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Dollar sellers are back in control today, as markets appear to turn back into risk-on mode. In particular, FTSE is hitting another record high. The greenback is still inversely coupled to risk sentiment. Swiss Franc and Canadian are trailing Dollar as the next weakest. On the other hand, Kiwi and Aussie are the strongest, followed by Sterling, while Yen is mixed.

Technically, one focus now is whether NASDAQ could break through last week's high at 12269.55 to resume the rebound from 10088.82, or even further through 38.2% retracement of 16212.22 to 10088.82 at 12415.87. That might give extra pressure to Dollar.

In Europe, at the time of writing, FTSE is up 0.67%. DAX is up 1.05%. CAC is up 1.20%. Germany 10-year yield is down -0.0622 at 2.298. Earlier in Asia, Nikkei dropped -0.08%. Hong Kong HSI rose 1.60%. China Shanghai SSE rose 1.18%. Singapore Strait Times dropped -0.86%. Japan 10-year JGB yield rose 0.0014 to 0.498.

Fed Barkin: Is inflation calming? That's really the core question for this year

Richmond Fed President Thomas Barkin said in a podcast that "while the average (inflation) has dropped, the median has still stayed high".

"That's because the average has been distorted by falling prices for a few goods, like used cars, that escalated unsustainably during the pandemic," he said.

"We have seen three good months on the inflation prints. I'd like to see them continue. Is inflation calming? That's really the core question for this year," he said.

"I think underneath that, I want to understand the labor market. Is it cooling? What's happening to wages? What's happened to employment?" he added. "Underneath that, I want to understand what's happening to the broader demand, particular for companies who may or may not be thinking about increasing prices.

US initial jobless claims rose to 196k

US initial jobless claims rose 13k to 196k in the week ending February 4. Four-week moving average of initial claims dropped -2.5k to 189k.

Continuing claims rose 38k to 1688k in the week ending January 28. Four-week moving average of continuing claims rose 14.5k to 1665k.

BoE Bailey very uncertain particularly about price-setting and wage-setting

BoE Governor Andrew Bailey said in a Treasury Committee hearing, "we are concerned about persistence (of inflation) and that's why, frankly, we raised interest rates this time,"

"I am very uncertain particularly about price-setting and wage-setting in this country. We have got the largest upside skew in our forecasts that we have ever had on inflation," Bailey added.

Nevertheless, "what I would urge is that - particularly going forwards because we think inflation is going to fall very rapidly - that is taken into account," Bailey added.

Chief Economist Huw Pill said, "There is no room for complacency. Inflation remains unacceptably high... Returning inflation to target in a sustainable manner requires that the MPC continues to be watchful for signs of greater persistence in inflationary pressures than is embodied in our baseline forecast."

MPC member Jonathan Haskel warned, "Economic theory suggests that uncertainty around the persistence of inflation should be met with more forceful action... I shall remain alert to indications that inflation is more persistent than we expected, and act forcefully if necessary."

On the other hand, Silvana Tenreyro said, "Unless there is another big development that we don't know about - and we have a massive energy shock or something that is not on the cards - then I think they fall in inflation is pretty much guaranteed."

"Where things stand right now, I would see myself considering a cut. I don't want to talk about the particular meeting,: Tenreyo added.

ECB Villeroy can rule out recession in France

ECB Governing Council member Francois Villeroy de Galhau told France 2TV that he can "rule out" a recession the country. The Bank of France yesterday said its economy was on course to eke out slightly positive growth this quarter after growing 0.1% in the previous quarter.

Villeroy also said he sees "peak in french inflation between now and June, maybe even before June." From this summer onwards, food price inflation could ease off".

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.2035; (P) 1.2072; (R1) 1.2109; More...

GBP/USD's break of 4 hour 55 EMA suggests that fall from 1.2446 has completed at 1.1960. Corrective pattern from 1.2445 might be finished too. Intraday bias is back on the upside for retesting 1.2445/6. Decisive break there will resume larger rise from 1.0351. On the downside, through break of 1.1960 will extend the corrective pattern with another fall to 1.1840 support and possibly below.

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

Richmond Fed President Thomas Barkin said in a podcast that "while the average (inflation) has dropped, the median has still stayed high".

"That's because the average has been distorted by falling prices for a few goods, like used cars, that escalated unsustainably during the pandemic," he said.

"We have seen three good months on the inflation prints. I'd like to see them continue. Is inflation calming? That's really the core question for this year," he said.

"I think underneath that, I want to understand the labor market. Is it cooling? What's happening to wages? What's happened to employment?" he added. "Underneath that, I want to understand what's happening to the broader demand, particular for companies who may or may not be thinking about increasing prices.

Full podcast here.

Daily Pivots: (S1) 1.0696; (P) 1.0728; (R1) 1.0747; More...

Intraday bias in EUR/USD stays neutral first. On the downside, break of 1.0668 will resume the correction from 1.1032 short term top and target 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Nevertheless, firm break of 4 hour 55 EMA (now at 1.0804) will bring retest of 1.1032 high instead.

