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Daily Pivots: (S1) 0.8636; (P) 0.8661; (R1) 0.8695; More....

Intraday bias in USD/CHF is turned neutral with current recovery. On the downside, below 0.8605 will resume the pull back from 0.8727 to 0.8487 support. Break there will argue that rebound from 0.8332 has completed, and bring retest of this low. 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 instead.

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) 147.20; (P) 147.55; (R1) 148.02; More...

Intraday bias in USD/JPY remains neutral as consolidation from 148.79 is extending. With 145.97 resistance turned support intact, further rally is in favor. As noted before, corrective fall from 151.89 should have completed at 140.25 already. Break of 148.79 will resume the rise from there for retesting 151.89/93 key resistance zone.

In the bigger picture, stronger than expected rebound from 140.25 dampened the original bearish review. Strong support from 55 W EMA (now at 141.89) 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.

Daily Pivots: (S1) 0.6564; (P) 0.6587; (R1) 0.6608; More...

AUD/USD's consolidation from 0.6524 is extending and intraday bias remains neutral at this point. With 0.6639 support turned resistance intact, further decline is expected. Firm break of 0.6524 support will argue that whole rebound from 0.6269 has completed, and bring deeper fall to this support.

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). 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) 1.3450; (P) 1.3493; (R1) 1.3517; More...

Intraday bias in USD/CAD remains neutral for the moment. Further rally is expected as long as 1.3414 minor support holds. Fall from 1.3897 should have completed at 1.3716. Break of 1.3540 will target 1.3617 cluster resistance (61.8% retracement of 1.3897 to 1.3176 at 1.3622). Decisive break there will pave the way to 1.3897/3976 key resistance zone. However, break of 1.3414 will dampen this view and turn bias back to the downside

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. In case of another fall, strong support should emerge above 1.2947 resistance turned support to bring rebound. Overall, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 at a later stage.

Daily Pivots: (S1) 0.9388; (P) 0.9407; (R1) 0.9425; More...

Intraday bias in EUR/CHF is mildly on the downside at this point. Deeper pullback could be seen but downside should be contained above 0.9252 low to bring rebound. On the upside, above 0.9471 will resume the rebound from 0.9252, as a correction to whole decline from 1.0095. Next target will be 38.2% retracement of 1.0095 to 0.9252 at 0.9574.

In the bigger picture, medium term outlook remains bearish as long as 0.9683 resistance holds. Current fall from 1.2004 (2018 high) is part of the multi-decade down trend. Another decline is in favor after rebound from 0.9252 completes. However, firm break of 0.9683, and sustained trading above 55 W EMA (now at 0.9659) will argue that EUR/CHF is already in a medium term rally, even as a corrective move.

Daily Pivots: (S1) 187.14; (P) 187.67; (R1) 188.17; More...

Intraday bias in GBP/JPY remains neutral as consolidation from 188.90 is still extending. with 186.14 resistance turned support intact, further rally is expected. On the upside, break of 188.90, and sustained trading above 188.63 will confirm up trend resumption. Next target is 38.2% projection of 155.33 to 188.63 from 178.32 at 191.04. However, break of 186.14 will turn bias to the downside for deeper pullback.

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) 159.58; (P) 160.28; (R1) 160.85; More...

EUR/JPY's retreat from 161.84 is extending and intraday bias remains neutral first. With 158.55 resistance turned support intact, further rally is in favor. On the upside, break of 161.84 will resume whole rise from 153.15 to 161.8% projection of 153.15 to 158.55 from 155.06 at 163.79, which is close to 164.29 high.

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.

Daily Pivots: (S1) 1.6411; (P) 1.6491; (R1) 1.6551; More...

Intraday bias in EUR/AUD stays neutral for the moment. With 1.6398 minor support intact, further rally is in favor. Corrective fall from 1.7062 should have completed with three waves down to 1.6127 already. Above 1.6671 will target 1.6844 resistance to confirm this bullish case. However, break of 1.6398 will dampen this view and bring retest of 1.6127 low instead.

In the bigger picture, fall from 1.7062 medium term top is seen as correction to the up trend from 1.4281 (2022 low). Break of 1.6844 resistance will argue that this up trend is ready to resume through 1.7062 high. In case of another fall, strong support should be seen around 1.5846 and 38.2% retracement of 1.4281 to 1.7062 at 1.6000 to bring rebound.

Daily Pivots: (S1) 0.8516; (P) 0.8540; (R1) 0.8559; More...

Intraday bias in EUR/GBP remains on the downside as fall from 0.8713 is in progress. Current decline is seen as part of the larger down trend. Next target is 0.8491 low, and then 0.8464 projection level. On the upside, above 0.8563 minor resistance will turn intraday bias neutral and bring consolidations again.

In the bigger picture, fall from 0.8764 is seen as another leg in the whole down trend from 0.9267 (2022 high). Outlook will stay bearish as long as 0.8713 resistance holds. Break of 0.8491 will target 61.8% projection of 0.8977 to 0.8491 from 0.8764 at 0.8464.

