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Daily Pivots: (S1) 138.74; (P) 139.52; (R1) 140.30; More...

USD/JPY's consolidation from 137.66 is extending and intraday bias remains neutral for the moment. Stronger rise cannot be ruled out, but upside should be limited below 145.16 support turned resistance. Break of 137.66 will resume the decline from 151.93, to 133.07 fibonacci level, as a correction to the larger up trend.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.58).

Daily Pivots: (S1) 0.9399; (P) 0.9434; (R1) 0.9483; More...

USD/CHF's recovery from 0.9355 extends higher today and intraday bias stays neutral. Upside of recovery should be limited below 0.9680 minor resistance to bring another decline. Below 0.9355 will resume the fall from 1.0146 to 0.9287 fibonacci level.

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 might be a medium term down trend itself. Break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 55 day EMA (now at 0.9793) holds.

Daily Pivots: (S1) 1.1851; (P) 1.1896; (R1) 1.1961; More...

GBP/USD's retreat from 1.2028 extends lower today but stays above 1.1597 resistance turned support. Intraday bias remains neutral first. Further rise is expected, and break of 1.2028 will target 100% projection of 1.0351 to 1.1494 from 1.1145 at 1.2288. However, sustained break of 1.1597 will bring deeper fall to 1.1145 support instead.

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 1.1145 support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759.

Dollar's recovery is starting pick up momentum in early US session, as risk off sentiment deepens. The development is reflected in broad based selloff in Australian and New Zealand Dollar. Sterling is also weak as mild reaction to UK's new budget statement. Canadian Dollar and Euro are the firmer ones next to Dollar, while Yen and Swiss Franc are mixed.

Technically, as Sterling dips, focus is back on 0.8827 resistance in EUR/GBP. Break there will resume larger rebound from 0.8570. Further break of 0.8869 resistance will pave the way to retest 0.9267 high. That, if happens, could add further pressure to the Pound elsewhere.

In Europe, at the time of writing, FTSE is down-0.71%. DAX is down -0.54%. CAC is down -1.15%. Germany 10-year yield is up 0.033 at 2.031. Earlier in Asia, Nikkei dropped -0.35%. Hong Kong HSI dropped -1.15%. China Shanghai SSE dropped -0.15%. Singapore Strait Times rose 0.61%. Japan 10-year JGB yield rose 0.0034 to 0.249.

Fed Bullard: Policy rate not yet sufficiently restrictive

St. Louis Fed President James Bullard said, "even under these generous assumptions, the policy rate is not yet in a zone that may be considered sufficiently restrictive". And, "to attain a sufficiently restrictive level, the policy rate will need to be increased further."

"Thus far, the change in the monetary-policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023," Bullard said.

US initial jobless claims dropped to 222k

US initial jobless claims dropped -4k to 222k in the week ending November 12, above expectation of 220k. Four-week moving average of initial claims rose 2k to 221k.

Continuing claims rose 13k to 1507 k in the week ending November 5. Four-week moving average of continuing claims rose 31k to 1482k.

Philly Fed survey dropped from -8.7 to 19.4 in November, below expectation of -6.

Eurozone CPI finalized at 10.6% yoy in Oct, core CPI at 5.0% yoy

Eurozone CPI was finalized at 10.6% yoy in October, up from September's 9.9% yoy. CPI core (all item ex energy, food, alcohol, & tobacco), was finalized at 5.0% yoy, up from prior month's 4.8% yoy. The highest contribution to annual inflation rate came from energy (+4.44%), followed by food, alcohol & tobacco (+2.74%), services (+1.82%) and non-energy industrial goods (+1.62%).

EU CPI was finalized at 11.5% yoy, up from September's 10.9% yoy. The lowest annual rates were registered in France (7.1%), Spain (7.3%) and Malta (7.4%). The highest annual rates were recorded in Estonia (22.5%), Lithuania (22.1%) and Hungary (21.9%). Compared with September, annual inflation fell in eleven Member States, remained stable in three and rose in thirteen.

BoJ Kuroda: May take a long time to achieve price stability with wage hikes

BoJ Governor Haruhiko Kuroda told the parliament that it may "take a long time" to achieve the "price stability target, involving wage hikes". He reiterated that the central bank needs to continue with its monetary easing to support a fragile recovery.

At the same session, Executive Director Shinichi Uchida said it was too early to discuss exit from monetary stimulus. "When exiting, the point will be adjusting long-term and short-term policy rates and the BoJ's balance sheet," Uchida said. "The order and mixture of those factors would differ depending on economy, prices and financial situations at the time."

