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Luis de Guindos, Vice-President of ECB, in speech today, indicated that the "rapid pace of disinflation" observed in 2023 is likely to "slow down" in the coming year, with a "pause" early in the year, mirroring the pattern seen in December 2023.

De Guindos also pointed out that "soft indicators" suggest an economic "contraction" in December, hinting at the likelihood of a "technical recession" in the latter half of 2023. This downturn is expected to have broad impacts across various sectors, with "construction and manufacturing" being particularly hit. "Services" sector is also anticipated to "soften in the coming months as a result of weaker activity in the rest of the economy."

Regarding the ECB's monetary policy, de Guindos expressed that the "current level of interest rates," if maintained, would substantially aid in returning inflation to the ECB's target. He underscored that the "key ECB interest rates" remain the central instrument for monetary policy, emphasizing that future decisions will be "data-dependent," focusing on the "appropriate level and duration of restriction."

Full speech of ECB de Guindos here.

Data today from the Australian Bureau of Statistics on Wednesday showed the monthly consumer price index (CPI) rose 4.3% year-on-year in November, the slowest pace since January 2022. Value a month earlier = 4.9%. Market forecasts = 4.4%.

This strengthened market expectations that interest rates would not have to rise further. Although the head of the Reserve Bank of Australia, Michele Bullock, warned of the risks of rising price pressures caused by domestic demand, for example, due to rising prices for rental housing.

Against the backdrop of the publication of news about inflation in Australia, no strong surges were noticed in the AUD/USD market. Perhaps this was due to the fact that there were no surprises.

Meanwhile, the 4-hour chart shows that the AUD/USD rate is nearing important support, which is formed by the lower line of the trend channel (shown in blue), within which the price has been moving since last fall.

Wherein:

→ in 2024, the price managed to push off from this line several times, but continued growth did not follow;

→ the highs of the days of January 4, 5 and 9 form a sequence of falling tops;

→ on January 5, prices broke through the low of December 15, but then rose sharply — a sign of demand below the level of 0.667.

Thus, the chart provides evidence to suggest that the forces of demand have enough capacity to prevent the price from falling, but are so exhausted that they cannot resume the upward trend in the blue channel.

It is possible that the AUD/USD market will trade in a restrained manner until the release of tomorrow's inflation news in the US (16:30 GMT+3), which could lead to the formation of a new balance of supply and demand.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

EUR/USD started a fresh decline below the 1.0980 support. USD/CHF is rising and might aim a move toward the 0.8620 resistance.

Important Takeaways for EUR/USD and USD/CHF Analysis Today

• The Euro struggled to clear the 1.1000 resistance and declined against the US Dollar.
• There is a major bearish trend line forming with resistance near 1.0945 on the hourly chart of EUR/USD at FXOpen.
• USD/CHF is gaining pace above the 0.8500 resistance zone.
• There is a key bearish trend line forming with resistance near 0.8530 on the hourly chart at FXOpen.

EUR/USD Technical Analysis

On the hourly chart of EUR/USD at FXOpen, the pair failed to clear the 1.1000 resistance. The Euro started a fresh decline below the 1.0980 support against the US Dollar.

There was a move below the 50-hour simple moving average and 1.0945. The bears were able to push the pair below the 1.0920 pivot level. The pair traded as low as 1.0910 and is currently consolidating losses.

Immediate resistance on the upside is near the 50% Fib retracement level of the downward move from the 1.0978 swing high to the 1.0610 low. There is also a major bearish trend line forming with resistance near 1.0945 and the 50-hour simple moving average.

The next major resistance is near the 1.0980 zone. An upside break above the 1.0980 level might send the pair toward the 1.1020 resistance or the 1.618 Fib extension level of the downward move from the 1.0978 swing high to the 1.0610 low. Any more gains might open the doors for a move toward the 1.1050 level.

On the downside, immediate support on the EUR/USD chart is seen near 1.0910. The next major support is near the 1.0890 level. A downside break below the 1.0890 support could send the pair toward the 1.0850 level.

