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Daily Pivots: (S1) 1.1414; (P) 1.1440; (R1) 1.1465; More...

Intraday bias in EUR/USD is turned neutral as it failed to break through 1.1482 resistance for now. A medium term bottom could be in place at 1.1120, on bullish convergence condition in daily MACD. Break of 1.1482 resistance will target 38.2% retracement of 1.2348 to 1.1120 at 1.1589 next. Sustained break there will argue that whole fall from 1.2348 has completed too and target 61.8% retracement at 1.1879. On the down, however, break of 1.1265 support will dampen this bullish view and bring retest of 1.1120 low instead.

In the bigger picture, the decline from 1.2348 (2021 high) is seen as a leg inside the range pattern from 1.2555 (2018 high). Sustained trading above 55 week EMA (now at 1.1613) will argue that it has completed and stronger rise would be seen back towards top of the range between 1.2348 and 1.2555. However, firm break of 1.0635 (2020 low) will raise the chance of long term down trend resumption and target a retest on 1.0339 (2017 low) next.

Daily Pivots: (S1) 1.3499; (P) 1.3527; (R1) 1.3564; More...

Range trading continues in GBP/USD and intraday bias remains neutral. On the upside, break of 1.3627 will resume the rebound to 1.3748 resistance. Firm break there will revive the bullish case that correction from 1.4248 has completed with three waves down to 1.3158. Further rally should then be seen to retest 1.4248 high. On the downside, however, break of 1.3356 will bring retest of 1.3158 low.

In the bigger picture, as long as 38.2% retracement of 1.1409 to 1.4248 at 1.3164 holds, up trend from 1.1409 (2020 low) is still in progress. On resumption, next target will be 38.2% retracement of 2.1161 to 1.1409 at 1.5134. Nevertheless sustained break of 1.3164 will argue that whole rise from 1.1409 has completed and bring deeper fall to 61.8% retracement at 1.2493.

Daily Pivots: (S1) 0.9218; (P) 0.9240; (R1) 0.9258; More....

Intraday bias in USD/CHF remains neutral as range trading continues. Further rise will remain mildly in favor as long as 0.9090 support holds. break of 0.9372 will resume the choppy rally from 0.8925 to 0.9471 high. However, break of 0.9090 will turn bias back to the downside for 0.8925 support instead.

In the bigger picture, medium term outlook will be neutral at best as long as 0.9471 resistance holds. Larger down trend could still extend through 0.8756 (2021 low). However, firm break of 0.9471 will argue that the trend has already reversed and rebound the rally from 0.8756 with another impulsive move.

Daily Pivots: (S1) 114.89; (P) 115.13; (R1) 115.35; More...

USD/JPY rises slightly today but stays in range of 114.14/115.68, and intraday bias remains neutral first. Overall, consolidation pattern from 116.34 is still extending. On the upside, break of 115.68 will resume the rebound from 113.46 to retest 116.34 high first. On the downside, break of 114.14 should extend the consolidation with another falling leg through 113.46 support.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.21) holds.

Dollar strengthens mildly in Asia today but overall markets have been quiet this week so far. Euro continues to consolidate last week's sharp gain, ahead of a key near term resistance against the greenback. Commodity currencies are the slightly stronger ones. Major benchmark global treasury yields continue to rally while stocks tread water. There might not be clear directions in the markets until US consumer inflation data later in the week.

Technically, Gold's recovery from 1780.10 was admittedly stronger than expected, even though upside momentum is unconvincing. Despite the steepness of the fall from 1853.70 to 1780.10, Gold is not ready to breakout to the downside. Instead, current development suggest that it's recent price actions were just forming a symmetric triangle pattern. Some more time is needed to break out from range of 1780.10/1853.70. But such breakout could reveal which direction the greenback is taking too.

