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Daily Pivots: (S1) 0.8549; (P) 0.8599; (R1) 0.8628; More....

USD/CHF rebounds notably today but stays in range below 0.8727. Intraday bias remains neutral first. On the upside, firm break of 0.8727 will resume the rebound to 61.8% retracement of 0.9243 to 0.8332 at 0.8995. On the downside, below 0.8550 will resume the fall from 0.8727 for 0.8487 support.

In the bigger picture, while rebound from 0.8332 could be strong, there is no clear sign of medium term bottoming yet. This rebound is tentatively seen as a corrective move for now. Also, outlook will stay bearish as long as 0.9243 resistance holds. Larger down trend from 1.0146 (2022 high) should resume through 0.8332 low at a later stage.

Daily Pivots: (S1) 145.85; (P) 146.48; (R1) 147.07; More...

USD/JPY's strong rebound today maintains its near term bullishness. Focus is turning to 148.79 resistance. Firm break there will confirm that correction has completed at 145.88, and rise from 140.25 would then resume to 151.89/93 key resistance zone. In case of retreat, further rally will now remain in favor as long as 145.88 support holds.

In the bigger picture, stronger than expected rebound from 140.25 dampened the original bearish review. Strong support from 55 W EMA (now at 142.49) is also a medium term bullish sign. Fall from 151.89 could be a correction to rise from 127.20 only. Decisive break of 151.89/93 will confirm resumption of long term up trend. This will now be the favored case as long as 140.25 support holds.

Dollar is staging a significant rebound in early US session, fueled by unexpectedly robust Non-Farm Payroll data. This surge was mirrored by a sharp increase in 10-year treasury yield, which is on the verge of reclaiming 4% handle. Conversely, stock futures took a downturn in response to the revelations from the labor market.

January's NFP report dramatically exceeded expectations, showcasing a labor market that remains resilient and dynamic. The highlight was not just the surprising headline job growth but also the notable acceleration in wage increases. This wage growth underscores the enhanced earning capabilities of the American workforce, signaling a tightening labor market that might exert upward pressure on domestic inflation.

This labor market snapshot suggests Fed would need to reassess its stance on policy easing this year. Chair Jerome Powell had already dismissed the possibility of a rate cut in March, and the latest employment figures only reinforce this position. The question now shifts to whether May is too soon to initiate the rate cut cycle.

In Europe, at the time of writing, FTSE is up 0.21%. DAX is up 0.45%. CAC is up 0.28%. UK 10-year yield is up 0.118 at 3.868. Germany 10-year yield is up 0.079 at 2.227. Earlier in Asia, Nikkei rose 0.41%. Hong Kong HSI fell -0.21%. China Shanghai SSE fell -1.46%. Singapore Strait Times rose 1.17%. Japan 10-year JGB yield fell -0.0342 to 0.661.

US NFP rises 353k, average hourly earnings rises 0.6% mom

US Non-Farm Payroll employment rose 353k in January, significantly surpassing expectation of 178k. Prior month's growth was also revised sharply higher from 216k to 333k. Both were well above monthly average of 255k growth in 2023.

Unemployment rate was unchanged at 3.7%, below expectation of 3.8%. Labor force participation rate was unchanged at 62.5%.

Average hourly earnings grew 0.6% mom, well above expectation of 0.3% mom. Annual hourly earnings growth also accelerated from 4.4% yoy to 4.5% yoy, above expectation of 4.1% yoy.

BoE's Pill advocates patience, rate cut remains some way off

BoE Chief Economist Huw Pill articulated a cautious stance on the prospect of interest rate cuts, noting that such a move remains "some way off." He underscored the absence of adequate evidence suggesting a trajectory towards the inflation target, which necessitates a sustained period of tight monetary policy to mitigate domestic inflationary pressures.

"Crucially, for me at least, we don't have sufficient evidence yet," Pill stated, pointing to the need for more conclusive data to consider easing rates.

Further elaborating his view, Pill advised against overreacting to any short-term reversion of inflation to target level in the coming months, particularly if driven by external factors. Instead, he advocated for a focused and sustained effort to address domestic inflationary pressures through maintaining a restrictive policy stance.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 145.85; (P) 146.48; (R1) 147.07; More...

USD/JPY's strong rebound today maintains its near term bullishness. Focus is turning to 148.79 resistance. Firm break there will confirm that correction has completed at 145.88, and rise from 140.25 would then resume to 151.89/93 key resistance zone. In case of retreat, further rally will now remain in favor as long as 145.88 support holds.

In the bigger picture, stronger than expected rebound from 140.25 dampened the original bearish review. Strong support from 55 W EMA (now at 142.49) is also a medium term bullish sign. Fall from 151.89 could be a correction to rise from 127.20 only. Decisive break of 151.89/93 will confirm resumption of long term up trend. This will now be the favored case as long as 140.25 support holds.

Economic Indicators Update

US Non-Farm Payroll employment rose 353k in January, significantly surpassing expectation of 178k. Prior month's growth was also revised sharply higher from 216k to 333k. Both were well above monthly average of 255k growth in 2023.

Unemployment rate was unchanged at 3.7%, below expectation of 3.8%. Labor force participation rate was unchanged at 62.5%.

Average hourly earnings grew 0.6% mom, well above expectation of 0.3% mom. Annual hourly earnings growth also accelerated from 4.4% yoy to 4.5% yoy, above expectation of 4.1% yoy.

Full US NFP release here.

BoE Chief Economist Huw Pill articulated a cautious stance on the prospect of interest rate cuts, noting that such a move remains "some way off." He underscored the absence of adequate evidence suggesting a trajectory towards the inflation target, which necessitates a sustained period of tight monetary policy to mitigate domestic inflationary pressures.

