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Key Highlights

• Crude oil prices started a recovery wave from the $67.70 zone.
• A key rising channel is forming with support near $73.80 on the 4-hour chart.
• Gold prices also gained pace and climbed above the $2,065 resistance.
• EUR/USD surged above the 1.1040 resistance zone.

Crude Oil Price Technical Analysis

In the past few days, Crude oil prices saw a decent recovery wave from the $67.70 zone. The price surpassed the $70.00 zone to move into a positive zone.

Looking at the 4-hour chart of XTI/USD, the price settled above the $73.50 zone, the 200 simple moving average (green, 4-hour), and the 100 simple moving average (red, 4-hour).

The price even broke the $75.00 level and the 61.8% Fib retracement level of the downward move from the $79.61 swing high to the $67.70 low. It is now consolidating gains near the $75.00 zone.

On the upside, the price is facing hurdles near the $75.80 level. The next major resistance is near the $77.20 zone, above which the price may perhaps accelerate higher. In the stated case, it could even visit the $78.00 resistance.

Immediate support is near the $73.60 level. There is also a key rising channel forming with support near $73.80 on the same chart. The next support is at $72.25, below which there is a risk of a sharp decline.

In the stated case, the price could dive toward the $70.00 support. Any more losses might call for a test of the $68.00 support zone.

Looking at gold prices, there was a steady increase and the bulls were able to push the price above the $2,065 resistance zone.

Economic Releases to Watch Today

• US Initial Jobless Claims - Forecast 210K, versus 205K previous.
• US Pending Home Sales for Nov 2023 (YoY) - Forecast +1%, versus -1.5% previous.

• EURCHF broke key support level 0.9410
• Likely to fall to support level 0.9300

EURCHF recently broke the pivotal support level 0.9410 (former multi month low from July).

The breakout of the support level 0.9410 accelerated both of the active impulse waves 3 and (5).

Given the predominant weekly downtrend and the widespread Swiss franc gains seen today, EURCHF currency pair can be expected to fall further to the next support level 0.9300 (target for the completion of the active impulse wave 3).

• USDCHF broke key support level 0.8570
• Likely to fall to support level 0.8400

USDCHF under the bearish pressure after the pair broke the key support level 0.8570 (former multi month low from July).

The breakout of the support level 0.8570 accelerated both of the active impulse waves 3 and (3).

Given the clear daily downtrend and the strongly bullish Swiss franc sentiment seen today, USDCHF currency pair can be expected to fall further to the next support level 0.8400 (target for the completion of the active impulse wave 3).

The Swiss franc is slightly lower in Wednesday trade. In the North American session, USD/CHF is trading at 0.8509, down 0.31%.

The Swiss franc continues to power higher and has climbed 2.5% against the slumping US dollar in the month of December. The Swissie has pummelled the greenback in 2023, gaining 7.7%, and is trading at its highest level since January 2015.

The Swiss National Bank has been buying Swiss francs during the year in order to boost its value and dampen inflation. This strategy has been successful but has come at a price, as the strong Swiss franc has made Swiss exports less competitive in global markets. The inflation rate is within the SNB’s target range of 0%-2% and the SNB’s inflation forecasts are also within the target range. This means that the central bank will likely decrease its currency intervention next year so long as there are no significant risks of inflation rising above 2%.

SNB unlikely to cut rates

The SNB has held the cash rate at 1.75% for two straight months and may have ended its rate-tightening cycle. The SNB has inflation right where it wants and there is little reason for the central bank to cut rates at this stage. The cash rate is not in restrictive territory as it is close to the expected level of inflation, which means that previous rate hikes are not hurting the economy, unlike the case in the US or the UK.

It’s a light data calendar between Christmas and New Year’s in the US. We’ll get a look at the Richmond Manufacturing Index today, with a market consensus of -6, compared to the -5 reading in November. On Thursday, unemployment claims are expected to drop to 205,000, down from 210,000 a week earlier..

USD/CHF Technical

• USD/CHF is testing support at 0.8518. Below, there is support at 0.8479
• 0.8550 and 0.8559 are the next resistance lines

Daily Pivots: (S1) 0.8518; (P) 0.8550; (R1) 0.8569; More....

USD/CHF's decline resumes by breaching 0.8513 temporary low and intraday bias is back on the downside. Current fall should target 100% projection of 0.9111 to 0.8665 from 0.8819 at 0.8373 next. On the upside, above 0.8578 minor resistance will turn intraday bias neutral again. But outlook will stay bearish as long as 0.8665 support turned resistance holds, in case of recovery.

In the bigger picture, break of 0.8551 support indicates resumption of whole decline from 1.0146 (2022 high). 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.

Daily Pivots: (S1) 142.11; (P) 142.37; (R1) 142.64; More...

