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Daily Pivots: (S1) 1.2305; (P) 1.2340; (R1) 1.2388; More...

Immediate focus is now on 1.2486 support turned resistance as GBP/USD's rebound from 1.2099 extends. Decisive break there will pave the way to 38.2% retracement of 1.3433 to 1.2099 at 1.2609, and possibly further to 1.2810 resistance. For now, further rally is in favor as long as 1.2292 minor support holds, in case of retreat.

In the bigger picture, rise from 1.0351 (2022 low) should have already completed at 1.3433, and the trend has reversed. Further fall is now expected as long as 1.2810 resistance holds. Deeper decline should be seen to 61.8% retracement of 1.0351 to 1.3433 at 1.1528, even as a corrective move.

Daily Pivots: (S1) 1.0379; (P) 1.0409; (R1) 1.0445; More...

Intraday bias in EUR/USD remains on the upside as rebound from 1.1076 is in progress. Strong resistance might be seen from 38.2% retracement of 1.1213 to 1.0176 at 1.0572 to limit upside. Break of 1.0371 minor support will bring retest of 1.0176 low. However, sustained break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

Euro posted notable gains today as lifted by encouraging Eurozone PMI data that suggests the region is beginning the year on firmer footing. Private sector activity showed cautious growth, with reduced drag from manufacturing and moderate expansion in services. Most surprisingly, Germany, which struggled throughout 2024, returned to expansion. Sterling also gained on better PMI readings even though stagnation risks persist, particularly due to accelerated job cuts in the UK.

Dollar extended its decline as risk-on sentiment dominated markets, despite US equity indices taking a breather after strong rallies earlier this week. The greenback is currently the weakest performer for the day, followed by Yen, which gave back its brief gains following BoJ’s widely anticipated rate hike. The Swiss Franc also underperformed, completing a trio of safe-haven currencies that lagged behind in today’s risk-driven market environment.

Technically, Swiss Franc’s weakness warrants closer attention. The strong rally in GBP/CHF today suggest that fall from 1.1393 has completed at 1.1086 after defending 1.1106 support. The development keeps the rally from 1.0741 alive. Retest of 1.1393 would be seen next, and firm break there will extend the rise towards 1.1675 high.

In Europe, at the time of writing, FTSE is down -0.75%. DAX is down -0.20%. CAC is up 0.36%. UK 10-year yield is down -0.001 at 4.639. Germany 10-year yield up 0.028 at 2.579. Earlier in Asia, Nikkei fell -0.07%. Hong Kong HSI rose 1.86%. China Shanghai SSE rose 0.70%. Singapore Strait Times fell -0.06%. Japan 10-year JGB yield rose 0.0255 to 1.235.

US PMI composite falls to 9-mth low, optimism holds despite slowing growth and rising costs

US PMI data for January painted a mixed picture. PMI Manufacturing rose from 49.4 to 50.1, reaching a seven-month high and signaling a return to slight expansion. However, PMI Services dropped sharply from 56.8 to 52.8, a nine-month low, dragging PMI Composite down from 55.4 to 52.4, also a nine-month low.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that US businesses are starting 2025 in an "upbeat mood," with optimism about the new administration driving stronger economic growth. Despite the slowdown in output growth, "sustained confidence" among businesses suggests this deceleration may be temporary. Encouragingly, hiring has surged, with job creation reaching its fastest pace in two and a half years, signaling resilience in the labor market.

However, inflationary pressures are resurfacing, posing risks to the economic outlook. Companies have reported "supplier-driven price hikes" and "wage growth amid poor staff availability." Inflation in input costs and selling prices has been "broad-based across goods and services," which, if sustained, could fuel concerns about hawkish policy approach from the Fed.

UK PMI composite edges higher to 50.9, but stagflation risks cloud economic outlook

UK PMI Composite rose slightly from 50.4 to 50.9 in January, indicating marginal growth. Manufacturing PMI improved from 47.0 to 48.2, while services PMI ticked up from 51.1 to 51.2. Despite these increases, the overall outlook remains gloomy, with underlying concerns about economic weakness and inflationary pressures persisting.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, warned that the data "add to the gloom" surrounding the UK economy.

