Sample Category Title

AUD/USD rose to 0.7247 last week but retreated since then. Initial bias is neutral this week first and some consolidation could be seen. Further rise would remain in favor as long as 0.7050 support holds. Above 0.7247 will target 0.7313 resistance. Decisive break there argue that correction from 0.8006 has completed at 0.6966, after hitting 0.6991 key support. Outlook will be turned bullish for 0.7555 resistance next. On the downside, however, break of 0.7050 support will bring retest of 0.6966 low instead.

In the bigger picture, focus remains on 0.6991 key structural support. Sustained break there will argue that the whole up trend from 0.5506 might be finished at 0.8006, after rejection by 0.8135 long term resistance. Deeper decline would then be seen back to 61.8% retracement of 0.5506 to 0.8006 at 0.6461. Meanwhile, strong rebound from 0.6991 will retain medium term bullishness. That is, whole up trend from 0.5506 is still in progress.

In the longer term picture, focus remains on 0.8135 structural resistance. Decisive break there will argue that rise from 0.5506 is developing into a long term up trend that reverses whole down trend from 1.1079 (2011 high). However, rejection by 0.8135 will keep long term outlook neutral at best.

USD/CAD stayed in sideway consolidation last week and outlook is unchanged. Initial bias remains neutral this week first. Further rise remains mildly in favor. On the upside, break of 1.2795 will resume the rally from 1.2448 to 1.2963 resistance next. However, break of 1.2634 support will turn bias back to the downside for 1.2448 support instead.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.

In the longer term picture, we're viewing price actions from 1.4689 as a consolidation pattern. Thus, up trend from 0.9506 (2007 low) is still expected to resume at a later stage. This will remain the favored case as long as 1.2061 support holds, which is close to 50% retracement of 0.9406 to 1.4689 at 1.2048. However, firm break of 1.2061 support will argue that USD/CAD has already started a long term down trend. Next target is 61.8% retracement of 0.9406 to 1.4689 at 1.1424.

GBP/JPY edged higher to 158.04 last week but failed to break through 158.19 resistance and retreated sharply. Initial bias is neutral this week first. On the downside, break of 155.11 minor support should argue that corrective pattern from 158.19 has started another falling leg. Intraday bias will be back on the downside for 152.88 support. Break there will target 148.94. Nevertheless, on the upside, sustained break of 158.19 will resume larger up trend.

In the bigger picture, price actions from 158.19 are seen as developing into a consolidation pattern to up trend from 123.94 (2020 low). Downside should be contained by 123.94 to 158.19 at 145.10 to bring rebound. Firm break of 158.19 will resume the up trend to long term fibonacci level at 167.93. However, sustained break of 145.10 will raise the chance of trend reversal and target 61.8% retracement at 137.02.

In the longer term picture, as long as 55 month EMA (now at 147.30) holds, we'd still favor more rally to 61.8% retracement of 195.86 to 122.75 at 167.93. But sustained trading below 55 month EMA will at least neutralize medium term bullishness and re-open the chance of revisiting 122.75 low (2016 low).

EUR/JPY reversed after hitting 133.13 and dropped sharply from there. The development suggests that corrective pattern from 134.11 is extending with another falling leg. Initial bias stays on the downside this week for 128.23 support. Break will target 127.36 and below. On the upside break of 133.13 will bring retest of 134.11 high.

In the bigger picture, price actions from 134.11 are currently seen as a consolidation pattern only. As long as 38.2% retracement of 114.42 (2020 low) to 134.11 at 126.58 holds, up trend from 114.42 is still in favor to continue. Break of 134.11 will target long term resistance at 137.49 (2018 high). However, sustained break of 126.58 will raise the chance of bearish reversal. In this case, deeper decline would be seen to 61.8% retracement at 121.94, and possibly below.

In the long term picture, EUR/JPY is staying in long term sideway pattern, established since 2000. Long term outlook will remain neutral until breakout from the range of 109.03/137.49.