In Asia, at the time of writing, Nikkei is up 0.24%. Hong Kong HSI is down -1.56%. China Shanghai SSE is down -0.39%. Singapore Strait Times is up 0.61%. Japan 10-year JGB yield is up 0.012 at 0.212. Overnight, DOW rose 0.00%. S&P 500 dropped -0.37%. NASDAQ dropped -0.58%. 10-year yield dropped -0.014 to 1.916.

Australia NAB business confidence rose to 3 in Jan, strong recovery expected

Australia NAB business confidence rose from -12 to 3 in January, turned positive. Business conditions, however, dropped from 8 to 3. Looking at some details, trading conditions dropped from 14 to 7. Profitability conditions dropped from 10 to 2. Employment conditions dropped from 2 to -1 and turned negative.

"Overall, the January survey shows significant disruption to business activity from the spread of the Omicron variant, albeit impacts on businesses were less severe than in past outbreaks,"said NAB Group Chief Economist Alan Oster. "However, we continue to expect a strong recovery as case numbers come down."

RBNZ Orr: An innovative approach needed to support a more efficient and resilient cash system

RBNZ is currently commencing Central Bank Digital Currency (CBDC) proof-of-concept design work, which is a "multi-stage and multi-year effort". The consultation on an issues paper Future of Money – Cash System Redesign, which closes on March 7, received 190 submissions so far.

Governor Adrian Orr said in a speech, "we must decide how best to use of digital technology to modernize central bank money, while we continue to ensure cash remains an option for those who need it. An innovative approach is needed to support a more efficient and resilient cash system, and the changes required are potentially far reaching".

"The technology exists now to implement a CBDC, but it needs to be well designed. At a basic hygiene level, a CBDC must be user-friendly, resilient to cyber and other operational risks, and enable privacy. These features promote widespread trust and use."

Elsewhere

Japan labor cash earnings dropped -0.2% yoy in December versus expectation of 0.9% yoy. Household spending dropped -0.2% yoy versus expectation of 0.3% yoy. Current account surplus narrowed to JPY 0.79T in December, versus expectation of JPY 1.16T.

Looking ahead, France trade balance and Italy retail sales will be released in European session. Later in the day, both US and Canada will release trade balance.

USD/JPY Daily Outlook

Daily Pivots: (S1) 114.89; (P) 115.13; (R1) 115.35; More...

USD/JPY rises slightly today but stays in range of 114.14/115.68, and intraday bias remains neutral first. Overall, consolidation pattern from 116.34 is still extending. On the upside, break of 115.68 will resume the rebound from 113.46 to retest 116.34 high first. On the downside, break of 114.14 should extend the consolidation with another falling leg through 113.46 support.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.21) holds.

Economic Indicators Update

Australia NAB business confidence rose from -12 to 3 in January, turned positive. Business conditions, however, dropped from 8 to 3. Looking at some details, trading conditions dropped from 14 to 7. Profitability conditions dropped from 10 to 2. Employment conditions dropped from 2 to -1 and turned negative.

"Overall, the January survey shows significant disruption to business activity from the spread of the Omicron variant, albeit impacts on businesses were less severe than in past outbreaks,"said NAB Group Chief Economist Alan Oster. "However, we continue to expect a strong recovery as case numbers come down."

Full release here.

RBNZ is currently commencing Central Bank Digital Currency (CBDC) proof-of-concept design work, which is a "multi-stage and multi-year effort". The consultation on an issues paper Future of Money – Cash System Redesign, which closes on March 7, received 190 submissions so far.

Governor Adrian Orr said in a speech, "we must decide how best to use of digital technology to modernize central bank money, while we continue to ensure cash remains an option for those who need it. An innovative approach is needed to support a more efficient and resilient cash system, and the changes required are potentially far reaching".

"The technology exists now to implement a CBDC, but it needs to be well designed. At a basic hygiene level, a CBDC must be user-friendly, resilient to cyber and other operational risks, and enable privacy. These features promote widespread trust and use."

Full release here.

