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Daily Pivots: (S1) 1.4337; (P) 1.4370; (R1) 1.4405; More...

Range trading continues in USD/CAD and intraday bias remains neutral. Further rally is expected as long as 1.4260 support holds. On the upside, firm break of 1.4516 will resume larger up trend to 1.4667/89 key resistance zone. Nevertheless, firm break of 1.4260 will turn bias to the downside for deeper pullback to 55 D EMA (now at 1.4221) and below.

In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Decisive break there will confirm long term up trend resumption. Next target is 100% projection of 1.2401 to 1.3976 from 1.3418 at 1.4993. Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.

Daily Pivots: (S1) 0.9421; (P) 0.9470; (R1) 0.9512; More....

Intraday bias in EUR/CHF stays neutral at this point. On the downside, firm break of 0.9242 support will indicate rejection by 38.2% retracement of 0.9928 to 0.9204 at 0.9481. Deeper fall would then be seen back to channel support (now at 0.9377). However, strong rebound from current level will keep the choppy rally from 0.9204 intact.

In the bigger picture, fall from 0.9928 should have completed at 0.9204 with the current strong rebound, after failing to sustain below 0.9252 (2023 low). It's still early to confirm long term bullish reversal. But even as a corrective move, current rebound could extend to 61.8% retracement of 0.9928 to 0.9204 at 0.9651. On the downside, firm break of 55 D EMA (now at 0.9387) will maintain medium term bearishness and bring retest of 0.9204 low.

Daily Pivots: (S1) 0.8382; (P) 0.8402; (R1) 0.8412; More...

Break of 0.8403 support confirms short term topping at 0.8472 in EUR/GBP. Intraday bias is back on the downside for 55 D EMA (now at 0.8354). Sustained break there will argue that whole rebound from 0.8221 has completed as a corrective move. Nevertheless, strong bounce from the 55 D EMA, followed by break of 0.8472 resistance, will resume the rally towards 0.8624 key cluster resistance zone.

In the bigger picture, a medium term bottom should be in place at 0.8221, just ahead of 0.8201 key support (2022 low). Sustained trading above 55 W EMA (now at 0.8442) will pave the way to 0.8624 cluster zone (38.2% retracement of 0.9267 to 0.8221 at 0.8621), even just as a correction to the down trend from 0.9267 (2022 high). But still, medium term outlook will be neutral at best as long as 0.8621/4 holds.

Daily Pivots: (S1) 1.6621; (P) 1.6674; (R1) 1.6728; More...

EUR/AUD is still bounded in range below 1.6800 and intraday bias remains neutral. In case of another dip, strong support is expected from 38.2% retracement of 1.5963 to 1.6800 at 1.6480 to contain downside. On the upside, firm break of 1.6800 will resume the rally from 1.5963. However, sustained break of 1.6480 will bring deeper correction 61.8% retracement at 1.6283 instead.

In the bigger picture, EUR/AUD is holding on to 1.5996 key support (2024 low) despite brief breach. Larger up trend from 1.4281 (2022 low) is still in favor to resume through 1.7180 at a later stage. Nevertheless, sustained break of 1.5996 will indicate that such up trend has completed and deeper decline would be seen.

Daily Pivots: (S1) 161.27; (P) 162.38; (R1) 163.21; More...

Intraday bias in EUR/JPY stays neutral for the moment. Overall outlook is unchanged that corrective pattern from 154.40 could extend. On the upside, break of 164.07 will target 164.89 and above. On the downside, break of 160.94 minor support will bring deeper fall through 159.74 support.

In the bigger picture, price actions from 175.41 are seen as correction to rally from 114.42 (2020 low). The range of consolidation should have been set between 38.2% retracement of 114.42 to 175.41 at 152.11 and 175.41 high. However, decisive break of 152.11 would argue that deeper correction is underway.

Daily Pivots: (S1) 191.98; (P) 193.31; (R1) 194.47; More...

GBP/JPY recovered above 192.05 minor support and intraday bias stays neutral for the moment. Overall outlook is unchanged that corrective pattern from 180.00 might extend. On the upside above 194.73 will target 198.94/197.79 resistance zone. On the downside, however, break of 192.05 minor support will turn bias back to the downside for 189.31 support instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

The sharp selloff in equities sparked by AI competition concerns appears to have run its course for now. While NASDAQ dropped more than -3% yesterday, the selling pressure did not intensify as the session progressed. DOW, on the other hand, demonstrated resilience, closing up 0.65%. This relatively stable market sentiment has led to reversal in safe-haven flows, with both Swiss Franc and Japanese Yen giving up most of their earlier gains and showing signs of returning to weakness.