Companies are cutting jobs at the fastest rate since the global financial crisis in 2009, reflecting falling sales and bleak business prospects. Business optimism remains at its lowest levels in two years, accompanied by subdued activity across sectors.

Inflationary pressures have also "reignited," creating what Williamson described as a "stagflationary environment" and a "policy quandary" for BoE.

Eurozone PMI composite hits 50.2 as Germany returns to growth

Eurozone PMI data for January showed cautious improvement, with PMI Composite rising from 49.6 to 50.2, a five-month high, signaling a return to marginal growth. Manufacturing PMI increased to 46.1, its highest in eight months, while services PMI slipped slightly to 51.4 but remained in expansion.

Germany led the improvement, with its PMI Composite climbing from 48.0 to 50.1, marking a seven-month high and a return to expansionary territory. Meanwhile, France lagged behind, with its PMI Composite increasing to 48.3 but remaining below the 50 threshold, indicating continued contraction.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, described the data as "mildly encouraging." He noted that the private sector had entered a phase of cautious growth, with reduced drag from manufacturing and moderate expansion in services. Germany’s strong rebound played a key role in offsetting the continued weakness in France.

Inflationary pressures, however, remain a concern ahead of next week’s ECB meeting. Input prices in manufacturing rose for the first time in four months, driven by a weaker euro and Germany’s increased CO2 tax. In the services sector, cost inflation persisted, largely due to higher wages. Selling prices in services also remained elevated.

Due to persistent inflation risks and the fragile state of the economy, ECB is likely stick to its gradual pace of cutting interest rates.

BoJ delivers expected rate hike, upgrades core inflation forecasts

BoJ raised its uncollateralized overnight call rate by 25bps to 0.50% as widely expected, marking the highest level since 2008. The decision, made by an 8-1 vote, saw dissent from board member Nakamura Toyoaki, who advocated for a delay until March.

In the new economic projections, core CPI forecasts were significantly revised upward from 1.9% to 2.4% for fiscal 2025, and slightly from 1.9% to 2.0% for fiscal 2026. Core-core CPI (excluding energy and fresh food) forecast was also raised from 1.9% to 2.1% for fiscal 2025, remaining unchanged at 2.1% for fiscal 2026. Real GDP growth projections were left steady at 1.1% for fiscal 2025 and 1.0% for fiscal 2026.

At the post-meeting press conference, Governor Kazuo Ueda downplayed the sharp inflation forecast revisions, stating, "The rise in underlying inflation is moderate. I don't think we are seriously behind the curve in dealing with inflation."

He reiterated the importance of a gradual approach to policy adjustments, and there no "preset idea" on the timing and pace of rate hikes. He also highlighted the estimated neutral range of 1%-2.5%, emphasizing that the current rate of 0.5% still has "some distance" to reach neutral.

Also released, CPI core (ex-food) jumped from 2.7% yoy to 3.0% yoy in December, marking the highest rate in 16 months. CPI core-core (ex-food & energy) was unchanged at 2.4% yoy. Headline CPI rose from 2.9% yoy to 3.6% yoy.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0379; (P) 1.0409; (R1) 1.0445; More...

Intraday bias in EUR/USD remains on the upside as rebound from 1.1076 is in progress. Strong resistance might be seen from 38.2% retracement of 1.1213 to 1.0176 at 1.0572 to limit upside. Break of 1.0371 minor support will bring retest of 1.0176 low. However, sustained break of 1.0572 will raise the chance of bullish reversal, and target 61.8% retracement at 1.0817.

In the bigger picture, fall from 1.1274 (2023 high) should either be the second leg of the corrective pattern from 0.9534 (2022 low), or another down leg of the long term down trend. In both cases, sustained break of 61.8 retracement of 0.9534 to 1.1274 at 1.0199 will pave the way back to 0.9534. For now, outlook will stay bearish as long as 1.0629 resistance holds, even in case of strong rebound.

