Sample Category Title

Daily Pivots: (S1) 0.6481; (P) 0.6501; (R1) 0.6524; More...

AUD/USD recovered after brief dip to 0.6476 and intraday bias is turned neutral first. Outlook will stay bearish as long as 0.6594 resistance holds. Below 0.6476 will bring retest of 0.6442 low first. Firm break there e will resume whole decline from 0.6870 for 61.8% projection of 0.6870 to 0.6442 from 0.6594 at 0.6329.

In the bigger picture, price actions from 0.6169 (2022 low) are seen as a medium term corrective pattern to the down trend from 0.8006 (2021 high). Fall from 0.7156 (2023 high) is seen as the second leg, which might still be in progress. Overall, sideway trading could continue in range of 0.6169/7156 for some more time. But as long as 0.7156 holds, an eventual downside breakout would be mildly in favor.

Daily Pivots: (S1) 149.66; (P) 150.11; (R1) 150.51; More...

USD/JPY falls notably today but stays above 149.20 supports so far. Intraday bias remains neutral first. On the upside, break of 150.87 will resume the rise from 140.25 to 151.89/93 key resistance zone. On the other hand, considering bearish divergence condition in 4H MACD, firm break of 149.20 will confirm short term topping at 150.87. Deeper fall would be seen to channel support (now at 148.65) and possibly below, even as a corrective move.

In the bigger picture, rise from 140.25 is seen as resuming the trend from 127.20 (2023 low). Decisive break of 151.89/.93 resistance zone will confirm this bullish case and target 61.8% projection of 127.20 to 151.89 from 140.25 at 155.50. However, break of 148.79 resistance turned support will delay this bullish case, and extend the corrective pattern from 151.89 with another falling leg.

Daily Pivots: (S1) 0.8817; (P) 0.8843; (R1) 0.8860; More....

Range trading continues in USD/CHF and intraday bias remains neutral. Further rally is in favor as long as 0.8741 support holds. Break of 0.8891 will resume the whole rebound from 0.8332 towards 0.9243 key resistance. Nevertheless, break of 0.8741 support will turn bias back to the downside for deeper pullback.

In the bigger picture, a medium term bottom should be formed at 0.8332, on bullish convergence condition in W MACD, just ahead of 0.8317 long term fibonacci support. It's still early to decide if the larger down trend from 1.0146 (2022 high) is reversing. But further rise should be seen to 0.9243 resistance even as a correction.

Daily Pivots: (S1) 1.0840; (P) 1.0858; (R1) 1.0875; More...

Intraday bias in EUR/USD stays neutral first as it's still bounded in range below 1.0887. On the upside, break of 1.0887 and sustained trading above 55 D EMA (now at 1.0831) will affirm the case that fall from 1.1138 has completed. Stronger rally would then be seen back to 1.1138. However, break of 1.0795 minor support will turn bias back to the downside for retesting 1.0694 support.

In the bigger picture, price actions from 1.1274 are viewed as a corrective pattern to rise from 0.9534 (2022 low). Rise from 1.0447 is seen as the second leg. While further rally could cannot be ruled out, upside should be limited by 1.1274 to bring the third leg of the pattern. Meanwhile, sustained break of 1.0694 support will argue that the third leg has already started for 1.0447 and possibly below.

Markets

In the run-up to the release of the US services ISM, (US) equity futures/markets yesterday fell prey to a tentative risk-off correction. In particular some parts of the tech sector apparently felt some vertigo after recent record race in the likes of the S&P and the Nasdaq. Safe haven flows supported Treasuries. A soft (but not outright weak) US services ISM pointed in the same direction. The headline index eased slightly more than expected (from 53.3 to 52.6). Employment also unexpectedly eased below the 50 mark (48.0 from 50.5). However, business activity (57.2) and orders remained strong. Price paid eased to 58.6, but clearly suggest ongoing price rises. Yields briefly spiked further south upon the release, but stabilization kicked in soon. At the end of the day, US yields eased between 4.4 bps (2-y) and 6.1 bps (30-y). The outperformance of the long end suggests that the risk-off was at least as much of a driver as the softer ISM. Also interesting the US 10-y real yield extended its correction below 2.0% (1.82%), but for now this doesn’t help risk assets (cf infra). German Bunds even outperformed Treasuries, declining between 5.2 bps (2-y) and 8.0 bps (30-y) even as losses on European equity markets were much more contained compared to the US (Eurostoxx 50 -0.4%). The dollar also briefly spike lower upon the ISM release, but in the end daily changes were limited (DXY 103.8; EUR/USD 1.0857). The yen slightly outperformed with USD/JPY closing at 150.05.

