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Daily Pivots: (S1) 1.3455; (P) 1.3487; (R1) 1.3537; More...

Intraday bias in GBP/USD remains neutral at this point. As noted before, rebound from 1.3158 could have completed at 1.3748 already. More importantly, larger fall from 1.4282 is probably not over yet. Deeper fall would be seen and break of 1.3435 will target 1.3158 low. On the upside, though, above 1.3571 minor resistance will turn bias back to the upside for retesting 1.3748.

In the bigger picture, strong support was seen from 38.2% retracement of 1.1409 to 1.4248 at 1.3164. The development suggests that 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) 0.9114; (P) 0.9136; (R1) 0.9164; More....

USD/CHF is still bounded in range of 0.9090/9276 and intraday bias remains neutral. On the downside, firm break of 0.9084 support will argue that choppy rise from 0.8925 has completed. Fall from 0.9471 might be ready to resuming. Further decline would be seen back to 0.8925 support first. On the upside, above 0.9276 will target 0.9372 resistance instead.

In the bigger picture, the corrective structure of the rebound from 0.8925 argues that fall from 0.9471 is not complete yet. It could either be the second leg of pattern from 0.8756 (2021 low), or resuming larger down trend from 1.0237 (2018 high). We'd pay attention to the downside momentum and assess the odds later. But for now, medium term outlook will be neutral at best as long as 0.9471 resistance holds.

Daily Pivots: (S1) 113.63; (P) 113.89; (R1) 114.12; More...

USD/JPY recovers today but stays in range above 113.47. Intraday bias remains neutral first. On the downside, break of 113.47 will resume the fall from 116.34. As a corrective to whole up trend from 102.58, break of 112.52 will target 38.2% retracement of 102.58 to 116.34 at 111.08. However, break of 115.05 resistance will bring stronger rebound back to retest 116.34 high.

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 110.91) holds.

Markets are gradually stabilizing, despite the fact that Russia-Ukraine tensions remain high. The two-day FOMC meeting concludes this afternoon.

FOMC meeting ends today

The Fed is widely expected to keep a hawkish stance as it prepares the market for a rate lift-off on March 15-16. This year's three quarterly rate increases have already been factored into the market. In the absence of any new macro projections or Dot Plots, we expect Fed Chair Powell to make a very clear message that the Fed is looking beyond recent stock market volatility and is instead focused on the tight labor market.

The resurgent pandemic is likely to have both slowed economic growth in 2021 and kept key inflation indicators well above the Fed's 2% target, according to newly revealed data expected later this week.

US stock index futures rose on Wednesday after two days of turbulence following Microsoft's excellent earnings, while investors awaited the outcome of the Federal Reserve's policy meeting. Tesla will release its earnings today after market close.

FX news

In the FX, the US dollar index is showing some minor gains around 96.00, while dollar/yen is edging notable higher after the flat Tuesday session. Euro/dollar is still pointing down below 1.1300, approaching yesterday’s lows, while sterling is climbing above $1.3500 today.

BoC decision on the calendar

Additionally, the Bank of Canada meets today. The BoC is expected to maintain a hawkish stance, and it may alter its forward guidance to prepare markets for a potential lift-off sooner rather than later. Currently, the BoC has designated Q2 as a possible launch window. Recent Canadian data, on the other hand, have been good, prompting markets to revise up the anticipated timeline. March 2 is completely priced in as well. Dollar/loonie dived below 1.2600 with immediate support at the 200-day simple moving average (SMA) around 1.2500.

In other currencies, aussie/dollar is rising near 0.7170; however, kiwi/dollar is having weak momentum today, standing around 0.6700.

WTI crude oil futures are hovering near the seven-year high of $85.54/per barrel, suggesting a strong positive day, while gold prices are looking steady at $1,845/per ounce.

US exports of goods rose USD 2.2B to USD 157.3B in December. Imports of goods rose USD 5.1B to 258.3B. Goods trade deficit widened to USD -101.0B, versus expectation of USD -96.1B.

Whole sale inventories rose 2.1% mom to USD 789.4B. Retail inventories rose 4.4% mom to USD 643.8B.

Full release here.

The German government lowered 2022 growth forecast to 3.6%, down from October's projection of 4.1%. That's still notably higher that 2021's preliminary figure of 2.7%.

"The consequences of the corona pandemic are still noticeable and many companies still have to struggle with them," Economy Minister Robert Habeck said . "Nevertheless, our economy is still robust."

"During the still-difficult economic rebound phase, we will continue aid programs for companies and furlough policies," he noted. "With an increasing vaccination rate, it should soon be possible to contain the pandemic in a sustainable manner and to reduce crisis aid. Then the economic recovery will accelerate noticeably."

We're seeing a strong start to trading on Wednesday after what has been a very turbulent start to the week.