US PMI data for January painted a mixed picture. PMI Manufacturing rose from 49.4 to 50.1, reaching a seven-month high and signaling a return to slight expansion. However, PMI Services dropped sharply from 56.8 to 52.8, a nine-month low, dragging PMI Composite down from 55.4 to 52.4, also a nine-month low.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted that US businesses are starting 2025 in an "upbeat mood," with optimism about the new administration driving stronger economic growth. Despite the slowdown in output growth, "sustained confidence" among businesses suggests this deceleration may be temporary. Encouragingly, hiring has surged, with job creation reaching its fastest pace in two and a half years, signaling resilience in the labor market.

However, inflationary pressures are resurfacing, posing risks to the economic outlook. Companies have reported "supplier-driven price hikes" and "wage growth amid poor staff availability." Inflation in input costs and selling prices has been "broad-based across goods and services," which, if sustained, could fuel concerns about hawkish policy approach from the Fed.

Full US PMI flash release here.

Markets

Eurozone business activity returned to growth in January according to flash EMU PMI’s. The composite gauge ticked up from 49.6 from 50.2 (vs 49.7 expected). It’s only the first 50+ reading since August of last year. The rate of expansion was only marginal amid ongoing demand weakness and it was centered solely on services. The services PMI was broadly flat at 51.4 with that PMI over the past year being only below the 50 boom-bust mark in November 2024. The manufacturing PMI improved from 45.1 from 46.1, the least worse level since May of last year. There were overall signs of improvement with business activity in Germany stabilising, ending a six-month sequence of decline. France remained in contraction, but the pace of reduction eased to the weakest since last September. The rest of the EMU continued to outperform, seeing a further modest expansion of output, the thirteenth increase in a row. Details showed new orders decreasing, but at the smallest degree since August while international export orders are still in dire straits. Signs of improvement in activity led to a near-stabilisation of employment. The fastest increase in workforce numbers in the service sector for six months was almost sufficient to cancel out a marked reduction in manufacturing employment. Meanwhile, input costs rose sharply, with the rate of inflation hitting a 21- month high. In turn, companies also increased their selling prices at a sharper pace. Ahead of next week’s ECB meeting, the latter isn’t encouraging in light of the ongoing rate cut cycle. Finally, companies remained optimistic that output will increase over the coming year. European bonds sold off after PMI’s with the curve bear flattening. EU swap rates rose by 5.5 bps (2-yr) to 2.3 bps (30-yr). EUR/USD temporarily pushed from 1.0450 to beyond 1.05, but failed to cling to those levels. The overnight move from 1.04 to 1.0450 was triggered by USD-weakness after US President Trump threatened Fed chair Powell a first time into lowering rates. European stock markets extend their bullish run.

News & Views

UK January PMIs pointed “to a stagflationary environment which poses a growing policy quandary for the Bank of England”, S&P Global’s chief economist said in a sobering comment. While having improved on face value – the composite PMI picked up from 50.4 to 50.9 – it was only slightly above the 50 no-change level and well below the series long-run average of 53.6. The marginal improvement came on the account of a smaller contraction in the manufacturing industry (48.2 vs 47), in turn the result of output still declining but at a markedly slower pace since December. Services stabilized at 51.2. Orders books shrank for the fourth month in manufacturing and for the first time in 15 months in the services sector. The latter also outpaced manufacturing in shedding jobs. Companies blamed the forthcoming hike in employer’s National Insurance as well as the impact of a post-Budget slump in business confidence as reasons for staff cutbacks. Businesses reported a sharp and accelerated increase in overall cost burdens at the fastest rate in 1.5 years amid higher salary payments, energy costs and priced paid for imported raw materials. Prices charged to end-consumers rose the quickest since July 2023. Activity expectations weakened for a sixth month straight to the lowest since December 2022, posing downside economic reasons. Reasons stretched from unfavourable UK economic prospects, higher employment costs and a Budget-related tumble in investment spending plans. UK money markets pared their Bank of England easing bets after today’s PMIs. That’s offering the pound a lifeline against the likes of the euro. EUR/GBP trades unchanged around 0.843.