USD/CHF Technical Analysis

On the hourly chart of USD/CHF at FXOpen, the pair started a decent increase from the 0.8360 support. The US Dollar climbed above the 0.8420 resistance zone against the Swiss Franc.

The bulls were able to pump the pair above the 50-hour simple moving average and 0.8460. The pair climbed above the 50% Fib retracement level of the downward move from the 0.8575 swing high to the 0.8455 low.

On the upside, the pair is now facing resistance near 0.8530. It is close to the 61.8% Fib retracement level of the downward move from the 0.8575 swing high to the 0.8455 low.

There is also a key bearish trend line forming with resistance near 0.8530. The next major resistance is at 0.8555. The main resistance is now near 0.8575. If there is a clear break above the 0.8575 resistance zone and the RSI climbs above 65, the pair could start another increase. In the stated case, it could test 0.8620.

If not, there could be a downside correction. On the downside, immediate support on the USD/CHF chart is near the 50-hour simple moving average at 0.8500.

The first major support is 0.8460. A downside break below 0.8460 might spark bearish moves. The next major support is near the 0.8420 pivot level. Any more losses may possibly open the doors for a move toward the 0.8360 level in the near term.

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Markets

Bond supply stood in the center of attention yesterday. Belgium and Italy kicked off in Europe. Both received bumper investor interest, the former for a new 10-year OLO benchmark and the latter for a 7-year one as well as a tap of an existing 30-year BTP. The US started its monthly refinancing round with a $52bn 3-year auction stopping through the WI. With markets absorbing the load well, the impact on yields stayed modest. German Bunds underperformed Treasuries. Yields increased between 5 and 6.2 bps. This was, however, mainly a catch-up move with a late-session UST swoon on Monday. After yields gapped higher at yesterday’s open, they traded sideways. ECB’s Villeroy after European closing hours weighed in on the heated rate cut debate. But the nor-dove-nor-hawk was, well, neither dovish nor hawkish. While saying that 2024 would see the first rate cuts, he declined on giving a timing. The Frenchman said the ECB shouldn’t rush things but must not be too obstinate about it either. US yields eased a few bps (0.8-2.2), the belly outperforming the wings. The dollar held the upper hand in currency markets, supported in part by the fragile risk environment (equity markets closed up to 0.4% lower in Europe and the US). EUR/USD moved south to 1.093 in technically insignificant trading. USD/JPY bounced off the 200dMA to end at 144.48. The pound caught a breather following the surge so far this week. EUR/GBP rose from an intraday low around 0.858 to just north of 0.86. Even as GBP continues in Asian dealings this morning, the currency’s early 2024 track record is strong nonetheless. Other moves in FX include a weak JPY following disappointing (but outdated) November labor earnings data. The BoJ’s window of opportunity to ditch negative policy rates is closing rapidly. USD/JPY is testing the 145 big figure and equities in the country (up to +2%) greatly outperform regional peers. The Aussie dollar appreciates even as inflation eased slightly more than expected from 4.9% to 4.3% in November. The eco calendar is once again razor thin today, meaning technically inspired trading ahead of tomorrow’s US CPI numbers. Supply does remain in focus, this time with Spain (20-y syndication) and the US auctioning $37bn of 10-y bonds. Considering yesterday’s bond sales, we expect no major issues for the ones today. NY Fed president Williams’ speech on the 2024 eco and inflation outlook is worth listening to but comes only in late US dealings.

News & Views

The National Bank of Poland kept its policy rate unchanged at 5.75%. The central bank’s rate cut cycle is now on hold for a third meeting running after a cumulative 100 bps stealth easing around the time of tide-changing parliamentary elections in October. Polish data suggest that growth increased in Q4 2023, yet it remained relatively low. The labour market is still tight and the unemployment rate low. Polish inflation is expected to fall significantly in coming months (6.1% Y/Y in December) but the decline in core inflation will be slower with sticky wage inflation playing a key role. The NBP is happy with the support an appreciating zloty is providing in helping inflation lower as it is consistent with fundamentals of the Polish economy. NBP governor Glapinski will give more comments on the outcome of yesterday’s meeting and the path forward at this afternoon’s press conference. We think that an another unchanged decision will follow in February with the early March meeting being the important one when new projections will be released. The Polish zloty holds strong in the EUR/PLN 4.35-area.

