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• GBPCHF reversed from support level 1.0690
• Likely to rise to resistance level 1.0855

GBPCHF currency pair recently reversed up from the major support level 1.0690 (which stopped the sharp weekly downtrend at the end of 2022).

The support level 1.0690 was strengthened by the lower weekly and daily Bollinger Bands.

Given the strength of the support level 1.0690 and the bullish divergence on the weekly Stochastic, GBPCHF can be expected to rise further to the next resistance level 1.0855 (former support from the end of 2023).

The onset of 2024 marked a notable shift in global market sentiment. Major U.S. stock indexes ended their nine-week winning streak, closing lower, while major benchmark treasury yields experienced a notable recovery. Concurrently, this shift in market dynamics was accompanied by a scaling back of bets on an immediate rate cut by Fed. Amidst these changes, Dollar concluded broadly higher, though it faced conflicting reactions due to mixed economic data. Looking ahead, extended pullback in risk markets and stabilization in yields could potentially bolster the greenback in the near term.

Japanese Yen, on the other hand, ended the week as the worst performer, undoing some of its massive gains from the end of last year. This reversal was primarily driven by the market adjusting its expectations for BoJ policy in the aftermath of the recent devastating earthquake in Japan. Moreover, Yen faced additional pressure due to the rise in treasury yields in other major economies. Australian and New Zealand Dollars also ended the week on a weaker note, affected by broader aversion to risk. Aussie, in particular, was further impacted by extended pullback in Copper prices as well.

Elsewhere in the currency markets, Euro ended the week mixed but softened against British Pound, weighed down by lower-than-expected headline inflation reading. The rebound in inflation seemed not as strong as ECB had anticipated. Meanwhile, Sterling was a standout performer among European majors, while Canadian Dollar ranked as the third strongest. Swiss Franc, despite reaching a new record high against Yen, showed a mixed performance overall.

Yields stabilize and stock pullback could support greenback

Dollar emerged as the strongest major currency last week, although it experienced some jittery on Friday. The robust non-farm payroll data, surprisingly, did not provide lasting momentum for Dollar's rebound. Instead, traders seemed more influenced by the weaker-than-expected ISM Services PMI. This suggests a shift in market sensitivity, with growth now appearing to be a more critical concern than employment or inflation. The upcoming US CPI release is expected to further clarify this trend.

As for Dollar Index, currently, the favored case is that fall from 107.34 is the second leg of the leg of the consolidation pattern from 99.57. While another fall cannot be ruled out, downside should be contained by 99.57 to bring reversal. On the upside, break of 55 D EMA (now at 103.41) is the first sign that fall from 107.34 has completed. Sustained trading above 104.26 resistance will argue that rise from 100.61 is already the third leg of the pattern and target 107.34.

The pullback in stock markets could be a supporting factor for Dollar in the short term. With last week's decline, a short term top should be formed at 4793.30 in S&P 500, ahead of 4818.62 (2022 high). The index should have now entered into a consolidation phase to rise from 4103.78. If that is correct, any rally attempt should be capped by 4818.62 key resistance. Risk is mildly on the downside for gyrating towards 55 D EMA (now at 4579.15).

Another element that might bolster the greenback is stabilization in treasury yields. 10-year yield should have formed a short term bottom at 3.785. For the near term, recovery from there should extend towards 55 D EMA (now at 4.206). Strong resistance could be seen from 38.2% retracement of 4.997 to 3.785 at 4.247 to set the range for consolidation to the fall from 4.997.

Earthquake aftermath and BoJ expectations weigh on Yen

Japanese Yen concluded the week as the weakest performer, primarily influenced by the economic repercussions of the recent devastating earthquake. This natural disaster has significantly reduced the probability of BoJ abandoning negative interest rates in the immediate future.

However, this shift represents more of an adjustment in aggressive market bets rather than a complete overhaul of the overall outlook. The consensus remains that BoJ is still on track to normalize its monetary policy within the year, though a rate hike in January can now be ruled out. The general market expectation is still leaning towards April for a rate hike, after with the outcomes of Spring wage negotiations and the availability of a new set of economic forecasts.

While USD/JPY's rebound from 140.25 was strong last week, there is no change in the overall outlook. Fall from 151.89 is still seen as the third leg of the pattern from 151.93 (2022 high). Rebound from 140.25 is seen as a correction to fall from 151.89 only. While further rise could be seen in the near term, upside should be limited by 61.8% retracement of 151.89 to 140.25 at 147.44. Break of 143.17 minor support will bring retest of 140.25. However sustained break of 147.44 will dampen this view, and bring retest of 151.89 instead.

Another interesting development to note is that CHF/JPY made new record high last week, by breaching 170.53, even though it couldn't close above that level. For now, near term outlook will stay bullish as long as 166.77 support holds. The long term up trend would target 38.2% projection of 137.40 to 170.53 from 162.12 at 174.44 next.