German newspaper Handelsblatt citing officials reported the government has lowered its 2025 forecast from 1.1% to just 0.3% amid signs of the economy showing little signs of recovering. Three leading German economic forecasters already projected growth rates between zero and 0.4% back in December. Europe’s largest economy shrank by 0.2% last year, posting a second straight yearly decline. The economy has shown up being the top concern of voters ahead of a national election on February 2023. The CDU/CSU is still having a comfortable but declining lead over other parties. It recently slipped below the 30% threshold with voters switching to the far-right AfD (22%) instead. Former government coalition parties SPD (socialists) and the Greens fluctuate around >15% and +/- 13% respectively. The liberals, whose opposition to break up the debt ceiling triggered the government collapse, flirt with 5%.

Hello fellow traders! In this technical article, we’ll be discussing GOLD (XAUUSD) and sharing some charts that we’ve presented to the members of ElliottWave-Forecast.

As our members know, GOLD is showing higher high sequences in the cycle from the December 18th low, which suggests a further rally in the commodity. Recently, GOLD completed a 3-wave pullback and made another leg up, reaching our target area. In the following text, we’ll take a closer look at the Elliott Wave count and explain how to find targets for wave (v).

GOLD (XAUUSD) H1 Update 01.23.2025

The commodity is forming a 5-wave pattern in the cycle from the 2656.3 low. We can already count 3 waves down, labeled as abc red. The current view suggests that as long as the price remains above the 2735.8 low, the (iv) blue pullback is considered complete. We believe (v) blue is now in progress, with the first target area projected at 2769.99–2708.55.

GOLD (XAUUSD) H1 Update 01.23.2025

GOLD continued its rally as expected. Wave (v) reached the first target at 2769.99–2708.55, calculated using the inverse 1.236–1.618 Fibonacci extension of wave (iv). Another method to project the target for wave (v) is (v) = (i), which comes at 2804.4. We expect the cycle from the 2656.6 low to soon complete as a 5-wave structure ((i) )black and anticipate a pullback in ((ii)). However, we do not recommend selling against the primary bullish trend. Once the ((ii)) pullback begins, we expect it to reach around the 50–61.8 Fibonacci retracement area measured from the 2656.6 low.

Market Picture

In the outgoing week, Bitcoin updated an all-time high, approaching a price of $110K and dragging the entire crypto market up with it. On Friday morning, capitalisation is moving up again, settling above $3.63 trillion. The market needs time to adjust to the current highs, and so far, there are more signs that this is a pause before further growth rather than the market hitting impenetrable resistance.

That said, the sentiment index has been cruising in the greed zone, only going to extreme greed once. As was the case in mid-December, high sentiment index values intensified the selling.

Bitcoin fell below $100K during the week, then approached $110K before gently re-emerging at 102K. The selling intensified on the approach to the peak of $110K in December and in January.

However, support has also shifted above $100K, meaning market participants are now getting used to a six-figure price. Additionally, the market continues to bounce around mentions of Bitcoin and cryptocurrency reserves by Washington officials, which adds volatility but doesn’t help with direction.

News Background

If investors of all categories, from private to institutional, decide to allocate between 2% and 5% of their portfolios to the first cryptocurrency, its value could reach the $700,000 mark, BlackRock CEO Larry Fink said.

Goldman Sachs CEO David Solomon commented that Bitcoin does not threaten the dollar’s status as a reserve currency, remaining a speculative asset. From a regulatory perspective, he said, the bank still cannot own and transact in the first cryptocurrency.

