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Key Highlights

• EUR/USD declined below 1.0920 and tested the 1.0845 zone.
• A key bearish trend line is forming with resistance near 1.0900 on the 4-hour chart.
• GBP/USD is eyeing a decent increase above the 1.2750 resistance.
• Gold prices found support near $2,000 and started a fresh increase.

EUR/USD Technical Analysis

The Euro failed to clear the 1.1120 resistance and started a fresh decline against the US Dollar. EUR/USD dropped below the 1.0950 and 1.0920 levels to enter a bearish zone.

Looking at the 4-hour chart, the pair settled below the 1.0950 level, the 100 simple moving average (red, 4 hours), and the 200 simple moving average (green, 4 hours). Finally, the bulls appeared near the 1.0845 level.

A low was formed near 1.0844 and the pair is now attempting a fresh increase. There was a minor move above the 1.0880 level. The pair is now facing resistance near the 1.0900 level.

There is also a key bearish trend line forming with resistance near 1.0900 on the same chart. The next key resistance is near the 1.0940 zone. A close above the 1.0940 zone could open the doors for more upsides. The next stop for the bulls might be 1.0985.

If there is no move above 1.0900, the pair might continue to move down. Immediate support is seen near the 1.0865 level. The first major support is near the 1.0845 level.

The next major support sits near the 1.0800. A downside break below the 1.0800 zone could spark a sustained decline. The next major support is 1.0760 below which the pair might decline and test 1.0720.

Looking at GBP/USD, the pair is slowly moving higher and might gain bullish momentum if there is a clear move above the 1.2750 resistance.

Economic Releases

• German Buba Monthly Report.

• Nasdaq-100 broke resistance level 16930.00
• Likely to rise to resistance level 17500.00

Nasdaq-100 index recently broke the key resistance level 16930.00, which stopped the previous impulse waves (1) and 1.

The breakout of the resistance level 16930.00 accelerated the active minor impulse wave 3 of the higher order impulse sequence (3) from the start of this year.

Given the strong daily uptrend, Nasdaq-100 index can be expected to rise further to the next resistance level 17500.00 (target for the completion of the active impulse wave 3).

Last week's market development suggest growing skepticism among traders on their own aggressive bets on early rate cut by major central banks. After a batch of economic data from US and UK, as well as the chorus of central banker comments, Q2 is starting to look much less likely for the start of a global monetary easing cycle.

This reassessment has led to an uptick in benchmark treasury yields across US, UK, and Germany. Beyond that, the impact notably varied across regions reflecting the differing economic resilience. Dollar stood out as the strongest performer while US stock markets reached new record highs. Sterling and Euro also saw gains against most other major currencies, though they were outshone the Canadian Dollar, which clinched the second spot in currency strength rankings.

In contrast, Japanese Yen faced significant headwinds as the week's weakest performer. Japan's latest inflation data did not provide the signs of a wage-price spiral, a key factor BoJ has been monitoring for its policy direction. Meanwhile, Swiss Franc also suffered, with its performance impacted by the shifting rate cut expectations in other major economies and concerns raised by SNB about the adverse effects of strong Franc on the economy.

Australian and New Zealand Dollars, on the other hand, were weighed down by the increasing pessimism surrounding China's economic prospects. As countries closely tied to China's economic performance, the deteriorating outlook in China has had a ripple effect on these currencies as usual.

Robust US consumer data eclipses waning bets on Fed cut

US stocks staged a remarkable rally last week, with DOW and S&P 500 reaching new record highs and NASDAQ climbing to its highest level in over two years. Investor sentiment was bolstered by a combination of robust consumer data and declining inflation expectations. Interestingly, this positive market trend has unfolded even as traders have scaled back their bets on a Fed rate cut in March.

A series of robust US economic data collectively suggest that Fed's previous rate hikes have been well absorbed by consumers and the economy is well-positioned for a strong start in 2024. December retail sales outperformed expectations, registering 0.6% mom increase against forecasted 0.4% om. Ex-auto sales also exceeded 0.2% mom predictions by rising 0.4% mom. University of Michigan consumer sentiment index surged substantially from 69.7 to 78.8 in January, hitting its highest mark since July 2021. Additionally, one-year inflation expectation in the same survey fell from 3.1% to 2.9%, hitting the lowest point since December 2020. Furthermore, initial jobless claims dropped to 187k, the lowest since September 2022.