Asian equity markets this morning mostly ignore the correction on WS yesterday as investors look out for more concrete measures from Chinese authorities to reach the ambitiously set 5.0% target. US yields gain marginally after yesterday’s setback. Later today, the US ADP labour market report and the JOLTS job openings might give some insight in strength of the labour market ahead of Friday’s payrolls. However, the market focus will be on Fed Chair Powell’s testimony before the House Financial Services Committee. Given recent data, we assume the Fed Chair has every reason to hold the line that the Fed is in no rush to cut interest rates until it has additional evidence that (underlying) inflation is cooling further, that growth eases enough to bring supply and demand in balance and that the labour market cools to a degree that guarantees wage growth in line with productivity. Such a message should help to put a bottom for yields, even in case of slightly milder than expected activity data. In the UK, markets are keen to see how much stimulus (tax cuts) Fin Min Hunt’s spring budget will provide in the run-up to the upcoming elections. Will it be strong enough for the BoE to take a more cautious stance on policy easing and be able to unlock the stalemate in sterling?

News & Views

The Reserve Bank of New Zealand’s chief economist Conway said the policy rate could be cut sooner than expected if the Federal Reserve begins to ease later this year. The kiwi central bank last week projected no change in the 5.5% rate until 2025, but these forecasts assume a constant NZD exchange rate. If the Fed starts easing (probably around the middle of the year), this would cause the NZD to appreciate and bring down inflationary pressures – all else equal. Conway says this “wiggle room” is limited though. The chief economist is encouraged by the declines in core inflation and business inflation expectations but highlighted the still-high levels of price pressures anticipated by households remain a risk. CPI in Q4 last year eased to 4.7% compared to the RBNZ’s 1-3% target range. The kiwi dollar’s drop on Conway’s comments was temporary. NZD/USD is currently trading a tad higher just south of 0.61.

Australian Q4 GDP growth printed bang in line with expectations. Quarterly dynamics came in at 0.2%. Growth slowed down over every quarter in 2023. Compared to the same period a year ago, GDP is 1.5% bigger. The Australian Bureau of Statistic’s head pointed at government spending (0.6% q/q) and private business investment (0.7%, supported by non-dwelling construction) as the main drivers. Net exports contributed 0.6% mainly on the account of faltering imports (-3.4% q/q). Household spending was subdued, rising a meagre 0.1% in the December quarter. All categories showed net increases but the ABS noted a shift as spending in discretionary areas was wound back while households upped their spending on essential items like electricity, rents and food. The Australian dollar rises this morning in lockstep with its NZD neighbour. Though that’s mostly a general USD move rather than AUD strength. AUD/USD trades around 0.652.

• 3 key risk events that may significantly influence the movement of NZD/JPY; Japan’s FY 2024/2025 annual wage negotiations preliminary results (15 March), BoJ’s monetary policy outcome (19 March) & Fed FOMC and release of its latest dot plot (20 March).
• Technical analysis has indicated a potential medium-term bearish momentum on sight for NZD/JPY.
• Watch the key short-term resistance of 92.00 for NZD/JPY.

The NZD/JPY cross pair has drifted lower after our prior analysis and hit the first intermediate support level of 89.40 (printed an intraday low of 89.26 on 1 February) before it reversed up to print a 52-week high of 93.45 on 23 February.

Right now, technical elements on both medium and short-term horizons are still flashing bearish biases to advocate for another round of further potential weakness in NZD/JPY.

3 key event risks ahead (Japan’s annual wage negotiations results, BoJ & FOMC)

The next key risk events to watch out for that may influence this JPY cross-pair significantly will be the outcome of the Bank of Japan’s (BoJ) monetary policy decision on 19 March, and on 15 March, Rengo, Japan’s biggest labour union federation releases the first results of the FY 2024/2025 annual wage negotiations where the expectations have been set for an average annual increase of 3.85% (slightly above last year’s 3.58%) for Japanese employees, the highest wage increase in 31 years if it materializes.

BoJ Governor Ueda has highlighted numerous times in public that BoJ will focus on the outcome of the wage negotiations which has an impact on sustainable demand-pull inflationary trends in Japan and, in turn, plays a significant part in setting up the decision to end short-term negative interest rates policy in April where most of the consensus has pencilled in.