Sterling gains while Aussie struggles, contrasting fortunes

Sterling ended as the second strongest currency, supported by PMI data that suggested resurgence in UK's services sector., which might help the economy steer clear of recession. Concurrently, there are indications of mounting inflationary pressures, particularly through wages. Pound's comparative strength against Euro also contributed to the downturn in EUR/GBP, further supporting Sterling's position.

In contrast, Australian Dollar was the second worst performer, its decline influenced partly by the pullback in risk-sensitive markets. The rebounds in Chinese stocks and Yuan have also been notably underwhelming. Moreover, there is an increasing risk of a near-term bearish reversal in Copper prices, which could have further implications for Aussie's performance.

GBP/AUD's strong rebound suggests short term bottoming at 1.8584. Considering bullish convergence condition in D MACD, correction from 1.9967 might have completed with three waves down to 1.8584, just ahead of 38.2% retracement of 1.5925 (2022 low) to 1.9967 (2023 high) at 1.8423. Firm break of 55 D EMA (now at 1.8992) will strengthen this bullish case and target 1.9263 resistance for confirmation. Nevertheless, rejection by 55 D EMA could bring another fall to 1.8423 before completing the corrective pattern.

Copper's extended decline from 3.9346 argues that rebound from 3.5021 might have completed, and the corrective pattern from 4.3556 (2023 high) is extending with another falling leg. Immediate focus is on 55 D EMA (now at 3.7688), and sustained trading below there will affirm this bearish case, and pave the way back to 3.5021 support. If realized, this bearish development in Copper would add additional pressure to Aussie.

USD/CAD Weekly Outlook

USD/CAD's strong rebound suggests short term bottoming at 1.3176, on bullish convergence condition in 4H MACD. Despite some loss of upside momentum, further rally is in favor this week as long as 1.3286 minor support holds, to 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.

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.

A short term top was in place at 1.1138 in EUR/USD with last week's pull back. But as it recovered after dipping to 1.0876, initial bias is neutral this week first. On the downside, below 1.0876 will target 1.0722 support next. However, break of 1.0997 will turn bias back to the upside for retesting 1.1138 high instead.

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 1.1073) and break of 1.1274 resistance will raise the chance of reversal and target 1.2348 resistance for confirmation.

USD/JPY's strong rebound last week confirms short term bottoming at 140.25, on bullish convergence condition in 4H MACD. Nevertheless, price actions from there are likely just correcting the fall from 151.89. While further rally cannot be ruled out, upside should be limited by 61.8% retracement of 151.89 to 140.25 at 147.44. On the downside, below 143.17 minor support will turn bias back to the downside for retesting 140.25 low.

In the bigger picture, for now, fall from 151.89 is still seen as the third leg of the corrective pattern from 151.89. Another decline through 140.25 will target 61.8% retracement of 127.20 to 151.89 at 136.63. Sustained break there will pave the way to 127.20 support (2022 low). However, firm break of 147.44 fibonacci resistance will dampen this view and bring retest of 151.89 instead.

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 rebound strongly after drawing support from 1.2611 last week. Initial bias is now on the upside this week for retesting 1.2826 first. Decisive break there will resume whole rally from 1.2036. Nevertheless, another fall and break of 1.2611 will bring deeper correction to 1.2499 support instead.

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.

A short term bottom was in place at 0.8332 with last week's rebound, but price actions from there are seen as a corrective pattern only. Initial bias in USD/CHF is neutral this week first. Outlook remains bearish with 0.8665 support turned resistance intact. On the downside, break of 0.8332 will resume larger fall from 0.9243 to 0.8257 projection level.

In the bigger picture, the down trend from 1.0146 (2022 high) is in progress. Next target is 61.8% retracement of 1.0146 to 0.8551 from 0.9243 at 0.8257. Sustained break there could prompt downside acceleration to 100% projection at 0.7648. This will now remain the favored case as long as 0.8819 resistance holds.

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 decline last week indicates short term topping at 0.6870, on bearish divergence condition in 4H MACD. Further decline will remain mildly in favor as long as 0.6759 minor resistance holds, to 55 D EMA (now at 0.6612). Nevertheless, break of 0.6759 will turn bias back to the upside for retesting 0.6870 instead.

In the bigger picture, price actions from 0.6169 (2022 low) could be just a medium term corrective pattern to the down trend from 0.8006 (2021 high). Rise from 0.6269 is seen as the third leg of the pattern that could target 0.7156 on break of 0.6894 resistance. For now, range trading should be seen between 0.6169 and 0.7156 (2023 high), until further developments.

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's strong rebound suggests short term bottoming at 1.3176, on bullish convergence condition in 4H MACD. Despite some loss of upside momentum, further rally is in favor this week as long as 1.3286 minor support holds, to 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

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.

Immediate focus is now on 184.15 in GBP/JPY after last week's strong rebound. Sustained break there will argue that whole pull back from 188.63 has completed and bring further rally to retest this high. Nevertheless, rejection by 184.15 will retain near term bearishness for another fall through 178.32 later.

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.

In the longer term picture, rise from 122.75 (2016 low) in still in progress despite loss of upside momentum as seen in W MACD. Further rise will remain in favor, as long as 172.11 support holds, to retest 195.86 (2015 high).