We've seen some sharp sell-offs already this week but investors appear to be encouraged by just how quickly and strong markets have bounced back. Monday looked like it was going to be a bloodbath in equity markets but rather than panic, investors poured back in and seized upon the lower valuations.

We saw this again after the close on Tuesday, when Microsoft earnings caused another wobble but reassurances around decelerating cloud growth were enough to trigger another wave of bargain hunting and we're seeing that carry through to Europe today. US futures also look very healthy ahead of a crucial Fed decision later.

Fed misstep could have severe consequences

The Fed could have a big role to play in whether stock markets will build on these encouraging signs. As ever, every word will be poured over so I expect the central bank will take a very careful approach in its communication later on.

They need to be careful to find the right balance between taking inflation seriously and not overdoing it. These markets will be easily spooked so today is all about finding just the right balance. That means sending a clear signal about a March hike and alluding to discussions around balance sheet reduction towards the middle of the year.

We probably won't get any specifics from Powell on when that will start or how fast it will happen, nor on how many hikes we'll get this year. He will probably be keen to stress how seriously they're taking it though and how they'll do whatever is necessary. Ultimately, we may learn very little but the important thing is we don't see a misstep as the consequences could be severe.

BoC expected to start aggressive tightening cycle

The Bank of Canada is unlikely to wait until March, with markets quite heavily pricing in a rate hike today and as much as six this year. This comes as inflation has risen to the highest level in 30 years and far above its 1-3% target range. With the labour market also tightening following a strong recovery from the pandemic, the time has arrived for accommodation to be removed.

The only question now is just how fast they'll move and whether they'll look to reduce their balance sheet, rather than just aggressively raise rates. The loonie has performed well recently, buoyed by very hawkish rate expectations and we could get more clarity on how accurate they are today.

Oil eyeing triple figures after brief pullback

Oil prices are continuing to edge higher after a brief pullback last week. The move followed some turbulence at the start of the week and came as API reported an 872,000 barrel draw which exceeded expectations. Crude prices are once again closing in on $90 and at this point, it doesn't look like we'll be waiting long.

So immediately it becomes a question how long we'll be waiting for triple figures. The supply/demand dynamics remain favourable and the potential for conflict in Ukraine can only be supportive, as additional risk premiums are priced in. It's still unlikely that oil and gas will be used as a weapon any time soon but if it was, it could lead to a serious surge in prices given how tight the markets are.

Gold awaits Fed decision

Gold is continuing to hold up ahead of the Fed meeting, close to $1,850 where it has seen some resistance recently. The central bank will have a big role to play on whether the yellow metal breaks above here or below $1,830 support.

It has been rising recently even as the market has priced in four hikes and balance sheet reduction which may suggest we're seeing some inflation hedging in case more tightening is needed. Risk aversion may also be supporting the gold price. Either way, we should have more clarity later today.

Cause for optimism?

The recovery in bitcoin over the last couple of days has been really encouraging. After falling to around $33,000, more than 50% from its highs, the cryptocurrency has performed extremely well and finds itself 4% higher on the day around $38,000. It's not out of the woods yet though and if broader risk appetite takes a hit, I'd expect bitcoin to suffer more. Whether that will see it test the crucial $30,000 region, only time will tell, but traders will be very relieved at what they've seen this week. The key test above is $40,000, a break of which could see momentum accelerate to the upside.

USD is moving slightly lower today, ahead of the important FOMC press conference. Stocks slowed down ahead of the even but it might be just a temporary intraday rally before the market hits resistance, especially if the FED will stick with the current hawkish "tone".

EURUSD moved south yesterday, but then it found a base as stocks found some buyers. As such, corrective rally can still be coming here on the EURUSD, ideally higher into wave c back to 1.1360/70 resistance.

EUR/USD 4h Elliott Wave analysis

GOLD came higher yesterday, ideally into the fifth wave of an ending diagonal which is now already facing some limited upside at 1850 area. We see a risk for a sharp reversal, especially if metal would also break and close below 1834 today.

Gold 4h Elliott Wave analysis

• Fed’s and BoC’s inflation-fighting credentials to be put to the test
• Dollar steady, yen pulls back as Fed and Ukraine jitters subside slightly
• Wall Street survives another rollercoaster session, Microsoft earnings lift futures

Will Powell scare markets or soothe the panic?

All eyes are on the Fed today as investors search for some much-needed policy guidance amid spiralling inflation, growing doubts about the economic outlook and geopolitical tensions in Eastern Europe. The FOMC decision itself, due at 19:00 GMT, is not expected to spark any fireworks, though there’s a small risk the Fed might decide to end its asset purchases even earlier. Chair Powell’s press conference 30 minutes later will be the main highlight as markets will try to get a sense of how fast policymakers want to move in terms of normalizing policy.