Next up on the calendar will be the US Federal Reserve FOMC monetary policy outcome, and the release of its latest “dot plot” on 20 March (market participants are likely to pay attention to the new projected US inflationary trends, and Fed funds rate forecasts).

Failure bullish breakout on NZD/JPY

Fig 1: 3-month rolling performances of G-10 JPY crosses as of 6 Mar 2024 (Source: TradingView, click to enlarge chart)

Fig 2: NZD/JPY medium-term trend as of 6 Mar 2024 (Source: TradingView, click to enlarge chart)

The NZD/JPY staged a failed bullish breakout between 20 to 23 February as its price actions did not again further upside traction and reintegrated back below the upper boundary/resistance of the medium-term bearish “Ascending Wedge” configuration on 28 February.

In addition, the daily RSI momentum indicator has staged a bearish breakdown below its parallel ascending support at around the 50 level on 29 February and remained below it so far which suggests a potential revival of medium-term bearish momentum.

Also, from a relative fixed income yield spread perspective, the yield premium between the 2-year New Zealand Government Bond over the 2-year Japanese Government Bond (JGB) has continued to shrink from 4.99% on 13 February to 4.60% currently on 6 March at this time of the writing (see Fig 2).

These observations suggest that the “attractiveness” to hold New Zealand bonds over Japanese bonds has been reduced which also may put downside pressure on the NZD/JPY cross-pair.

Watch the 92.00 key short-term resistance on NZD/JPY

Fig 3: NZD/JPY short-term trend as of 6 Mar 2024 (Source: TradingView, click to enlarge chart)

The current price actions of NZD/JPY have evolved into a minor descending channel in place since the 23 February high of 93.45 (see Fig 3).

If the 92.00 key short-term pivotal resistance (also the 20-day moving average) is not surpassed to the upside, and a break below 91.05 may see further weakness to expose the next intermediate support at 90.35 in the first step (0.618 Fibonacci extension from 23 February 2024 high & lower boundary of the minor descending channel).

On the other hand, a clearance above 92.00 negates the bearish tone for a squeeze up to see the key medium-term resistance zone coming in at 92.40/70 (also the upper boundary of the “Ascending Wedge”).

Bitcoin hit a record. The price of a coin advanced past the $69K, then shortly dipped below $60K, and is now settling at around the $65K. Volatility is high as the coin flirts with new record levels. The latter attracts new interest and speculation, of course. Fundamentally, though, the demand is surging thanks to the introduction of new spot ETFs which made cryptocurrencies easier to invest for institutional players. Halving due in April means that the Bitcoin supply will be divided by two. Higher demand and lower supply points at a higher price. We should still figure out where we can use Bitcoin, but the ‘to-the-mooners’ have all the reasons to believe that Bitcoin could hit $100K per coin.

In the more traditional space

Gold rose on safe haven demand walking into the Federal Reserve (Fed) Chair Jerome Powell’s testimony before the Congress. Powell is expected to ask policymakers for patience before cutting interest rates. The US economic growth remains resilient, the jobs market remains hot – remember the last two NFP prints in the US were above the 300K mark, and disinflation has given signs of slowing at the beginning of the year. Due today, the ADP report is expected to print around 150K new private job additions and we might see lower job openings. A sufficiently soft data would make Powell’s job easier into the first rate cut, while a stronger-than-expected set of data will keep the Fed watchers wondering whether the Fed should cut rates anytime at all this year.

Gold is higher on expectation that the lofty equity valuations could finally lead to a sizeable downside correction and gold could serve as a hedge. Even though higher yields – that would result from a hawkish shift in Fed expectations – are not favourable for the valuation of gold, the size and the amplitude of a potential market selloff could help investors look past the higher opportunity cost of holding the non-interest-bearing gold and push the price of an ounce further up.

But keep in mind that the major US equity indices do not necessarily react to yield changes since AI disrupted the negative relationship between equity valuations and the US yields.

Sour Apple

Apple is not having a good time. The stock price fell another 2.84% yesterday on news that its iPhone sales in China fell 24% over the first six weeks of the year. iPhone’s market share in China fell below 16% from 19% a year earlier. Huawei amassed some good demand and increased its own marker share from below 10% to above 16% over the same period. And it’s not only China. The company is coming too late to the AI race, which makes it vulnerable to any broad market selloff unless it comes up with a project that would excite investors. It was removed from Goldman’s high conviction list and it’s no longer in Evercore ISI’s tactical outperform list. The stock price is in a free-fall mode. Earlier this week, the $180 support was broken, and yesterday the stock fell and closed below a key technical level: the major 38.2% retracement on the bullish trend forming since the beginning of 2023. Technically, the stock has now stepped into the medium-term bearish consolidation zone and could extend losses to $162 per share, the 50% Fibonacci level.