Japan trade deficit hit another record as import surged

Japan's exports rose 25.3% yoy to JPY 9.00T in October, after shipments of cars and electronics components increased. Imports rose 53.5% yoy to JPY 11.16T, hitting a historical high, as led by crude oil, liquefied natural gas and coal.

Trade deficit came in at JPY -2.16T, a record for the month. Also, Japan has seen as record trade deficit for each month in the past six months, on rising energy and raw material costs, as well as weak Yen exchange rates.

US-bound exports rose 36.5% yoy to JPY 1.78T while imports rose 47.1% yoy to JPY 1.06T. Exports to China rose 7.7% yoy to JPY 1.72T while imports rose 39.3% yoy to JPY 2.39T.

In seasonally adjusted term, exports rose 2.2% mom to JPY 8.91T. Imports rose 4.2% mom to JPY 11.21T. Trade deficit came in at JPY -2.30T.

Australia employment grew 32.3k in Oct, unemployment rate dropped to 3.4%

Australia employment rose 32.2k in October, above expectation of 15.0k. Unemployment rate dropped from 3.5% to 3.4%, below expectation of 3.5%. Participation rate was unchanged at 66.5%. Monthly hours worked in all jobs rose 2.3% mom.

"Although employment in seasonally adjusted terms rose 0.2 per cent in October 2022, the underlying trend estimate was monthly growth of around 0.12 per cent. This was below the average for the 20 years prior to the pandemic of 0.16 per cent," Bjorn Jarvis, head of labour statistics at the ABS said.

"This indicates that while employment has continued to grow, the rate of growth has slowed to below the longer-term average. It has been below this average for the past 5 months."

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1851; (P) 1.1896; (R1) 1.1961; More...

GBP/USD's retreat from 1.2028 extends lower today but stays above 1.1597 resistance turned support. Intraday bias remains neutral first. Further rise is expected, and break of 1.2028 will target 100% projection of 1.0351 to 1.1494 from 1.1145 at 1.2288. However, sustained break of 1.1597 will bring deeper fall to 1.1145 support instead.

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 1.1145 support holds. Next target is 61.8% retracement of 1.4248 to 1.0351 at 1.2759.

Economic Indicators Update

St. Louis Fed President James Bullard said, "even under these generous assumptions, the policy rate is not yet in a zone that may be considered sufficiently restrictive". And, "to attain a sufficiently restrictive level, the policy rate will need to be increased further."

"Thus far, the change in the monetary-policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023," Bullard said.

The Japanese yen continues to flirt with the 140 level. In the European session, USD/JPY is trading at 140.25, up 0.51%.

Japan releases the October National CPI later today, which is expected to rise to 3.5%, following the September reading of 3.0%. Inflation has been on the rise and is above the BoJ’s target of 2%, although these are levels that other major central banks can only dream about. The Bank of Japan has no plans to change its ultra-loose policy, even though inflation is above the target and the yen remains weak. BoJ Governor Kuroda reiterated his well-worn script earlier today that the rise in inflation is transitory, adding that he expects CPI to drop below 2% in fiscal year 2023. The yen has been on a tear in November, with gains of close to 6%, but that is more a case of dollar weakness rather than any newfound yen strength. With the Fed planning another oversize rate hike in December, the US/Japan rate differential will continue to weigh on the yen.

Fed sends a hawkish message

The investor exhilaration which sent the stock markets rallying after the soft inflation report has taken a pause. Fed policy makers responded with a hawkish message, reminding the markets that the Fed was planning to raise rates higher than they had anticipated. The Fed speak may or may not have convinced investors to settle down, but a strong US retail sales report clearly did the trick. The headline and core releases both posted strong gains of 1.3%, dampening sentiment that the Fed would pivot and ease its tightening. The US economy remains resilient and appears able to absorb further rate hikes without triggering a deep recession. Interest rates are expected to peak at 5% or slightly higher, which means that the Fed is highly likely to continue tightening into next year.

USD/JPY Technical

• USD/JPY has support at 140.30 and 139.66
• There is resistance at 141.08 and 141.86

US initial jobless claims dropped -4k to 222k in the week ending November 12, above expectation of 220k. Four-week moving average of initial claims rose 2k to 221k.

Continuing claims rose 13k to 1507 k in the week ending November 5. Four-week moving average of continuing claims rose 31k to 1482k.

