmed that the government nominated Kazuo Ueda as the next BoJ Governor, when Haruhiko Kuroda's term ends on April 8. Ueda is a 71-year-old former BoJ board member and an academic at Kyoritsu Women's University.

Australia consumer sentiment dropped back to 78.5, pressures bearing down on consumer becoming intense

Australia Westpac-Melbourne Institute Consumer Sentiment Index fell -6.9%mom from 84.3 to 78.5 in February. The reading was already below the trough of 79.0 as seen in the global financial crisis, but above the 75.6 low in April 2020 when the pandemic first hit.

Westpac noted: "Cost of living pressures and interest rate rises continue to weigh heavily. Hopes of some easing in both have been dashed by the strong December quarter CPI and the RBA's resumption of its interest rate tightening cycle."

Regarding RBA policy, Westpac expects another 25bps hike to 3.60% on March 7, a pause in April, and then a final 35bps hike in May to 3.85%.

It added, "The consumer sentiment survey continues to give a very clear warning that the pressures bearing down on the consumer are becoming intense. While spending has held up relatively well to date, we expect an abrupt slowdown to show through in coming months."

Australia NAB business confidence rose to 6, conditions rose to 18

Australia NAB Business Confidence rose further from 0 to 6 in January. Business Conditions also improved from 13 to 18. Looking at some details, trading conditions rose from 20 to 28. Profitability conditions rose from 13 to 17. Employment conditions rose from 9 to 10.

NAB Chief Economist Alan Oster: "Business conditions picked back up in January after three months of softening in late 2022. There were strong increases in conditions for 'upstream' sectors such as wholesale, construction and manufacturing, and importantly, conditions in the more consumer-facing industries remained very strong."

"Confidence dipped into negative territory late in 2022 but is now back around the average after rebounding over the past two months. The improvement in confidence suggest firms have a more optimistic outlook as concerns about global growth prospects ease, while strong conditions are also providing evidence that the economy is more resilient than previously expected."

RBNZ survey: OCR expected to rise to 5% by year end

According to RBNZ Survey of Expectations (Business), one-year inflation expectations rose slightly from 5.08% to 5.11% in February quarter. The reading was similar to value from the 1990 survey when actual CPI was 7.60%.

On the other hand, two-year inflation expected dropped further from 3.62% to 3.30%. The spread also narrowed, with no respondent answering below 2.00% or above 6.00%.

Official Cash Rate (OCR) expectations increased notably by 74 basis points from 4.25% to 4.89% by the end of this quarter. OCR is expected rise further to 5.00% by the end of the year, up from 4.67%.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2064; (P) 1.2108; (R1) 1.2184; More...

GBP/USD's rebound from 1.1960 resumed by breaking 1.2192 minor resistance and intraday bias is back on the upside. The development revived the case that corrective pattern from 1.2445 has already completed at 1.1960. Further rise should be seen to retest 1.2445/6 next. On the downside, however, below 1.2123 will mix up the outlook again and turn intraday bias neutral.

In the bigger picture, rise from 1.0351 medium term bottom is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1644 resistance turned support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759. Sustained break there will pave the way back to 1.4248.

Economic Indicators Update

US CPI rose 0.5% mom in January while CPI core rose 0.4% mom. Both matched expectations. Food index rose 0.5% mom while energy index rose 2.0% mom.

Over the last 12 months, CPI slowed from 6.5% yoy to 6.4% yoy, above expectation of 6.2% yoy. That's nonetheless the lowest reading since October 2021. CPI core slowed from 5.7% yoy to 5.6% yoy, above expectation of 5.5% yoy, but was the lowest since December 2021. Energy index rose 8.7% yoy while food index rose 10.1% yoy.

Full release here.

This week, there is a thrilling array of fundamental releases for the US Dollar. This array features several high-impact news releases like the Consumer Price Index (CPI), Retail Sales, and the Producer Price Index (PPI). The overall impact of this line-up remains to be seen, but we can formulate predictions based on the current price action on the DXY and the major pairs. Let's take a look at them right away!

US Dollar - Daily Timeframe

The Daily timeframe chart of the US Dollar index shows the price currently reacting from the 50-Day moving average and the 61.8 Fibonacci retracement. Considering the most recent break of the structure being bullish, I am expecting to see an initial bearish reaction from the Dollar. After that bearish reaction, we can hope for a bullish continuation from the drop-base-rally demand zone I have marked towards the bottom of the chart attached above.

Analysts’ Expectations:

• Direction: Bullish
• Target: 104.739
• Invalidation: 100.774

GBPUSD

GBPUSD has recently broken below the trendline support of the rising channel. If the price rises to meet the trendline, I expect that to act as a bearish confirmation. The highlighted supply zone is also a crucial confluence to consider in favor of a bearish move.

Analysts’ Expectations:

• Direction: Bearish
• Target: 1.19412
• Invalidation: 1.24058

EURUSD

EURUSD is currently reacting from a confluence of the 50-Day moving average. However, the price action to the left suggests that the price needs to fill up the imbalance created by the break of the previous high.