The subdued trading in the forex markets observed through the week continued in today's Asian session. Despite numerous central bank decisions and key economic data releases, most major currency pairs and crosses are staying within last week's range. Euro, as the worst performer. so far is a notable exception. This lackluster performance seems tied to relatively larger decline in Germany's benchmark yield, which reflects concerns over the region's economic prospects. Yet, selling momentum in the common currency is limited, except versus Sterling.

Meanwhile, Yen, Swiss Franc, and Dollar are leading as the strongest currencies for the week. This may suggest a shift toward risk-averse behavior among investors. However, this interpretation isn't fully supported by global stock market activity; there's a noticeable absence of significant selloffs. Even in China, where stocks have been underperforming globally this year, there has been a rebound following PBoC's decision to cut the reserve requirement ratio to injects liquidity into the market. Commodity currencies are showing slight weakness, though they are performing marginally better than Euro.

The market's attention is now pivoting to the upcoming US PCE inflation data. Expectations are set for headline PCE inflation to remain steady at 2.6% yoy in December, while core PCE is anticipated to slow from 3.2% yoy to 3.0% yoy. Despite the strong US Q4 GDP data released yesterday, the futures market continues to indicate a roughly 52% likelihood of a Fed rate cut in March. The impending inflation data is poised to play a crucial role in either reinforcing or altering these rate cut expectations.

Technically, EUR/USD is now pressing 1.0821 temporary low again as this week's recovery faltered quickly. Break there will resume the fall from 1.1138 to 1.0722 support. More importantly, decisive break of 1.0722 will argue that whole rebound from 1.0447 has completed, and turn near term outlook bearish for retesting this low. Let's see how EUR/USD would react to today's US inflation data.

In Asia, at the time of writing, Nikkei is down -1.39%. Hong Kong HSI is down -0.71%. China Shanghai SSE is down -0.12%. Singapore Strait Times is up 0.41%. Japan 10-year JGB yield is down -0.0369 at 0.713. Overnight, DOW rose 0.64%. S&P 500 rose 0.53%. NASDAQ rose 0.18%. 10-year yield fell -0.046 to 4.132.

Japan's Tokyo CPI slows sharply to 1.6%, raises questions on BoJ's negative rates exit

Japan's Tokyo CPI core (ex-food) slowed significantly from 2.1% yoy to 1.6% yoy in January, below expectation of 1.9% yoy. That's also the lowest rate since March 2022. Additionally, core-core CPI (ex-food and energy) declined from 3.5% yoy to 3.1% yoy, marking a fifth consecutive month of decline. Headline CPI mirrored this trend, falling from 2.4% yoy to 1.6% yoy.

The latest Tokyo CPI data has sparked a debate among economists regarding its influence on BoJ strategy to phase out negative interest rates. While some analysts believe this data won't significantly impact BoJ's plan, anticipating the first rate hike since 2007 in April, others are more cautious. They suggest that the surprising drop in Tokyo inflation might lead BoJ to reconsider or delay the decision.

In parallel, December's corporate services price index remained steady at 2.4% yoy, aligning with the near nine-year high recorded in November.

BoJ's minutes emphasize importance of discussions on exiting negative rates

The minutes from BoJ's meeting on December 18-19 highlighted a focus on strategic discussions regarding the future of its monetary policy. The members agreed on the importance to "deepen discussions" about the "timing of the exit" from the current monetary policy framework and determining the "appropriate pace of raising policy interest rates thereafter." This discussion is closely tied to the evolving dynamics of "wage and price developments."

A key sentiment echoed by many members was the prerequisite for a sustainable and stable achievement of the price stability target before considering the termination of the negative interest rate policy and the yield curve control framework. The establishment of a "virtuous cycle between wages and prices" was reiterated as a necessary condition for these policy shifts.

Additionally, some members expressed the viewpoint that BoJ is "not in a situation where it would fall behind the curve" if it did not rush to raise policy interest rates. This perspective suggests a cautious approach to monetary tightening, implying that the central bank doesn't feel pressured to act hastily in adjusting its interest rate policy.

Looking ahead

Germany Gfk consumer sentiment and Eurozone M3 money supply will be released in European session. Later in the day, US personal income and spending, as well as PCE inflation will be the main focus.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8516; (P) 0.8540; (R1) 0.8559; More...

Intraday bias in EUR/GBP remains on the downside as fall from 0.8713 is in progress. Current decline is seen as part of the larger down trend. Next target is 0.8491 low, and then 0.8464 projection level. On the upside, above 0.8563 minor resistance will turn intraday bias neutral and bring consolidations again.

In the bigger picture, fall from 0.8764 is seen as another leg in the whole down trend from 0.9267 (2022 high). Outlook will stay bearish as long as 0.8713 resistance holds. Break of 0.8491 will target 61.8% projection of 0.8977 to 0.8491 from 0.8764 at 0.8464.

Economic Indicators Update