Full release here.

The Australian dollar is considerably lower on Thursday. In the European session, AUD/USD is trading at 0.6671, down 1.02%.

Employment data shines

Australia’s tight labor market got even tighter in October. Total employment jumped by 32,200, up from just 900 in September. The numbers were especially encouraging as full-time employment jumped by 47,100, up from 10,900 prior. The unemployment rate of 3.5%, which was already running at a 50-low, inched lower to 3.4%.

The excellent numbers are unlikely to change the Reserve Bank of Australia’s rate policy. The RBA has eased the pace of rate hikes considerably, with two straight increases of a modest 0.25%. The markets have priced in another 0.25% hike at the December 6^th meeting, which would bring the cash rate to 3.10%. With rates expected to peak in early 2023 around 3.5% or 3.6%, the end appears in sight for the current rate-tightening cycle.

The robust labour market has put upward pressure on wages, which burst higher on Wednesday with a gain of 3.1% YoY in the third quarter, its strongest quarterly gain since 2013. The Reserve Bank of Australia will be wary of a spectre of a wage-price spiral if wages continue to accelerate, which would greatly complicate efforts to curb inflation.

US retail sales for October pointed to consumer resilience, despite high interest rates and stubbornly sticky inflation. The headline and core releases both came in at 1.3%, above expectations and a strong rebound from the September data (0.0% headline, 0.1% core). This indicates that the US economy can handle additional rate hikes, with the Fed expected to raise rates to 5.0% or slightly higher. With the benchmark rate sitting at 4.0%, investors would do well to keep in mind that there is still some life left in the current rate-tightening cycle.

AUD/USD Technical

• 0.6603 and 0.6490 are providing support
• There is resistance at 0.6750 and 0.6821

Bears are pausing for the second day after being accelerated by lower than expected inflation numbers which suggested that the Fed may ease its aggressive policy tightening stance, but better than expected US retail sales in October questioned bears, prompting traders to stay on hold and await more signals.

Downtrend from 20-year peak (114.72, Sep 28) spiked to three-month low at 105.15 on Tuesday, but faced strong headwinds on approach to rising 200DMA (104.89), confirmed by long tails of daily candles of Tue/Wed.

Bears cracked pivotal Fibo support at 106.42 (61.8% of 101.29/114.72 upleg) weighed by last week’s massive bearish candle, but require weekly close below 106.42 for confirmation and signal of bearish continuation.

On the other side, signals of stall and possible bounce are developing on a weekly chart, where long-legged Doji is forming, stochastic is oversold and momentum indicator overextended, with oversold daily studies contributing to the notion.

Markets need to digest data which suggest that the US economy may enter the upward trajectory and escape from recession, however, pressure on dollar over Fed’s potential downsizing interest rate hikes would likely persist.

Overall structure on all larger timeframes remains bearish, as reversal pattern has formed on monthly chart (though still requiring confirmation on monthly close below pivotal Fibo level at 104.95 )38.2% of 89.15/114.72).

Oversold weekly and daily studies suggest limited recovery, which should be capped under 109.00 zone (100DMA / 20WMA) to keep bears in play.

Expect initial positive signal on close above 107.14 (Monday’s high / lower 20-d Bollinger band) which would look for a verification on lift and violation of falling 10DMA (108.02).

Conversely, repeated close below 106.42 Fibo support would signal that recovery attempts lose traction and bears keep control, though firmer bearish signal to be expected on drop below Tuesday’s spike low (105.15) which would signal attack at 200DMA.

Res: 107.14; 107.87; 108.02; 109.00.
Sup: 105.70; 105.15; 104.89; 104.46.

Eurozone CPI was finalized at 10.6% yoy in October, up from September's 9.9% yoy. CPI core (all item ex energy, food, alcohol, & tobacco), was finalized at 5.0% yoy, up from prior month's 4.8% yoy. The highest contribution to annual inflation rate came from energy (+4.44%), followed by food, alcohol & tobacco (+2.74%), services (+1.82%) and non-energy industrial goods (+1.62%).

EU CPI was finalized at 11.5% yoy, up from September's 10.9% yoy. The lowest annual rates were registered in France (7.1%), Spain (7.3%) and Malta (7.4%). The highest annual rates were recorded in Estonia (22.5%), Lithuania (22.1%) and Hungary (21.9%). Compared with September, annual inflation fell in eleven Member States, remained stable in three and rose in thirteen.

Full release here.