Elsewhere

The Bank of Canada (BoC) is expected to keep its policy rate steady today and the UK Chancellor of the Exchequer will reveal the budget. He is expected to aim for tax cuts to please British voters, but he has a limited margin and some tax cuts could lead to inflationary pressures prompting the Bank of England (BoE) to maintain a tighter monetary policy for an extended period, which may further burden mortgage payers. Hunt should find a fine balance.

The 10-year gilt yield fell to 4% and Cable is testing the top of this year’s downtrending range. It’s up to Jeremy Hunt to keep the market at this sweet spot.

In focus today

In the U.K. Chancellor of the Exchequer Jeremy Hunt will deliver his spring budget. With the general election looming the chancellor is expected to present a range of expansionary measures, namely tax cuts.

In the US we get both JOLTs for January as well as ADP employment numbers for February. FOMC chairman Powell will also be giving testimony in the House of Representatives.

In Poland and Canada, the respective central banks both announce rate decisions today. We expect both central banks to keep rates unchanged at 5.75% in Poland, and 5.00% in Canada respectively.

In the euro area we await retail sales for January due at 11.00 CET.

Economic and market news

What happened overnight

Former president Donald Trump expectedly came out a major winner of the so-called Super Tuesday. Trump had by 6.45 CET secured 662 delegates out of the 1215 republican that were up for grabs between the 15 different states that voted in the republican primaries yesterday. His opponent Nikki Haley had Tuesday secured 36 at that point in time.

What happened yesterday

In the US, the ISM non-manufacturing PMI disappointed slightly at 52.6 whereas a consensus of economists polled by Reuters had expected 53.0.

In Europe, the European Commission presented a draft for a European Defence Industry Strategy. Besides focusing on building the EU defence sector and ensuring that the EU buys defence equipment from European producers, the draft proposed mobilising EUR 1.5bn from 2025-2027 funded by the EU budget.

Released country data indicates euro area wage growth as measured by compensation per employee is likely to have slowed to 4.65% in Q4 2023 down from 5.3% in Q3. As the ECB likely knows the euro area aggregate figure when meeting Thursday, they may sound less hawkish on the upside risk to inflation from wage growth. However, as wage growth is high despite the decline, the ECB may prefer seeing Q1 2024 data before cutting rates as the wage-sensitive services inflation is hot. Q1 data is available for the ECB's June meeting.

Amongst precious metals, spot gold surged to an intraday record as it rose to as high as USD 2141.59 per troy ounce beating its previous record from 4 December of USD 2135.40 per troy ounce.

Equities: Global equities were lower yesterday with most sectors and regions lower. However, US tech was in focus, ending down more than 2% despite a late hour rally. Also, consumer discretionary was lower as Tesla was taking a 2-day beating of more than 10%. Add to this that Bitcoin was down almost 10%, and we have a picture of stocks that have been rallying sharply since October now getting beat down. Hence, this was not a macro story but much a reflection of the heavy positioning tilt towards the AI, tech and growth space. In US yesterday, Dow -1.0%, S&P 500 -1.0%, Nasdaq -1.7% and Russell 2000 -1.0%. Asian markets are mostly lower this morning while China going against the trend. Futures in Europe and US are higher this morning.

FI: Risk-off sentiment in US equity markets and weak ISM details supported global bonds yesterday, with the 10Y tenor seeing substantial declines across markets. The German government yield curve was down by 5-6bp throughout yesterday's session, while peripherals continued to outperform with 10Y BTP yields declining 10bp. The Bund ASW-spread was close to unchanged at 34bp, still standing at the lowest level since mid-2021, while the 5Y5Y EUR Inflation swap rate dropped a bit following ISM. The weakening of US data seen over the past week has led to a convergence between the expected amount cuts in 2024 from the ECB (now 90bp) and the FOMC (85bp). We pencil in 75bp for both.

FX: After a short-lived spike toward 1.0875, EUR/USD is back at around 1.0850. JPY is a bit stronger with USD/JPY dipping below the 150 mark and with EUR/JPY back below 163. EUR/GBP is lower, yet in the tight range around 0.8550. USD/CAD is challenging, still without taking out the 1.36 level. The Antipodeans are flirting with the lower end of their recent trading ranges vs the USD. EUR/DKK spot continues to trade around the 7.4540-50 level, while both SEK and NOK has had a weak start to the week.