Powell will likely give his blessing to the fully priced rate hike in March but what exactly comes after that is open to debate. There is no dot plot chart at the January meeting so Powell’s tone will be very important in dictating sentiment. Should he signal that more than one rate hike per quarter might be needed to fight inflation, that could send stocks spinning again.

Another hot issue for the markets right now is the timing and pace of the Fed’s balance sheet reduction plan. Powell is unlikely to reveal much at this point so it will all come down to how worried he will sound about inflation and whether he will attempt at all to ease investor fears that the Fed may end up tightening policy too aggressively.

BoC: a ‘surprise’ rate hike?

The Bank of Canada will announce its decision a few hours before the Fed and may opt to get a head start on rate increases even though its last guidance didn’t foresee such a move before April the earliest. With a strong labour market and inflation at a 30-year high in Canada, a surprise rate rise is more than possible from a central bank that has a history of shocking markets. Although it wouldn’t exactly be considered much of a surprise when rate hike odds are as high as 80%.

Hence, it’s questionable whether the Canadian dollar will be able to make another push for the recent high of C$1.2450 per dollar level in the near term.

Dollar firm, pound shrugs off ‘partygate’ debacle

The greenback’s latest resurgence has quashed the mild rebound that the riskier currencies were enjoying in December and early parts of January when the loonie, along with the pound saw the strongest recovery.

The US dollar index is currently trading near two-week highs, climbing back above the 96.0 level and awaiting fresh direction from the Fed. The yen, however, gave up some of its recent gains as safe haven flows eased somewhat amid no fresh escalation in the standoff between Washington and Moscow over Ukraine.

The pound was steady around $1.35, showing few nerves even as things keep getting worse for UK Prime Minister Boris Johnson, who is being investigated for holding a birthday party during lockdown. The next 24 hours could be critical for Johnson when the report into the ‘partygate’ debacle is expected to be published.

Microsoft helps stocks perk up, Tesla and Fed tests still to come

In equity markets, most stocks were in the green, though some Asian markets remained under pressure. European shares opened strongly higher, extending their gains into a second day, despite another wild session on Wall Street on Tuesday.

US stocks fell at the open, started rebounding in late trading, before taking a tumble right before the close. The S&P 500 ended the day 1.2% lower, while the Nasdaq Composite slipped 2.3%. The volatility soon settled down afterwards, however, after Microsoft cheered markets by predicting its cloud unit will enjoy faster growth in the current quarter, following slightly disappointing growth in the reported period.

Microsoft shares were up more than 3% in pre-market trade and US e-mini futures were sharply higher on Wednesday, led by Nasdaq futures, which were last quoted up 2%.

However, there’s plenty of tests to come for the markets, as aside from the Fed meeting, Tesla will announce its earnings after the closing bell.

The Canadian dollar is usually sleepy before the North American session. Today has been unusual, with the currency showing recording steady gains in the Asian and European sessions. USD/CAD is trading at 1.2564, down 0.53% on the day, in anticipation of a rate hike from the Bank of Canada later today.

BoC expected to raise rates

It’s a busy day on the central bank watch, with the BoC making their rate announcement followed by the FOMC meeting. Most economists do not expect the BoC to raise rates, but the markets are more hawkish and have priced in a 0.25% rate hike at 70%. The labor market is robust and inflation is running at a 30-year high. In normal times, this would virtually guarantee a hike, but these are not normal times. The Omicron variant continues to spread rapidly and many provinces have renewed health restrictions. The BoC is expected to revise downwards its growth forecast for Q1 and would prefer not to make any moves during a pandemic, but the surge in inflation may prove to be too much for the bank to ignore.

If the BoC does press the rate trigger, USD/CAD should continue to fall towards the symbolic 1.25 line. However, if the bank opts to stay on the sidelines, there would be some disappointment from investors and I would expect USD/CAD to strengthen. The FOMC meeting will also impact on the movement of the pair, which means that the Canadian dollar’s biggest moves should be against the pound, euro and New Zealand and Australian dollars.

The Fed policy decision follows the BoC, with no rate move expected. However, the likelihood of a March lift-off stands at 94%, making it a virtual certainty. The key question swirling in the markets is how aggressive will the Fed be in 2022. The baseline assumption is that the Fed will implement four rates hikes of 0.25% each. Still, the risk of additional hikes, given the surge in inflation, is tilted towards the upside. Will Fed Chair Powell confirm a March move? If so, the US dollar should move higher. If, on the other hand, Powell suggests that inflation could ease after a few hikes, we should see a risk-on mood in the markets which will weigh on the US dollar.

USD/CAD Technical

• There is support at 1.2495 and 1.2405
•  1.2632 was tested in resistance on Tuesday, but has some breathing room. Above, there is resistance at 1.2679