In the bigger picture, current development suggests that 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.

Daily Pivots: (S1) 1.2035; (P) 1.2072; (R1) 1.2109; More...

GBP/USD's break of 4 hour 55 EMA suggests that fall from 1.2446 has completed at 1.1960. Corrective pattern from 1.2445 might be finished too. Intraday bias is back on the upside for retesting 1.2445/6. Decisive break there will resume larger rise from 1.0351. On the downside, through break of 1.1960 will extend the corrective pattern with another fall to 1.1840 support and possibly below.

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.

Daily Pivots: (S1) 0.9182; (P) 0.9206; (R1) 0.9234; More...

Intraday bias in USD/CHF stays neutral and outlook is unchanged. On the upside, firm break of 0.9287 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) 130.85; (P) 131.19; (R1) 131.79; More...

USD/JPY's break of 4 hour 55 EMA argues that rebound from 127.20 has completed at 132.89. Intraday bias is back on the downside for retesting 127.20 low. Decisive break there will resume larger down trend from 151.93. On the upside, above 132.89 will resume the rebound to 38.2% retracement of 151.93 to 127.20 at 136.64.

In the bigger picture, prior of 55 week EMA (now at 131.39) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong rebound from current level, followed by sustained break of 38.2% retracement of 151.93 to 127.20 at 136.64 will argue that price actions from 151.93 is merely a corrective pattern. However, rejection by 136.64 will solidify medium term bearishness for 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 75.56 to 151.93 at 122.75.

US initial jobless claims rose 13k to 196k in the week ending February 4. Four-week moving average of initial claims dropped -2.5k to 189k.

Continuing claims rose 38k to 1688k in the week ending January 28. Four-week moving average of continuing claims rose 14.5k to 1665k.

Full release here.

BoE Governor Andrew Bailey said in a Treasury Committee hearing, "we are concerned about persistence (of inflation) and that's why, frankly, we raised interest rates this time."

"I am very uncertain particularly about price-setting and wage-setting in this country. We have got the largest upside skew in our forecasts that we have ever had on inflation," Bailey added.

Nevertheless, "what I would urge is that - particularly going forwards because we think inflation is going to fall very rapidly - that is taken into account," Bailey added.

Chief Economist Huw Pill said, "There is no room for complacency. Inflation remains unacceptably high... Returning inflation to target in a sustainable manner requires that the MPC continues to be watchful for signs of greater persistence in inflationary pressures than is embodied in our baseline forecast."

MPC member Jonathan Haskel warned, "Economic theory suggests that uncertainty around the persistence of inflation should be met with more forceful action... I shall remain alert to indications that inflation is more persistent than we expected, and act forcefully if necessary."

On the other hand, Silvana Tenreyro said, "Unless there is another big development that we don't know about - and we have a massive energy shock or something that is not on the cards - then I think they fall in inflation is pretty much guaranteed."

"Where things stand right now, I would see myself considering a cut. I don't want to talk about the particular meeting,: Tenreyo added.

The WTI oil remains at the front foot and extends strong rise from $72.24 (Feb 6 low) for the fourth straight day, underpinned by growing optimism over Chinese demand recovery.

Analysts remain cautiously optimistic as signs that inflation in the US is getting entrenched that would result in further increase in interest rates, may partially offset positive impact and limit gains.

The latest bullish acceleration hit target at $78.65 (Fibo 61.8% of $82.61/$72.24) reinforced by 20DMA, where bulls may face stronger headwinds as daily stochastic entered overbought zone and momentum moves deeper into negative territory.

Failure to break above $78.65 pivot would signal consolidation, with bullish near-term bias to remain intact while dips stay above daily cloud base ($76.83) for attempt at psychological $80.00 barrier.

Conversely, return below the base of thickening daily cloud and extension through daily Tenkan-sen ($76.34) would weaken near-term structure and signal an end of recovery from $72.24.

Res: 78.82; 79.69; 80.00; 81.04
Sup: 77.96; 77.44; 76.83; 76.34

The USDJPY edged lower in early Thursday but remains within 130.50/132.90 range which extends into fourth consecutive day.

Fading bullish momentum and south-heading stochastic / RSI on daily chart, signal that the downside is vulnerable, but need a firm break of daily Kijun-sen (131.00) which contained dips in past two days, with extension below daily Tenkan-sen (130.49) to confirm reversal and open way for further retracement of 127.22/132.90 recovery phase.

Ability to hold above Kijun-sen support would keep an action in extended consolidation, but still weighed by falling thick daily cloud (base of the cloud lays at 132.92).

Investors are focusing on US inflation data for stronger direction signals, after the latest hawkish comments from Fed and speculations that US terminal rate would increase towards 6%, did not provide stronger support to dollar.

Res: 131.56; 131.82; 132.70; 132.92
Sup: 130.49; 130.00; 129.39; 128.56