Daily Pivots: (S1) 1.2672; (P) 1.2704; (R1) 1.2736; More...

Gold's rise from 1.2517 resumed by breaking through 1.2708 and intraday bias is back on the upside. Further rally would be seen to 1.2826 resistance first. Firm break there will target 61.8% projection of 1.2036 to 1.2826 from 1.2517 at 1.3005 next. For now, further rise will remain in favor as long as 1.2599 support holds, in case of retreat.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to up trend from 1.0351 (2022 low). Rise from 1.2036 is seen as the second leg, which could be still in progress. But upside should be limited by 1.3141 to bring the third leg of the pattern. Meanwhile, break of 1.2517 support will argue that the third leg has already started for 38.2% retracement of 1.0351 (2022 low) to 1.3141 at 1.2075 again.

Dollar faced some selling pressure overnight, as dragged down by the sharp decline in the 10-year treasury yield. Despite this, the impact on the greenback was relatively contained, thanks to significant pullbacks in major stock indices, which provided a cushion against more substantial losses. Today's spotlight turns to Fed Chair Jerome Powell's semiannual testimony, an event that, despite low expectations for groundbreaking revelations, is highly anticipated for its impact on financial market, particularly in stocks and bonds.

Simultaneously, Canadian Dollar finds itself among the week's laggards, in tandem with other commodity currencies. The spotlight is now on BoC as it gears up for its latest rate decision. While analysts broadly anticipate the central bank will maintain rates, the focal point will be the tone of BoC's statement and Governor Tiff Macklem's press conference, specifically whether a dovish stance will be adopted. Or, BoC would adopt a cautious "wait and see" approach, contingent on forthcoming data, will prevail to set the stage for future rate cuts.

Sterling leads as the week's top performer, with Euro and Yen trailing behind. Swiss Franc and Dollar are mixed, while New Zealand Dollar, Australian Dollar, and Canadian Dollar lag at the bottom of the performance chart.

Technically, Gold surged to new record high at 2141.53 overnight and stays firm. Current interpretation is that rise from 1984.50 is resuming the rise rise from 18102.6 (which is a five-wave impulsive rise with a failure fifth ended at 2088.24). Further rally is expected as long as 2088.24 resistance turned support holds. Next target is 61.8% projection of 1810.26 to 2088.24 from 1984.05 at 2155.84.

But the ultimate target for this round would be cluster level at around 2260, 100% projection of 1810.26 to 2088.24 from 1984.05 at 2262.03 and 100% projection of 1614.60 to 2062.95 from 1810.26 at 2259.15

In Asia, Nikkei fell -0.02%. Hong Kong HSI is up 1.80%. China Shanghai SSE is down -0.05%. Singapore Strait Times is up 1.17%. Japan 10-year JGB yield rose 0.0080 to 0.716. Overnight, DOW fell -1.04%. S&P 500 fell -1.02% NASDAQ fell -1.65%. 10-year yield fell -0.082 to 4.137.

RBNZ's Conway: OCR to stay restrictive for some time into the future

RBNZ Chief Economist Paul Conway, speaking at a webinar today, noted that emphasizing the contractionary nature of current interest rates is effectively "tapping the brakes" on the economy to moderate its pace of growth and address inflationary pressures.

Conway expressed optimism about the recent declines in core inflation and business inflation expectations. However, he also highlighted ongoing concerns regarding elevated household inflation expectations, which pose a potential risk to the inflation outlook.

Looking forward, Conway underscored the necessity for OCR to maintain a restrictive level "for some time into the future" to get headline inflation, currently at 4.7%, back into the 1-3% target band.

An interesting consideration Conway raised was the impact of Fed's policy moves on New Zealand's monetary policy trajectory. He suggested that if Fed were to initiate rate cuts towards the end of the year, and RBNZ did not follow suit, the resulting appreciation in NZD could alleviate inflationary pressures in New Zealand. This scenario might prompt RBNZ to reassess its rate cut timeline, leading to earlier-than-anticipated adjustments depending on the broader economic implications.

Australia's GDP up 0.2% qoq in Q4, continuing consistent slowdown

Australia GDP grew 0.2% qoq in Q4, slightly below expectation of 0.3% qoq. On an annual basis, the economy expanded by 1.5% yoy.

The data indicates deceleration in economic momentum as the year progressed, with Katherine Keenan, the head of national accounts at ABS, noting a consistent slowdown across each quarter of 2023.