At the same time, Fed fund futures market has scaled back its expectations for a March rate cut, with the likelihood now standing at just 47%. This is a significant decrease from the 81% probability priced in just a week ago. Fed might lean towards maintaining the current restrictive monetary policy for a longer duration to ensure the economy does not overheat again. While three rate cuts are still anticipated this year, the first might not occur until the third quarter. As Atlanta Fed President Raphael Bostic, a centrist, noted, the bar for a rate cut before July is high.

Technically, S&P 500 is now on track to next near term target of 100% projection of 3808.86 to 4607.07 from 4103.78 at 4901.99. But the real test lies in the zone between 5000 psychological level and 61.8% projection of 2191.86 to 4818.62 from 3491.58 at 5395.28. In any case, outlook will remain bullish as long as 4714.82 support holds.

10-year yield's recovery from 3.785 extended higher last week, and met 55 D EMA (now at 4.163). While further rise cannot be ruled out, strong resistance is expected from 38.2% retracement of 4.997 to 3.785 at 4.247 to limit upside. As expectation of Fed rate cut regrows at a later stage, TNX should resume the decline from 4.997 through 3.785. However, decisive break of 4.247 could be a signal of some fundamental shifts in Fed expectation, that opens up further rally to 61.8% retracement at 4.534.

Dollar Index's rebound from 100.61 short term bottom extended higher last week. The break of 55 D EMA (now at 103.24) argues that fall from 107.34 has completed. Rise from 100.61 could be the third leg of the consolidation pattern from 99.57. Further rise is in favor as long as 102.08 support holds. Break of 104.26 resistance will strength this bullish case and target 107.334 next.

Global markets show divergence as China struggles

The positive momentum in US stock markets contrasts starkly with the performance of other global markets. FTSE closed the week with down over -2%, reacting to a combination of stronger-than-expected UK CPI data and weaker-than-anticipated retail sales figures. These developments placed BoE in a difficult position, as its ability to cut interest rate is constrained, while the ongoing restrictive monetary policy continues to impact the UK economy negatively. In Europe, both DAX and CAC ended the week with slight losses, indicating cautious sentiment among investors in these markets. Meanwhile, Japan's Nikkei index achieved another three-decade high, though it only recorded a modest weekly gain of 1.1%.

However, the most significant downturns were observed in the markets of China and Hong Kong, with recent rout intensifying The Shanghai SSE Composite plunged to its lowest level since April 2020, and the Hong Kong HSI also tumbled its lowest point in over a year. Despite China achieving its official growth target last year, recent data releases, including Q4 GDP and retail sales, have not been well-received by the markets. Investors perceived the economic performance as mixed at best, raising fresh concerns about the country's future prospects. Additionally, China is currently experiencing a significant deflationary period coupled with continuous decline in home prices, and hope for forceful stimulus by the government is dim.

Technically speaking, while further decline is expected in China Shanghai SSE, there is prospect of some support from 100% projection of 3322.12 to 3923.51 from 3089.77 at 2691.16 to bring a sustainable bounce. However, firm break of 2923.51 support turned resistance is needed to signal short term bottoming first. Otherwise, risk will stay on the downside even in case of strong recovery.

NZD and AUD weaken amidst China's market slump

Because of the close economic ties with China, New Zealand and Australian Dollar weakened notably last week, following the decline in Chinese stocks.

After breaking through 55 D EMA (now at 0.6144), NZD/USD pressing 0.6083 key near term support. Sustained break there will argue that whole rebound from 0.5771 has completed at 0.6368 already. More importantly, that would argue that whole corrective fall from 0.6537 (2023 high) is still in progress, with fall from 0.6368 has the third leg. In the case, near term outlook will be turned bearish for 0.5771 support and possibly below

Nevertheless, strong bounce from current level, followed by decisive break of 0.6180 resistance, will retain near term bullishness. NZD/USD should then head for a test on 0.6368 instead.