EUR/GBP sharp decline last week argues that rebound from 0.8282 has completed at 0.8476. Initial bias is now mildly on the downside this week for retesting 0.8282 low. On the upside, above 0.8411 minor resistance will turn bias back to the upside for 0.8476 resistance. Break there will resume the rebound from 0.8282.

In the bigger picture, price actions from 0.9499 (2020 high) are still seen a corrective pattern that should be contained by 0.8276 long term support (2019 low). Bullish convergence condition in daily MACD and break of 55 day EMA raises the chance that it might be completed. Sustained trading above 38.2% retracement of 0.9499 to 0.8282 at 0.8747 will affirm this bullish case. However, sustained break of 0.8276 will argue that the long term trend has reversed.

In the long term picture, outlook will stay bullish as long as 0.8276 support holds. Break of 0.9499 is in favor at a later stage, to resume the up trend from 0.6935 (2015 low). However, sustained break of 0.8276 will indicate long term trend reversal, and target 61.8% retracement of 0.6935 to 0.9499 at 0.7917, and possibly below.

EUR/AUD's pull back from 1.6223 extended lower last week but stayed above 1.5776 support. Initial bias remains neutral this week first and further rise is mildly in favor. Above 1.6223 will resume whole rise from 1.5354 to 1.6434 resistance first. However, break of 1.5776 will turn bias back to the downside for 1.5559 support instead.

In the bigger picture, rise from 1.5354 is seen as the third leg of the corrective pattern from 1.5250 low. Further rise cannot be ruled out, but even in that case, strong resistance should be seen at 38.2% retracement of 1.9799 to 1.5250 at 1.6988. Larger down trend from 1.9799 is in favor to extend through 1.5250 at a later stage.

In the longer term picture, fall from 1.9799 (2020 high) is seen as a long term down trend. Further decline will remain in favor as long as 38.2% retracement of 1.9799 to 1.5250 at 1.6988 holds. Break of 1.5250 will target 61.8 retracement of 1.1602 (2012 low) to 1.9799 at 1.4733

EUR/CHF edged higher to 1.0610 last week but the fall from there accelerated to close at 1.0487. Initial bias is neutral this week first. Break of 1.0439 support will argue that rebound from 1.0298 has completed, ahead of 38.2% retracement of 1.1149 to 1.0298 at 1.0623. Deeper fall will then be seen back to retest 1.0298 lower. On the upside, sustained break of 1.0623 will raise the chance of trend reversal and target 61.8% retracement at 1.0824 next.

In the bigger picture, a medium term bottom was formed at 1.0298 on bullish convergence condition in daily MACD. Rebound from there is still tentatively viewed part of a corrective pattern. That is, larger down trend from 1.2004 (2018) could still extend through 1.0298 to 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223. However, sustained trading above 55 week EMA (now at 1.0673) will argue that the down trend is over, and bring stronger rise back to 1.1149 next.

In the long term picture, prior rejection by 55 month EMA (now at 1.0967) maintains long term bearishness. Down trend from 1.2004 could still extend lower as long as 1.1149 resistance holds.

War or rate hikes, it's very clear that investors are worried about the former. Sentiment took a deep dive on Friday on worries over an imminent Russian invasion of Ukraine. WTI crude oil surged to new 7-year high while Gold also soared before weekly close, while stocks took a heavy beating. In the background, markets are raising their bets on aggressive Fed tightening. But that would take a back seat for now until the Russia/Ukraine situation de-escalates.

The weekly currency heatmap couldn't really reflect the sharp turn on Friday. Aussie was the strongest for the week followed by Kiwi. Euro was the worst, followed by Yen and Dollar. However, it should be noted that Yen and Swiss Franc had sharp rallies before close and would remain strong on geopolitical risks. Euro and commodity currencies could extend their late weakness too.