The main pillars supporting GDP growth were identified as government spending and private business investment. Government final consumption expenditure saw 0.6% qoq increase , while private business investment grew 0.7% qoq.

The significant contribution of net trade, which added 0.6 percentage points to the overall GDP growth, was largely attributed to a -3.4% qoq decrease in import.

BoC to hold rates steady, EUR/CAD and GBP/CAD extending gains

BoC is widely anticipated to maintain benchmark overnight rate at 5.00% today, marking the fifth consecutive meeting without change. While dropping its tightening bias in January, it is deemed premature for BoC to adopt a loosening stance at this point. The central bank might reiterate the ongoing process to bring inflation back to target, indicating that the desired state has not been fully achieved yet. The critical aspect to observe will be how Governor Tiff Macklem articulates the current inflation outlook.

A recent Bloomberg survey highlighted consensus among economists predicting the first rate cut to occur in June. Overnight swaps markets attributing a mere 30% chance for a cut in April and anticipating the initial full 25 basis points reduction in July. Nonetheless, these projections remain flexible, hinging on forthcoming data and economic developments.

Canadian Dollar is trading as the month's weakest performer so far, particularly struggling against Euro and Sterling. More downside is in favor for the Loonie in the near term as traders continue to reverse their bets on earlier ECB and BoE cut. The persistence of this selling momentum, however, ultimately depends on which central bank initiates rate cuts first and the subsequent rate of policy easing.

Technically, EUR/CAD's breach of 1.4733 resistance suggests that correction from 1.5041 has already completed with three waves down to 1.4457. Further rally is now in favor as long as 55 D EMA (now at 1.4625) holds. Further rally would be seen to retest 1.5041 resistance first. Firm break there will resume the larger up trend to 61.8% projection of 1.4155 to 1.5041 from 1.4457 at 1.5343 next.

GBP/CAD's breach of 1.7270 resistance this week suggests that consolidation from there has completed at 1.6919 already. Further rise is in favor as long as 55 D EMA (now at 1.7060) holds. Decisive break of 1.7332 high will resume the larger up trend from 1.4069 and target 100% projection of 1.6355 to 1.7270 from 1.6919 at 1.7834.

Fed Powell's testimony eyed, 10-year yield takes a preemptive drop

Fed Chairman Jerome Powell is set to begin his two-day semiannual Congressional testimony today, drawing significant attention from the markets as participants seek clarity on the Fed's monetary policy direction for the year. Key questions include the timing of the first rate cut and the total number expected throughout the year.

Powell is anticipated to reiterate the cautious stance echoed by his colleagues, indicating that Fed is not in a hurry to lower interest rates. The central bank seeks further assurance that inflation is on a consistent downward path to target before considering rate reductions. Regarding the number of rate cuts, Powell may reference the median projection of three cuts this year, emphasizing that any adjustments will be contingent on incoming economic data.

Currently fed fund futures suggest a slightly less than 70% probability of the initial rate cut occurring in June. By year-end, the likelihood exceeds 80% that federal funds rate will adjust to a range of 4.50-4.75%, marking three 25bps reductions from the present 5.25-5.50% level.

A key to watch is the reactions in 10-year yields the break of 55 D EMA (now at 4.188) affirms the case that corrective recovery from 3.785 has completed at 4.354 already. Risk will now stay on the downside as long as this EMA holds. Deeper fall is in favor towards 3.785 low. This development would keep Dollar under some pressure, or at least cap its rally momentum. A daily close above 55 EMA would delay the bearish case. But upside potential for rebound should be limited below 4.354.

On the data front

Germany trade balance, UK PMI construction and Eurozone retail sales will be released in European session. Canada will release labor productivity and Ivey PMI later in the day. Fed will also publish Beige Book economic report.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.2672; (P) 1.2704; (R1) 1.2736; More...

Gold's rise from 1.2517 resumed by breaking through 1.2708 and intraday bias is back on the upside. Further rally would be seen to 1.2826 resistance first. Firm break there will target 61.8% projection of 1.2036 to 1.2826 from 1.2517 at 1.3005 next. For now, further rise will remain in favor as long as 1.2599 support holds, in case of retreat.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to up trend from 1.0351 (2022 low). Rise from 1.2036 is seen as the second leg, which could be still in progress. But upside should be limited by 1.3141 to bring the third leg of the pattern. Meanwhile, break of 1.2517 support will argue that the third leg has already started for 38.2% retracement of 1.0351 (2022 low) to 1.3141 at 1.2075 again.

Economic Indicators Update