Similarly, AUD/USD also broke through 55 D EMA (now at 0.6620). And it's now pressing 0.6524 support. Sustained break there will argue that rebound from 0.6269 has completed at at 0.6870. Deeper fall would then be seen back to 0.6269 support and possibly below. Nevertheless, strong bounce from current level, followed by firm break of 0.6639 resistance, will retain near term bullishness. AUD/USD should then rise further to retest 0.6870.

USD/JPY Weekly Outlook

USD/JPY's rise from 140.25 extended to as high as 148.79 last week, then retreated mildly. Initial bias remains neutral this week for some consolidations first. Current development argues that whole pull back from 151.89 has already completed. Further rise is in favor as long as 145.97 resistance turned support holds. Above 148.79 will target 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.

In the long term picture, as long as 125.85 resistance turned support holds (2015 high), up trend from 75.56 (2011 low) is still in favor to continue through 151.93 (2022 high) at a later stage.

EUR/USD's fall from 1.1138 resumed to 1.0843 last week, then recovered. Initial bias stays neutral this week for some consolidations. But further decline is expected as long as 1.0995 resistance holds. Below 1.0843 will target 1.0722 support next. Decisive break there will argue that whole rise from 1.0447 has completed, and target this low.

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 1.0722 support will argue that the third leg has already started for 1.0447 and below.

In the long term picture, a long term bottom is in place at 0.9534 on bullish convergence condition in M MACD. It's still early to call for bullish trend reversal with the pair staying inside falling channel in the monthly chart. Nevertheless, sustained trading above 55 M EMA (now at 1.1078) and break of 1.1274 resistance will raise the chance of reversal and target 1.2348 resistance for confirmation.

USD/JPY's rise from 140.25 extended to as high as 148.79 last week, then retreated mildly. Initial bias remains neutral this week for some consolidations first. Current development argues that whole pull back from 151.89 has already completed. Further rise is in favor as long as 145.97 resistance turned support holds. Above 148.79 will target 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.

In the long term picture, as long as 125.85 resistance turned support holds (2015 high), up trend from 75.56 (2011 low) is still in favor to continue through 151.93 (2022 high) at a later stage.

GBP/USD's corrective pattern from 1.2826 continued last week. Initial bias stays neutral this week first. Deeper pull back could be seen, and break of 1.2595 will target 1.2499 support. On the upside, however, firm break of 1.2826 will resume larger rise from 1.2036 towards 1.3141 high.

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 that's in progress. Upside should be limited by 1.3141 to bring the third leg of the pattern. Meanwhile, break of 1.2499 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.

In the long term picture, a long term bottom should be in place at 1.0351 on bullish convergence condition in M MACD. But momentum of the rebound from 1.3051 argues GBP/USD is merely in consolidation, rather than trend reversal. Range trading is likely between 1.0351/4248 for some more time.

USD/CHF's rebound from 0.8332 extended higher last week, but lost momentum after hitting 55 D EMA (now at 0.8687). It's also pressing 38.2% retracement of 0.9243 to 0.8332 at 0.8680. Focus stays on this 0.8680 resistance zone. Decisive break there will turn near term outlook bullish for 61.8% retracement 0.8995. Nevertheless, break of 0.8565 minor support will turn intraday bias back to the downside for retesting 0.8332 low.

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.

In the long term picture, there is no clear sign that down trend from 1.8305 (2000 high) has completed. With 38.2% retracement of 1.8305 to 0.7065 at 1.1359 intact, outlook is neutral at best.

AUD/USD's fall from 0.6870 resumed and accelerated to as low as 0.6524 last week, then recovered. Initial bias remains neutral at this week for consolidations. But further decline is expected as long as 0.6639 support turned resistance holds. 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.

In the long term picture, the down trend from 1.1079 (2011 high) should have completed at 0.5506 (2020 low) already. It's unsure yet whether price actions from 0.5506 are developing into a corrective pattern, or trend reversal. But in either case, fall from 0.8006 is seen the second leg of the pattern. Hence, in case of deeper decline, downside strong support should emerge above 0.5506 to bring reversal.

USD/CAD rebounded further to 1.3540 last week, but retreated since then. Initial bias remains neutral this week for some consolidations first. Current development suggests that fall from 1.3897 has already completed. Further rally is expected as long as 1.3342 minor support holds. Above 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.

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.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as long as 1.2947 resistance turned support holds.