"Crucially, for me at least, we don't have sufficient evidence yet," Pill stated, pointing to the need for more conclusive data to consider easing rates.

Further elaborating his view, Pill advised against overreacting to any short-term reversion of inflation to target level in the coming months, particularly if driven by external factors. Instead, he advocated for a focused and sustained effort to address domestic inflationary pressures through maintaining a restrictive policy stance.

US nonfarm payrolls expected to drop to 180,000

The week wraps up with the US nonfarm payroll report later today. The ADP employment report, which was released on Wednesday, fell from 158,000 to 107,000. The ADP report isn’t considered a reliable guide for nonfarm payrolls, but investors still attach significance to it as they hunt for clues as to where nonfarm payrolls are headed. In this instance, nonfarm payrolls are expected to follow the ADP lead and decline to 180,000 in January, down from 216,000 in December. If the estimate proves to be wide of the actual reading, we could see volatility from USD/CAD later today.

Strong US data could allow BOC to delay rate cuts

Canada’s stagnant economy showed signs of life late in 2023, as November GDP climbed 0.2% m/m. This was by no means an explosive expansion, but was still a welcome improvement after three consecutive months of zero growth. The December GDP is expected to tick higher, with an estimate of 0.3% m/m according to Stats Canada.

The US economy remains solid, and recent key releases have been stronger than expected. Canada’s economy is closely intertwined with its giant southern neighbor and US economic strength has spilled into Canada and could continue to do so into 2024. If Canada’s economy continues to expand, there will be less pressure on the Bank of Canada to lower interest rates. Inflation is running at 3.4% and the BoC would like to keep rates in restrictive territory in order to bring inflation back down to the 2% target. The BoC hasn’t signaled it will be lowering rates but the central bank will likely cut rates once the Federal Reserve has done so.

USD/CAD Technical

• There is resistance at 1.3400 and 1.3467
• 1.3349 and 1.3310 are providing support

• GBPJPY pauses its slide from a fresh 8½-year high
• Broader long-term uptrend remains in place
• RSI and MACD soften but remain positive

GBPJPY has been in a prolonged uptrend since early 2023, posting a fresh 8½-year high of 188.91 on January 19 before experiencing a setback. However, in the past couple of sessions, the pair managed to halt its decline in an attempt to move back higher towards its recent multi-year peak.

Considering that the short-term oscillators remain tilted to the upside, the price could revisit the 8½-year high of 188.91. Surpassing that zone, the pair might challenge the 190.00 psychological mark. Conquering this barricade, the bulls could then aim for the June 2015 peak of 195.87.

On the flipside, if the rebound falters, the recent support of 185.21 could act as the first line of defence. A violation of that zone could pave the way for the September-October support of 180.80. Failing to halt there, the pair may decline towards the December bottom of 178.33.

In brief, GBPJPY managed to stop its short-term retreat and is now trading in breathing distance from its 8½-year high of 188.91. Nevertheless, the momentum indicators are not yet confirming the prospect of fresh higher highs.

• AUDUSD sends some encouraging signals
• But the bulls need to claim the 0.6600 territory
• US nonfarm payrolls awaited at 13:30 GMT

AUDUSD bulls came into action instantly after the price dropped to a more-than-two-month low of 0.6507 to test the ascending trendline from the 2020 low. The pair finished the day with a bullish long-tailed hammer candlestick, which is theoretically a positive signal of an upside reversal. Yet, traders will need another big green candlestick to confirm a continuation higher.

The exponential moving averages (EMAs) have been capping upside movements around the 0.6598 level over the past week. Therefore, a clear break above this wall is probably required for a rally towards the next resistance of 0.6700-0.6720. Even higher, the pair could retest the lower band of the broken bullish channel near the 0.6800 psychological mark.

Note that the RSI has yet to rise above its 50 neutral mark, while the MACD remains stable near its red signal line, reflecting some uncertainty in the market.

If the pair gets a rejection near the 0.6600 number, the focus will turn back to the 0.6500-0.6520 constraining zone. A close below this region could trigger a decline towards the 0.6450 area, where the pair paused several times in the second half of 2023. The 0.6400 round level could be the next destination if sellers stay in play.

All in all, AUDUSD is displaying a bullish tendency, with traders likely awaiting a durable move above the 0.6600 mark to boost the price higher.

Daily Pivots: (S1) 185.67; (P) 186.17; (R1) 187.09; More...

GBP/JPY rebounded after brief dip to 185.21 and intraday bias is turned neutral first. On the downside, below 185.21 will extend the correction from 188.90 to 55 D EMA (now at 184.99) and below. On the upside, break of 187.60 minor resistance will argue that the pull back has completed, and bring retest of 188.90 instead.

In the bigger picture, up trend from 123.94 (2020 low) in in progress. Medium term outlook will stay bullish as long as 178.32 support holds. Next target is 195.86 long term resistance (2015 high).

Daily Pivots: (S1) 158.46; (P) 158.83; (R1) 159.59; More...

EUR/JPY recovered quickly after dipping to 158.06. Some support is seen from 158.55 resistance turned support and rising channel for now. Intraday bias stays neutral first. On the downside, sustained break of 158.55 will argue that rebound from 153.15 has completed at 161.84 already. Fall from there is then seen as the third leg of the pattern from 164.29 high. Intraday bias will be turned back to the downside for 155.06 support next. On the upside, above 160.25 minor resistance will retain near term bullishness, and bring retest of 161.84.

In the bigger picture, price actions from 164.29 medium term top are seen as a correction to rise from 139.05 only. As long as 148.48 resistance turned support holds (2022 high), larger up trend from 114.42 (2020 low) is expected to resume through 164.29 at a later stage.