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Daily Pivots: (S1) 0.6925; (P) 0.6949; (R1) 0.6993; More...

Intraday bias in AUD/USD stays neutral for consolidation below 0.7062. Overall outlook stays bullish as long as 0.6721 support holds. On the upside, break of 0.7062 will resume rise from 0.6169 to 61.8% projection of 0.6169 to 0.6892 from 0.6721 at 0.7168 next. However, firm break of 0.6721 will indicate short term topping, and turn bias back to the downside.

In the bigger picture, corrective decline from 0.8006 (2021 high) should have completed with three waves down to 0.6169 (2022 low). Further rally should be seen to 61.8% retracement of 0.8006 to 0.6169 at 0.7304. Sustained break there will pave the way to retest 0.8006. This will now remain the favored case as long as 0.6721 support holds.

Daily Pivots: (S1) 128.41; (P) 129.51; (R1) 130.67; More...

Intraday bias in USD/JPY remains neutral at this point. On the downside, break of 127.20 will resume the whole decline from 151.93 and target 121.43 fibonacci level. Nevertheless, on the upside, break of 131.56 should confirm short term bottoming, and turn bias back to the upside for stronger rebound.

In the bigger picture, the break of 55 week EMA (now at 131.47) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong support could be seen around 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 to bring rebound. But break of 131.56 resistance is needed to indicate bottoming first. Otherwise further fall will remain in favor.

Daily Pivots: (S1) 0.9152; (P) 0.9193; (R1) 0.9245; More...

Intraday bias in USD/CHF stays neutral, and outlook remains bearish with 0.9407 resistance intact. On the downside, sustained break of 61.8% projection of 1.0146 to 0.9355 from 0.9545 at 0.9056 will pave the way to 100% projection at 0.8754, which is close to 0.8756 long term support. Nevertheless, on the upside, break of 0.9407 should confirm short term bottoming and turn bias back to the upside.

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) 1.2354; (P) 1.2380; (R1) 1.2423; More...

Intraday bias in GBP/USD remains neutral first. On the upside, decisive break of 1.2445 will confirm resumption of whole rise from 1.0351. Next target will be 1.2759 fibonacci level. On the downside, break of 1.2252 minor support will turn bias to the downside, and extend the corrective pattern from 1.2445 with another falling leg.

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.

The week started slowly in Asia, as many markets were closed due to the Chinese New Year holiday. But those that were open benefited from the positive vibes from the US markets last Friday.

US equities rally, led by tech stocks

The S&P500 rallied 1.89% and flirted with the 200-DMA again, and closed the week a stone’s throw from the ceiling of the 2022-to-date bearish trend.

Nasdaq did even better. The index rallied 2.86%, boosted by a well-deserved 8.50% rally from Netflix - which not only announced better-than-expected results in the Q4, but also a mouth-watering beat on the subscription growth end, with 7.7 mio new subscribers – a number that we thought we would hear only during a pandemic!

Google, on the other hand, jumped 5.72%, but for a less glamorous reason. The company said it will fire 6% of its workforce, which is around 12’000 jobs globally. Investors heard ‘yes, that will clearly improve the cloud profitability!’

In total, Amazon, Microsoft and Google will be cutting 40’000 jobs.

Fed’s quiet period

The quiet period for Federal Reserve (Fed) officials will help us digest what has been said over the past weeks.

In summary, we know that the Fed will further slow the size of its rate hikes in the coming months. $

But the fact that the Fed will raise by only 25bp next meeting doesn’t mean that it won’t continue hiking the rates. The rates will likely go above 5% in the Q1.

Focus on earnings

Microsoft, Johnson&Johnson, General Electric,Texas Instruments, Intel, Tesla Mastercard, Visa, Chevron and American Express are among companies that will go to the earnings confessional this week.

Big Tech earnings projections are down by about 5% since October.

Yet, expectations went sufficiently low that there is plenty of room for a positive surprise, as has been the case with Netflix.

FX and energy

The dollar kicked off the week under pressure. The EURUSD already hit the 1.09 mark early in the session, for the first time since last April, and is just a couple of pips away from the major 50% retracement on 2021-2022 selloff.

PMI data due tomorrow could confirm that the European economies took a softer hit thanks to mild start to the winter, and cheaper energy prices as a result of it.

And sufficiently strong PMI data, combined to the negative pressure in the US dollar into the Fed meeting, could help the EURUSD take a chance on the 1.10 resistance in the coming sessions.

In energy, crude oil posted its second straight week of gains on Friday, as the Chinese reopening story and prospects of higher global demand, and around 1 mbpd gap between supply and demand outweighed the recession fears.

The latest rebound in European nat gas prices, and the fact that we now have cold and snow in Europe could also tilt the balance further to the upside.