Trading in XRP and SOL futures on the CME could begin on 10 February if approved by regulators. Such information appeared on a subdomain of the CME Group platform. A spokesperson for the exchange said that the beta version of the website was in the public domain ‘by mistake,’ and no decision has yet been made to launch the contracts.

Investment firm Bitwise has filed an application to register the Dogecoin-based ETF (DOGE) with the Delaware (US) Department of State’s Division of Corporations. Decrypt notes that asset managers typically register legal entities with the state before filing formal applications with the SEC.

Member of the US House of Representatives Gerald Connolly called for an investigation into possible conflicts of interest in connection with cryptocurrency projects of Donald Trump. In his opinion, it potentially violates ethical norms and creates risks to national security.

The Japanese yen gained as much as 0.8% earlier today but has failed to consolidate these gains. In the European session, USD/JPY is trading at 156.03, dwon 0.02% on the day.

BoJ raises rates to highest since 2008

The Bank of Japan hiked its policy rate by 25 basis points earlier today, as expected. This brings the policy rate to 0.5%, its highest level since October 2008, during the global financial crisis. The Japanese yen climbed sharply after the decision but was unable to consolidate these gains.

The BoJ has been signaling that it planned to raise rates at today’s meeting, although the BoJ tends to surprise the markets and a rate hike, while expected, was not a given. The BoJ statement expressed hope that this year’s wage negotiations would result in strong wage increases, as was the case last year. Governor Ueda has said in the past that he would raise rates provided that inflation was driven by higher wages, which would show that inflation was sustainable. Wage growth has been moving higher and this resulted in today’s rate hike.

Japan’s inflation rate has been moving higher and the December inflation report, which came out today, showed core CPI climbed to 3%, up from 2.7% in November and in line with the market estimate. The core rate has hovered above the BoJ’s 2% target for 2.5 years and at today’s meeting, the BoJ upgraded its inflation outlook to above 2% until 2026.

Predictably, Governor Ueda didn’t provide a timeline for the next rate hike at his post-meeting press conference, but a May rate hike is on the table if the wage negotiations result in higher wages and inflation does not weaken unexpectedly. Another key factor in the timing of the next rate hike will be President Trump’s trade policy. Trump had promised to levy tariffs on US trading partners on his first day in office but has delayed the tariffs until at least Feb. 1. The BoJ will want to see which direction Trump’s trade policy is going before raising rates again.

USD/JPY Technical

• There is support at 154.78 and 153.27
• 156.49 and 158.00 are the next resistance lines

USDCHF, Weekly

In the Weekly timeframe, USDCHF formed a triple-top pattern. The price bounced again from the critical resistance and MA200. The CCI and %R are out of the overbought zone, also confirming the possibility of a fall.

• We can consider selling USDCHF only in case of consolidation below 0.9020 with the target to 0.8890 and further to 0.8750;

Cable rose further on Friday, following better than expected UK PMI data, while the near term action remains underpinned by weaker dollar.

Fresh strength cracked daily Kijun-sen (1.2414) and approached next barrier at 1.2455 (50% retracement of 1.2811/1.2099 bear-leg) but started to face headwinds here.

Potential risk of recovery stall is presented by overbought stochastic and 14-d momentum remaining in negative territory, although bias expected to remain with bulls while the price stays above broken 20DMA (1.2354, former significant barrier, reverted to support).

On the other hand, more optimistic outlook could be seen on weekly chart, where a reversal pattern has formed, keeping in play hopes for further recovery.

In such scenario, weekly close above broken Fibo resistance at 1.2371 (38.2% of 1.2811/1.2099) will be a minimum requirement to keep fresh bulls in play, with lift above 1.2455 (50% retracement) and 1.2500 (psychological / 10WMA) to verify signal.

Fundamentals may not work in favor of pound, as BOE is likely to cut rates next month, but elevated inflation and soft data from labor sector would further harm the outlook.

Res: 1.2455; 1.2500; 1.2539; 1.2557
Sup: 1.2371; 1.2354; 1.2280; 1.2229