Analysts’ Expectations:

• Direction: Bearish
• Target: 1.10386
• Invalidation: 1.06004

XAUUSD - 4 Hour Timeframe

Gold has recently broken below the trendline support of the rising wedge, followed by a retracement and another structure break. Based on this, the order block responsible for the most recent structure break would act as an area of resistance. The 50-period moving average provides further confirmation in favor of a bearish reaction.

Analysts’ Expectations:

• Direction: Bearish
• Target: $1,839.04
• Invalidation: $1,890.70

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.

There are a lot of reasons for investors to seek safe havens, particularly recently. But gold has struggled to reach the $1,900/oz level. Although it could make it that high eventually, it's still notable that it's taking so long. There are some fundamental things going on that could explain the phenomenon, as well as some other unusual things happening in the Forex space.

The clouds are gathering

Gold bulls could compile a pretty long list of reasons to support their position. From the longer term expectation of a recession, to the more immediate worries around the "balloon crisis" between the US and China. In fact, after the US confirmed shooting down as many as four "objects" in the last few days, risk appetite rallied. The stock market rose at the expense of safe havens, including gold.

Even with the dollar getting weaker recently, gold still hasn't managed to move up as much as anticipated. There are other, less publicized events in the gold space, such as Freeport cutting production in Indonesia due to floods. Meanwhile, China's bought up over $5B in gold over the last month, adding it to their reserves. That was the third month of reserve growth in China, and is in line with global central banks expanding their precious metal holdings.

Prices are slowing down

So, given the fundamentals, it's perfectly reasonable to expect gold prices to have upward momentum. But that doesn't mean there might be some delays along the way. One of those could be the pending release of US CPI figures later today. As discussed, inflation is expected to come down once again.

Generally, gold is seen as a store of value. It's not subject to inflation. So, in periods when inflation is expected to rise, gold generally gets more interest. But, if inflation peaks and starts to come down, that interest starts to wane. Especially in an environment with higher interest rates, which can compensate much of if not all of the losses from expected inflation.

Things are a bit skewed right now

More than gold specifically, other pricing mechanisms are in a situation that is economically irrational, for the moment. This can lead to these somewhat contradictory or somewhat erratic moves in assets, such as gold. But also things like crude, copper, and even currencies. The dollar in particular, which is the basis for pricing a lot of assets around the world.

The thing is, in normal circumstances, debt should generate a return on investment. That is, the interest rate should be higher than inflation. This is a "positive real rate of return". The longer the debt, the more above inflation it should pay. But now, inflation is above the interest rate, meaning that anyone preserving liquidity is losing money. Buying treasuries, for example, generates a net loss. Which means investors have to look for alternatives to investment that aren't debt.

The expectation for this year is that the Fed funds rate will remain above 5.0%, but inflation will come down to something around 3.0%. That means "rationality" in the debt markets is expected to be restored. But, before that, markets will have to adjust, which can mean situations where risk rises, but gold prices don't, might keep happening for a while longer.

ECB Governing Council member Gabriel Makhlouf told WSJ, "I'm open to acting forcefully to get inflation down to our target." He noted that interest rate could rise to above 3.5% and stay there.

Regarding speculations that ECB would cut interest this year, Makhlouf said, "I think that really is going too far... We'll reach a point where we're going to, then plateau."

"I see the ECB as putting up interest rates after the March meeting...Even though inflation is coming down it's still way above our target," Makhlouf added.

The US dollar remains at the back foot and extends weakness in European trading on Tuesday, ahead of key event – US inflation report for January.

Fresh bears are in control for the second consecutive day following repeated failure at pivotal barriers at 103.43/58 (55DMA / Fibo 61.8% of 105.39/100.66 bear-leg) and test initial support at 102.79 (rising 10DMA) which also marks the floor of seven-day range.

Potential break lower would increase downside risk on formation of a double-top pattern on daily chart and add to signals that short correction from 100.66 (Feb 2 low) might be over.

Daily indicators are heading south and contribute to negative near-term outlook, as the action is heavily weighed by thick falling daily Ichimoku cloud (base of the cloud lays at 104.12).

The greenback is in defensive ahead of key US data, with annualized inflation expected to ease to 6.2% in Feb from 6.5% in Jan, but monthly figure is expected to jump by 0.5% following 0.1% increase previous month.

Although the core inflation (excluding volatile food and energy components) is also forecasted to ease to 5.5% in Feb from 5.7% in Jan, economists remain concerned as core inflation’s values of nearly three times above Fed’s 2% target, warn that price pressure is still strong and imply that the US central bank may opt for extended tightening period in efforts to bring inflation under control and push it towards 2% target.

Expectations for annualized CPI range from 6.1% to 6.7%, with release above consensus to offer fresh boost to the dollar, as rising inflationary pressure would add to the scenario of hiking interest rates above expected targets, while lower figures in Feb to boost optimism that inflation have peaked and increase pressure on dollar.

Res: 103.43; 103.83; 104.14; 104.28.
Sup: 102.79; 102.50; 101.87; 101.41.