WTI oil and gold surged on Russia-Ukraine escalations

Investors were in deep worry that a Russian invasion of Ukraine could begin any time. US urged their citizens to leave Ukraine right away, and that was followed by a wave of other nations including the UK, Japan, Latvia, Norway, Netherlands, Australia and New Zealand, etc.

"We continue to see signs of Russian escalation, including new forces arriving at the Ukrainian border," US national security adviser Jake Sullivan warned. "We are in the window when an invasion could begin at any time."

WTI crude oil surged to as high as 94.88, to resume its medium term up trend. Further rise should be seen to 61.8% projection of 82.42 to 93.52 from 88.66 at 95.51 next. Break there will target 100% projection at 99.76. That is, 100 handle could be quickly reached if the Russia-Ukraine situation worsens further.

Gold also surged through 1853.70 resistance and hit as high as 1865.26. Now it looks like the rise from 1682.60 is resuming too. Break of 1877.05 will target 100% projection of 1682.60 to 1877.05 from 1752.12 at 1946.57. Firm break of this projection level will indicate further upside acceleration, and affirm the case that Gold is already in a medium term up trend.

Yen and Franc jumped on Friday on risk aversion

In the currency markets Yen and Swiss Franc staged strong rallies towards the end of Friday's session. USD/JPY's break of 115.31 support suggests that rebound from 113.46 has completed with three waves up to 116.33, after rejection by 116.34 high. Deeper fall is now in favor back to 113.46/114.14 support zone.

Near term outlook won't be that bad as long as 113.46 support holds. In this case, price actions from 116.34 are just developing into a sideway pattern, which should be completed within a near-term time scale. However, firm break of 113.46 would open up deeper correction to 38.2% retracement of 102.58 to 116.34 at 111.08, which should last much longer.

EUR/CHF also dropped sharply after hedging higher to 1.0610. Strong break of 4 hour 55 EMA is already a sign of near term weakness. Immediate focus will be on 1.0439 support. Firm break there should confirm rejection by 38.2% retracement of 1.1149 to 1.0298 at 1.0623. Deeper fall would be seen back to retest 1.0298 low. Such development will also keep medium term outlook bearish for resuming the larger down trend through 1.0298.

94% chance of a 50bps Fed hike in March after CPI

In the background, a "less imminent" risk is of course intensified expectation of aggressive Fed rate hikes. After data showed US CPI rose more than expected to 40-year high. Bets on a 50bps hike in March surged. There were even talks that FOMC could hold an emergency meeting between now and March 15/16, to deliver an interest rate hike. Though, the latter panic move is rather unlikely.

Anyway, Fed funds futures now indicate 93.8% chance of a 50bps hike to bring federal funds rate to 0.50-0.75% in March, up from 33.7% just a week ago.

Going forward, there's 95% chance of a 25bps hike in May to 0.75-1.00%, 96% chance of another 25bps hike to 1.00-1.25% in June, 60% chance of a 25bps hike again to 1.25-1.50% in July. The next hike could be delivered in September or November, followed by another one in December and next January. That is, by the end of the year, federal funds rate could reach 1.50-1.75% or even 1.75-2.00%.

S&P 500 more rejected by 55 day EMA

Stocks were indeed rather resilient to rate hike speculations, but was then knocked down more by war worries. S&P 500 was rejected twice by 55 day EMA and that was a near term bearish development. Though, outlook wouldn't be too bad if SPX could defend 4278.94 support, which is close to 55 week EMA. There is chance that price action from 4818.62 are merely a sideway consolidation pattern.

However, firm break of 4278.94 will open up deeper medium term scale correction to 38.2% retracement of 2191.86 to 4818.62 at 3815.19 at least, before forming a bottom.

10-year yield breached 2%, more upside ahead

10-year yield's break of 2% handle was also a talking point last week. For now, we'd expect recent up trend to continue higher. The real test is in 2.159/87 cluster level. This represents 61.8% retracement of 3.248 to 0.398 at 2.159, and 61.8% projection of 0.398 to 1.765 from 1.343 at 2.187. This level is not expected to be taken out decisively, unless markets believe that inflation would spiral out of control of Fed's hands.