The short-term Elliott wave view in WTI (CL) shows that we are looking for more upside to complete a 5 waves impulse structure, before a 3 swings pullback at least. The impulse move started from 81.90 low to end wave 1 at 89.72 and pullback in wave 2 ended at 86.75. Oil then resumes higher in wave 3 with internal subdivision as another impulse in lesser degree. Up from wave 2, wave ((i)) ended at 88.20, dips in wave ((ii)) ended at 87.30, wave ((iii)) rallied to 90.99 and a short pullback appeared as wave ((iv)) ended at 90.61. The last push higher to finish wave ((v)) ended at 93.17. This completed wave 3 in higher degree.

Wave 4 pullback ended in a double correction at 90.73 and Oil started the last wave 5 higher to finish an impulse. We are looking an extension in this wave. In lesser degree, wave ((i)) of wave 5 has ended at 92.37 then wave ((ii)) correction completed at 90.88 and Oil has continued to the upside. Expect CL to extend higher and break wave 3 peak to complete wave 5. A possible area to complete this structure comes in 93.76 – 94.69 zone calculated using Fibonacci inverse retracement tool, where Oil could find seller to begin at least a correction or an important new cycle.

CL 1 Hour Elliott Wave Chart

Key Highlights

• GBP/USD started a downside correction from the 1.3635 resistance zone.
• Earlier, it surpassed a major bearish trend line at 1.3525 on the 4-hours chart.
• EUR/USD is consolidating gains below the 1.1480 resistance.
• Gold price could gain pace if it clears the $1,825 resistance.

GBP/USD Technical Analysis

The British Pound started a decent increase from the 1.3360 zone against the US Dollar. GBP/USD climbed above the 1.3450 and 1.3500 resistance levels to move into a positive zone.

Looking at the 4-hours chart, the pair was able to settle above the 1.3500 level and surpassed the 100 simple moving average (red, 4-hours). The pair also climbed above the 50% Fib retracement level of the key decline from the 1.3748 high to 1.3357 low.

Besides, there was a break above a major bearish trend line at 1.3525 on the same chart. However, the pair struggled to gain pace above the 1.3620 and 1.3635 levels.

It faced sellers near the 61.8% Fib retracement level of the key decline from the 1.3748 high to 1.3357 low. GBP/USD corrected gains and traded below 1.3550. An initial support is near the 1.3480 level.

The next major support is near the 1.3450 level. If there is a downside break below the 1.3450 support, the pair could decline towards the 1.3360 support zone. On the upside, an immediate resistance is near the 1.3550 level.

The first major resistance is near the 1.3620 zone. A clear move above the 1.3620 level might start a major increase in the coming sessions.

Looking at EUR/USD, the pair surged above the 1.1420 and 1.1450 levels. It is now consolidating gains and facing resistance near the 1.1480 level.

Economic Releases

• US Goods and Services Trade Balance for Dec 2021 - Forecast $-83.0B, versus $-80.2B previous.

The key takeaway point from a rather busy last week was this: interest rates are going to rise quicker than previously thought. At the start of this week, investors have continued to offload government bonds, sending their yields higher:

The BoE and ECB were more hawkish than expected, with a bigger split in the former in deciding how much to raise rates by. In the US, the much stronger non-farm payrolls report, plus more signs of rising inflationary pressures, cemented expectations of a faster rate hiking cycle over there. While yields have extended their gains, the equity markets have started the new week on a stronger footing – except in some peripheral European countries.

The bond selling has been more profound for European peripheries, with Greek and Italian yields sharply widening their gaps against German bunds.

This is because peripheral Europe has been the major beneficiary from ECB’s emergency stimulus measures. With investors now pricing in a faster removal of QE by the ECB, they are taking no chances. The Italian benchmark stock index was down around 1.5% today, sharply under-performing the likes of the UK’s FTSE and the German DAX indices.

Still, the wider European equity markets are holding their own well and for those that have fallen the losses have been very mild relative to how much they have gained. It remains to be seen whether stock investors will panic more if yields rise further, and yield spreads widen even more.