The barrel of American crude spent last week above the 50-DMA, now around $78pb, but couldn’t clear the 100-DMA, which stands around $82pb.

The next target for the oil bulls is a move above the $82pb, for a potential extension of gains toward the $87/88 range.

Market movers today

A quiet start to the week, with consumer confidence for the euro area and Denmark the only releases of interest. Although consumer confidence rose for a second consecutive month in December, it remains extremely low from a historical perspective and is at odds with the relative resilience in consumer spending seen in actual hard data so far.

Later this week, markets will focus on the PMIs for January (Tuesday) and US GDP figures (Thursday), while the earnings season continues.

The 60 second overview

US debt ceiling: Last week the US government hit its statutory debt limit at USD 31.4 trillion, and the treasury is now utilizing the so-called 'extraordinary measures' (for example delaying payments to government workers' pension funds) to avoid a default. The measures are expected to last only until around June, however. Over the weekend a bi-partisan congress group suggested changing the debt ceiling from a fixed dollar amount to a percentage of economic output, which would reduce the risk of the government hitting the ceiling while still limiting growth in national debt. That said, the details of the proposal are not yet known, and a near-term solution appears elusive as some Republican lawmakers in the House of Representatives have pushed for steep spending cuts in return of supporting the debt ceiling raise.

Market sentiment: Risk sentiment recovered late last Friday, and the positive tone continued in Japan this morning, as markets digest the mixed economic signals. Last week's December US retail sales and industrial production data pointed towards a clear slowdown in activity but consensus is looking for an uptick especially in the euro area leading indicators, when the January PMIs are released tomorrow. Markets are already looking ahead towards the next round of central bank meetings next week, although both the ECB and the Fed are well priced for 50bp and 25bp hikes, respectively.

FI: European yields ended last week higher after ECB's Lagarde as well as other ECB officials stated that that it was much too premature to speculate in a slowdown of the rate hikes and that 50bp at the next two meetings was still in place.

FX: Last week was generally characterised by a stabilisation in the asset price moves that had otherwise characterised the beginning of the year. The rally in risk and FI levelled off and the move higher in EUR/USD slowed. In FX spot markets GBP notably had a strong week driven by both domestic data releases and defensive stocks outperforming cyclicals. EUR/GBP is consequently close to the lowest levels since December. While EUR/NOK remains in the 10.70s last week's SEK rally has brought EUR/SEK back below the 11.20 mark. EUR/USD remains below the 1.09 mark.

Credit: According to data from EPFR Global European domiciled high-yield funds recorded their biggest weekly fund inflow in 41 weeks last week as investor appetite for credit risk returned. This bodes well for continued high primary bond activity in the coming weeks. Friday, credit markets saw only small changes with ITraxx-Xover 1bp wider at 429bp while Main was unchanged at 81.

Daily Pivots: (S1) 1.0819; (P) 1.0839; (R1) 1.0876; More...

EUR/USD's rally resumed after brief consolidations and intraday bias is back on the upside. Current rise form 0.9534 should target 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0532).

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.

Euro opens the week higher as support by hawkish comments from ECB officials over the weekend. Overall, it's more likely for ECB to deliver at two more 50bps hike before slowing down, despite some market speculations. Dollar and Yen turned softer again. Trading is subdued, nevertheless, with many Asian markets closed on Lunar New Year Holiday.

Technically, GBP/CHF's rise from 1.1094 is making progress as expected, and further rally should be seen as long as 1.2181 support holds. Current upside momentum doesn't warrant a range break out yet. That is, there might be resistance below 1.1543/1574 zone, to bring one more falling leg, to complete a five-wave triangle pattern. Let's see if that's the case, or GBP/CHF would just shoot through the roof.

In Asia, at the time of writing, Nikkei is up 1.30%. Japan 10-year JGB yield is down -0.0196 at 0.385. Hong Kong, China, and Singapore are on holiday.

ECB Knot: Expect 50bps in Feb and Mar, and more in May and June

ECB Governing Council member Klaas Knot said in a WNL interview, "expect us to raise rates by 0.5% in February and March and expect us to not be done by then and that more steps will follow in May and June."

"In the December data, we saw a first decline in headline inflation, but that was entirely due to base effects and lower energy inflation," Knot said. "We focus on core inflation where, unfortunately, there is no good news. Because it is still on the rise. Underlying inflationary pressures show no signs of abating yet."

In a separate interview with La Stampa, Knot said, "At some point, of course, the risks surrounding the inflation outlook will become more balanced... That would also be a time in which we could make a further step down from 50 to 25 basis points, for instance. But we are still far away from that."