Meanwhile, Dollar found fresh support from reports of new tariff measures. According to the Financial Times, Treasury Secretary Scott Bessant is pushing for a universal 2.5% tariff that would increase incrementally each month, potentially reaching as high as 20%.

US President Donald Trump hinted at an even more aggressive rate, emphasizing that higher tariffs on imports would be balanced by lower taxes for American workers and businesses. Trump also renewed his push for a corporate tax rate cut to 15%—down from 21%—for companies producing goods domestically.

In the currency markets, Yen continues to lead as the strongest performer this week, followed by Swiss Franc and Dollar. On the other end, commodity-linked currencies have come under significant pressure, with Aussie leading the declines, followed by Kiwi and Loonie. Euro and British Pound are trading in the middle of the pack.

While this still reflects a broadly risk-off sentiment, the picture could shift quickly albeit another swift in sentiment. U.S. durable goods orders and consumer confidence data are in focus today. But the spotlight will soon turn to key central bank decisions from BoC and FOMC tomorrow, and ECB on Thursday.

Technically, USD/CHF is well supported by the near term rising channel so far, as rally from 0.8374 remains intact. Break of 0.9107 minor resistance should bring rise resumption to through 0.9200 high to 0.9223 key medium term resistance. Reaction from there will decide whether the pair is already in larger bullish trend reversal.

Australia NAB business confidence rises to -2, price pressures persist

Australia's NAB Business Confidence showed slight improvement in December, rising from -3 to -2, but remains below the long-term average since early 2023. Business Conditions, on the other hand, posted a stronger gain, climbing from 3 to 6.

Breaking down the details, trading conditions improved from 6 to 9, profitability rose from 0 to 4, and employment conditions ticked up from 3 to 4.

Price pressures continue to persist, with purchase cost growth rising slightly to 1.5% in quarterly equivalent terms. Labour cost growth edged lower to 1.4%, but output price growth increased by 0.3 percentage points to 0.9%. Retail prices also ticked up to 0.7%.

According to NAB Chief Economist Alan Oster, “The uptick in purchase cost growth and final product prices reminds us that businesses continue to face some price pressures.”

SNB's Schlegel: Negative rates won't be taken lightly

SNB Chair Martin Schlegel said on Monday that while the central bank is reluctant to reintroduce negative interest rates, it cannot rule them out entirely.

He stated, "negative interest rates have served their purpose, but it is not something the SNB would do lightly," .

Schlegel also downplayed the risks of deflation, noting that occasional months of negative inflation "is not a problem".

"Our concept is price stability over the mid term," he emphasized.

Markets currently see 64% chance of SNB cutting rates from 0.5% to 0.25% in March, with a 27% likelihood of a further cut to 0% by June.

GBP/JPY Daily Outlook

Daily Pivots: (S1) 191.98; (P) 193.31; (R1) 194.47; More...

GBP/JPY recovered above 192.05 minor support and intraday bias stays neutral for the moment. Overall outlook is unchanged that corrective pattern from 180.00 might extend. On the upside above 194.73 will target 198.94/197.79 resistance zone. On the downside, however, break of 192.05 minor support will turn bias back to the downside for 189.31 support instead.

In the bigger picture, price actions from 208.09 are seen as a correction to whole rally from 123.94 (2020 low). The range of consolidation should be set between 38.2% retracement of 123.94 to 208.09 at 175.94 and 208.09. However, decisive break of 175.94 will argue that deeper correction is underway.

Australia's NAB Business Confidence showed slight improvement in December, rising from -3 to -2, but remains below the long-term average since early 2023. Business Conditions, on the other hand, posted a stronger gain, climbing from 3 to 6.

Breaking down the details, trading conditions improved from 6 to 9, profitability rose from 0 to 4, and employment conditions ticked up from 3 to 4..

Price pressures continue to persist, with purchase cost growth rising slightly to 1.5% in quarterly equivalent terms. Labour cost growth edged lower to 1.4%, but output price growth increased by 0.3 percentage points to 0.9%. Retail prices also ticked up to 0.7%.

According to NAB Chief Economist Alan Oster, “The uptick in purchase cost growth and final product prices reminds us that businesses continue to face some price pressures.”

Full Australia NAB business confidence release here.

SNB Chair Martin Schlegel said on Monday that while the central bank is reluctant to reintroduce negative interest rates, it cannot rule them out entirely.