At the same time, we're not expecting a break of 1.743 support even in case of retreat. But of course, that's based on the assumption that a full-blown war would not take place.

USD/CAD Weekly Outlook

USD/CAD stayed in sideway consolidation last week and outlook is unchanged. Initial bias remains neutral this week first. Further rise remains mildly in favor. On the upside, break of 1.2795 will resume the rally from 1.2448 to 1.2963 resistance next. However, break of 1.2634 support will turn bias back to the downside for 1.2448 support instead.

In the bigger picture, focus stays on 38.2% retracement of 1.4667 (2020 high) to 1.2005 (2021 low) at 1.3022. Sustained break there should confirm that the down trend from 1.4667 has completed after defending 1.2061 long term cluster support. Further rise would then be seen towards 61.8% retracement at 1.3650. However, rejection by 1.3022 will maintain medium term bearishness. Break of 1.2005 will resume the down trend from 1.4667 and that carries larger bearish implications too.

In the longer term picture, we're viewing price actions from 1.4689 as a consolidation pattern. Thus, up trend from 0.9506 (2007 low) is still expected to resume at a later stage. This will remain the favored case as long as 1.2061 support holds, which is close to 50% retracement of 0.9406 to 1.4689 at 1.2048. However, firm break of 1.2061 support will argue that USD/CAD has already started a long term down trend. Next target is 61.8% retracement of 0.9406 to 1.4689 at 1.1424.

Monday, Feb 14, 2022

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Tuesday, Feb 15, 2022

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Wednesday, Feb 16, 2022

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Thursday, Feb 17, 2022

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Friday, Feb 18, 2022

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Summary

United States: Hot Inflation Data Widen the Door for a More Aggressive Fed Move in March

• Consumer prices rose a better-than-expected 0.6% in January, and the details of the report hinted that just as price pressures in some areas ease, inflation in other parts of the economy are picking up. The stronger-than-expected CPI report and more hawkish comments from St. Louis Fed President James Bullard on Thursday caused markets to price in a more aggressive move by the Fed next month. These developments tilt the risks more in favor of an aggressive hike out of the gate.
• Next week: Retail Sales (Wed.), Industrial Production (Wed.), Housing Starts (Thurs.)

International: U.K. Economy Showed Resilience in Q4, Brazil and Mexico Face Elevated Inflation

• In the G10, U.K. GDP data revealed that growth in the fourth quarter as well as the month of December was affected by the spread of the Omicron variant. December GDP fell 0.2% month-over-month and Q4 GDP grew only 1.0% quarter-over-quarter. Elsewhere in the emerging markets, Brazil's January CPI figures showed inflation ticking higher to 10.4% year-over-year, while Mexico's January CPI slowed less than expected to 7.1% year-over-year. As expected, Banxico increased its Overnight Rate by 50 bps to 6.00% at its February monetary policy meeting.
• Next week: U.K. CPI (Wed.), Canada CPI (Wed.), Japan CPI (Thurs.)

Interest Rate Watch: Global Monetary Policy Cycle Tightening Gains Momentum

• Central banks from the developed major economies have been active in early 2022, with several either delivering a policy shift or putting markets on notice that policy action should be forthcoming in the months and quarters ahead.

Credit Market Insights: Household Debt Surges at Year's End, as Revolving Credit Starts to Flounder

• Total household debt balances rose $333M in the final quarter of last year, which marks the largest quarterly increase nearly 15 years. Last quarter's surge rung in total household debt rung for 2021 at just shy of $15.6T. Mortgage and credit card balances saw the largest increases in Q4. But in other news this week, December revolving credit saw its smallest gain since April 2021 and points to a slowdown in consumer demand.

Full report here.