The Fed’s vice chair for supervision, Michael Barr, signaled that the central bank’s Term Funding Program (BTFP) is set to expire on March 11. The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations. The BTFP was set up for emergency purposes in the wake of the SVB collapse in March of last year with the aim of eliminating an institution’s need to quickly sell assets in times of stress. The BTFP was extensively used of late as institutions borrow at the one-year overnight index swap rate (which currently discounts rate cuts over the next 12 months) rather than at the 5.5% rate from the discount facility.

Daily Pivots: (S1) 182.94; (P) 183.45; (R1) 184.15; More...

Intraday bias in GBP/JPY stays neutral this point. On the upside, sustained break of 184.15 resistance will argue that whole pull back from 188.63 has completed and bring further rally to retest this high. However, break of 181.73 minor support will indicate rejection by 184.15, and retain near term bearishness. Intraday bias will be back on the downside for 178.71 support instead.

In the bigger picture, price actions from 188.63 medium term top are seen as a correction to the up trend from 148.93 (2022 low) only. As long as 172.11 resistance turned support holds, larger up trend from 123.94 (2020 low) is still in favor to resume through 188.63 at a later stage.

Daily Pivots: (S1) 157.42; (P) 157.73; (R1) 158.24; More...

Intraday bias in EUR/JPY stays neutral at this point, and further rally is in favor with 155.06 support intact. On the upside, above 158.97 will resume the rebound from 153.15 to 100% projection of 153.15 to 158.55 from 155.06 at 160.46.

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

Daily Pivots: (S1) 0.8586; (P) 0.8597; (R1) 0.8612; More...

Intraday bias in EUR/GBP is turned neutral with current recovery, but further decline is in favor with 0.8638 minor resistance intact. On the downside, break of 0.8585 will resume the fall from 0.8713 to 0.8548 support first. Break there will target 0.8491 low next. However, break of 0.8638 will turn bias to the upside for stronger rebound.

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 0.8764 resistance holds. Break of 0.8491 will target 61.8% projection of 0.8977 to 0.8491 from 0.8764 at 0.8464.

Daily Pivots: (S1) 1.6297; (P) 1.6331; (R1) 1.6382; More...

Intraday bias in EUR/AUD is turned neutral first. But risk will stay on the upside as long as 1.6127 support holds. Above 1.6398 will resume the rebound to 1.6478 resistance. Firm break there will argue that whole correction from 1.7062 has completed, and target 1.6844 resistance for confirmation. Nevertheless, break of 1.6127 will resume the corrective fall to 1.6000 fibonacci level.

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

Daily Pivots: (S1) 0.9290; (P) 0.9306; (R1) 0.9332; More...

Intraday bias in EUR/CHF stays neutral as consolidation from 0.9252 is still extending. While another recovery cannot be ruled out, outlook will stay bearish as long as 0.9402 support turned resistance holds. On the downside, break of 0.9252 will resume larger down trend to 100% projection of 0.9995 to 0.9416 from 0.9683 at 0.9104 next.

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. Next target is 61.8% projection of 1.1149 (2020 high) to 0.9407 from 1.0095 at 0.9018.

Daily Pivots: (S1) 1.3349; (P) 1.3382; (R1) 1.3423; More...

Further rise remains in favor in USD/CAD, and rebound from 1.3176 would target 38.2% retracement of 1.3897 to 1.3176 at 1.3451. Firm break there will pave the way to 61.8% retracement at 1.3622. On the downside, however, break of 1.3286 will turn bias back to the downside for 1.3176 low instead.

In the bigger picture, price actions from 1.3976 (2022 high) are viewed as a corrective pattern only. While fall from 1.3897 could still extend through 1.3091, 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 at a later stage.