ECB Rehn: There are grounds for significant increases in interest rates

ECB Governing Council member Olli Rehn said "there are grounds for significant increases" in the key interest rate in the winter and early spring.

Rehn declined to estimate the terminal rate. "It's certain that the rate hikes that we've already made and the forward guidance on upcoming hikes have the effect that markets are pricing in a lot of it into the Euribor rates," he said.

BoJ Minutes: Meeting suspended at government's request

published minutes of the December 19-20 meeting today, where the 10-year JGB yield cap was raised from 0.25% to 0.50%.

"Many members noted that there was a distortion in the price formation of 10-year bonds, and that the functioning of bond markets had deteriorated, particularly in terms of relative relationships among interest rates of bonds with different maturities and arbitrage relationships between spot and futures markets," the minutes said".

"Members concurred that, with regard to the conduct of yield curve control, the measure to expand the range of 10-year JGB yield fluctuations to between around plus and minus 0.5 percentage points from the target level, while significantly increasing the amount of JGB purchases, was appropriate."

Meanwhile, government representatives requested to adjourn the meeting after the discussions. They're probably surprised by the agreed adjustment to YCC. The meeting was adjourned from 10:51 a.m. to 11:28 a.m. before concluding at 11:54 a.m.

BoC rate hike, BoJ minutes and opinions, plus lots of data

BoC rate decision is a major focus of the week. The central bank has already indicated it will be "considering whether the policy interest rate needs to rise further" after December's 50bps hike. Yet, with inflation still high at 6.3% in December, the markets are expecting BoC to deliver one more hike, by 25bps, to bring policy rate to 4.50%. The majority expects a pause afterwards, but that's not a clear consensus. So, most attention will be on the guidance on whether next would be a pause.

In terms of central bank activities, BoJ will publish minutes of December meeting, when it doubled the 10-year JGB yield cap to 0.50%. Summary of Opinions at the January meeting will also be released. Main focus is on the discussions around lifting the cap, and then holding it at subsequent meetings, the views on yield curve distortion, and hints on any change in the yield curve control ahead.

The economic data schedule is also extremely busy with PMIs from Australia, Japan, Eurozone, UK and US. CPI data from Australia and New Zealand will be featured, with US PCE inflation, and Japan Tokyo CPI. The US will also release Q4 GDP advance. Here are some highlights for the week:

• Monday: BoJ minutes; Canada new housing price index; Eurozone consumer confidence; US leading index.
• Tuesday: New Zealand BusinessNZ services index; Australia PMIs, NAB business confidence; Japan PMI manufacturing; Swiss trade balance; Germany Gfk consumer climate; Eurozone PMIs; UK PMIs; US PMIs.
• Wednesday: New Zealand CPI; Australia CPI; UK PPI; Swiss Credit Suisse economic expectations; Germany Ifo business climate; BoC rate decision.
• Thursday: BoJ summary of opinions, corporate service prices; US GDP, durable goods orders, jobless claims, goods trade balance, new home sales.
• Friday: Japan Tokyo CPI; New Zealand ANZ business confidence; Australia import prices, PPI; Eurozone M3 money supply; US personal income and spending with PCE inflation, pending home sales.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.0819; (P) 1.0839; (R1) 1.0876; More...

EUR/USD's rally resumed after brief consolidations and intraday bias is back on the upside. Current rise form 0.9534 should target 61.8% projection of 0.9630 to 1.0733 from 1.0482 at 1.1164 next. On the downside, though, break of 1.0765 support should now indicate short term topping, and turn bias back to the downside for 55 day EMA (now at 1.0532).

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.

Economic Indicators Update

BoJ published minutes of the December 19-20 meeting today, where the 10-year JGB yield cap was raised from 0.25% to 0.50%.

"Many members noted that there was a distortion in the price formation of 10-year bonds, and that the functioning of bond markets had deteriorated, particularly in terms of relative relationships among interest rates of bonds with different maturities and arbitrage relationships between spot and futures markets," the minutes said.

"Members concurred that, with regard to the conduct of yield curve control, the measure to expand the range of 10-year JGB yield fluctuations to between around plus and minus 0.5 percentage points from the target level, while significantly increasing the amount of JGB purchases, was appropriate."

Meanwhile, government representatives requested to adjourn the meeting after the discussions. They're probably surprised by the agreed adjustment to YCC. The meeting was adjourned from 10:51 a.m. to 11:28 a.m. before concluding at 11:54 a.m.

Full minutes here.

ECB Governing Council member Olli Rehn said "there are grounds for significant increases" in the key interest rate in the winter and early spring.

Rehn declined to estimate the terminal rate. "It's certain that the rate hikes that we've already made and the forward guidance on upcoming hikes have the effect that markets are pricing in a lot of it into the Euribor rates," he said.