He stated, "negative interest rates have served their purpose, but it is not something the SNB would do lightly," .

Schlegel also downplayed the risks of deflation, noting that occasional months of negative inflation "is not a problem".

"Our concept is price stability over the mid term," he emphasized.

Markets currently see 64% chance of SNB cutting rates from 0.5% to 0.25% in March, with a 27% likelihood of a further cut to 0% by June.

Markets

China’s DeepSeek R1 AI model sparked risk-off across the board. It was yesterday’s main trading theme in absence of other major news. Trained at a significantly lower cost and with inferior chip technology, R1 raised questions to the lofty valuations of US big tech. AI poster child Nvidia sank 17%, wiping out some $560bn in market capitalization. Others suffered to a lesser extent. Google parent Alphabet lost more than 4%. Microsoft gapped 5% lower but was picked up along the way. Meta Platforms even swapped a lower open for a record high. On an index level, the Nasdaq obviously underperformed. It lost some 3% compared to the slight 0.65% gain for the Dow. Core bonds enjoyed a safe haven bid. US Treasuries outperformed Bunds. Yields closed between 3.8 and 9.3 bps lower. German rates eased around 4 bps across the curve. The Japanese yen and Swiss franc scored well in the currency landscape. USD/JPY fell below the 155 mark to close at 154.5. EUR/CHF erased Fridays PMI-driven gain, back towards the 0.945 area. The US dollar lagged its haven peers during Asian and European dealings but got a better bid in US dealings. EUR/USD ended the day even marginally weaker around 1.05. The trade-weighted index (107.34) bounced back after touching 107 before finding new vigor this morning and attacking the 108 barrier. EUR/USD falls to 1.044. USD-strength followed on quotes from Trump in a response to Treasury Secretary Bessent’s approach to import tariffs. The Financial Times citing people familiar said Bessent favours a 2.5% universal tariff, to be raised by the same amount each month. Trump said he wants tariffs to be “much bigger” than that while also vowing to slap levies on foreign-produced chips, pharmaceuticals and metals such as steel, aluminum and copper.

The R1 bombshell came at a peculiar timing with Chinese markets starting today closed for a whole week (Lunar NY) and just ahead of the US earnings season shifting into higher gear. Microsoft and Meta report tomorrow, Intel and Apple on Thursday. For today, though, we’ll look out whether yesterday’s stock sell-off already lures some dip buyers. Futures in any case suggest the dust has settled a bit and core bond yields recoup some of the basis points lost yesterday. The eco calendar contains US durable goods orders and Conference Board consumer confidence but we don’t think they’ll move the market needle by a lot ahead of Wednesday’s FOMC and Thursday’s ECB meeting.

News & Views

Prices at UK shops dropped 0.4% M/M January compared to December, the British Retail Consortium reported. Prices were 0.7% lower y/y, but this was -1.0% in December. Non-food product prices were down -1.8% M/M and 0.9% lower Y/Y. Food price inflation accelerated to 0.5% M/M and 1.6% Y/Y. In a comment accompanying the release, BRC indicated heavy January discounting in some sectors including furniture and fashion. At the same time the consortium warned on a potential risk of more upside price pressures going forward. The trend of higher food prices might continue with the M/M rise the fastest since April last year. BRC also indicates that retailers might push up prices in response to higher social security contribution and higher (minimum) wages. UK headline CPI inflation slowed to 0.3% M/M and 2.5% Y/Y in December, but might rebound from that level.

Business confidence in Australia recovered modestly according to the confidence survey from National Australia Bank, with the index rising to -2 from -3 in December. The overall level remains low after a substantial decline in November. Business conditions, rising from 3 to 6, also reversed part of the sharp November decline. Trading sales picked up, as did profitability (4 from 0). The employment index also rose marginally (4 from 3). Cost price indicators still showed no consistent, broad-based downward trend. Firm’s purchases costs were seen at 1.5% Q/Q from 1.3% Q/Q. Prices rises of final products also rebounded (0.9% Q/Q from 0.6%). The labour cost index slowed further and at 1.4% Q/Q was materially lower than in summer of last year. The data come as markets are considering the start of the RBA easing cycle at the upcoming 18 February policy decision. A 80% chance of an inaugural 25 bps cut is discounted. The December and Q4 inflation data published tomorrow will be decisive. Disregarding the broader USD swings, the Aussie dollar (AUD/USD 0.626) continues to trade soft against other majors, including the euro and the yen.