USD/JPY is staying in sideway consolidation and intraday bias remains neutral at this point. In case of stronger recovery, upside should be limited below 146.58 resistance. On the downside, firm break of 140.94 will resume the whole fall from 151.89. Next target will be next fibonacci level at 136.63.

In the bigger picture, fall from 151.89 is seen as the third leg of the corrective pattern from 151.93 (2022 high). Deeper decline would be seen to 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). This will now remain the favored as long as 146.58 resistance holds.

Daily Pivots: (S1) 1.2697; (P) 1.2714; (R1) 1.2742; More...

GBP/USD is still bounded in consolidation below 1.2793 and intraday bias stays neutral. As long as 1.2499 support holds, near term outlook will stay bullish and further rally is expected. On the upside, firm break of 1.2793 will resume the rally from 1.2036. Next target is 61.8% projection of 1.2068 to 1.2731 from 1.2499 at 1.2909.

In the bigger picture, price actions from 1.3141 medium term top are seen as a corrective pattern to rise 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.

Daily Pivots: (S1) 1.1020; (P) 1.1032; (R1) 1.1056; More...

EUR/USD's rally continues today and hit as high as 1.0749 so far. Intraday bias remain son the upside for retesting 1.1274 high. Strong resistance should be seen from there to limit upside, at least on first attempt. On the downside, below 1.1027 minor support will turn intraday bias neutral first. But further rally will remain in favor as long as 1.0722 support holds, in case of retreat.

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 today's subdued trading environment, Sterling Euro have emerged as the strongest currencies, outperforming Australian Dollar and New Zealand Dollar. The ascendancy of these European currencies does not appear to be driven by any specific fundamental factors. Instead, it seems to be part of a rotational trend where different currencies take turns rallying against Dollar and Japanese Yen. Currently, it is the turn of Euro and Pound to experience this upward movement.

Australian Dollar also remains firm, supported by a general recovery in risk sentiment across Asian markets. However, the currency's momentum is somewhat limited. This restraint indicates that investors are maintaining a cautious stance towards China's economic recovery. Despite recent positive indicators, there seems to be a preference for a wait-and-see approach during the holiday period. Market participants are likely looking for further evidence to confirm the sustainability of China's recovery, with the upcoming PMI data this Sunday being a potential catalyst. The outcome of this data may play a crucial role in shaping investor engagement and market dynamics at the start of January.

In Europe, at the time of writing, FTSE is up 0.65%. DAX is up 0.40%. CAC is up 0.30%. Germany 10-year yield is down -0.0505 at 1.913. UK 10-year yield is down -0.031 at 3.471. Earlier in Asia, Nikkei rose 1.13%. Hong Kong HSI rose 1.74%. China shanghai SSE rose 0.54%. Singapore Strait Times rose 0.98%. 10-year JGB yield fell -0.0349 to 0.599.

China's Shanghai SSE recovers, but risks remain on the downside

China's Shanghai SSE recovered mildly by closing up 0.54% earlier today. Sentiment was lifted by data from showing that industrial profits saw a substantial year-on-year jump of 29.5% in November, a significant acceleration from the modest October's 2.7% growth.

However, there is no change in outlook of SSE for now. As long as 2935.70 resistance holds, fall from 3089.77 should still extend further to 61.8% projection of 3322.12 to 2923.51 from 3089.77 at 2843.42.

Break of 2935.70 would indicate short term bottoming and bring stronger rebound. In this case, the key hurdle will be 55 D EMA (now at 3008.08) which is close to medium term trend line resistance, as well as 3000 psychological level.

BoJ's Ueda: Policy adjustment possible with strengthened wage-price relationship

BoJ Governor Kazuo Ueda, in a speech yesterday, acknowledged that while the probability of achieving the central bank's price target is gradually increasing, it is still not high enough to justify a change in the current monetary policy.

Ueda highlighted, "The likelihood of Japan's economy getting out of the low-inflation environment and achieving our price target is gradually rising, though the likelihood is still not sufficiently high at this point."

The Governor pointed out the significant uncertainties surrounding economic and price conditions both domestically and internationally. He emphasized the importance of observing how firms' wage- and price-setting behaviors evolve in response to these conditions.

Ueda also mentioned that "we will likely considering changing policy," if there is significant strengthening of the virtuous cycle between wages and prices, leading to a sustainable and stable likelihood of achieving BoJ's price target.

BoJ's Dec meeting highlights lack of urgency in tightening

Summary of Opinions of BoJ's December 18-19 meeting revealed a prevailing view among the board members on a lack of urgency in tightening monetary policy. The consensus was that delaying the decision to tighten poses minimal risk. This general sentiment indicates BoJ's preference for a measured approach, prioritizing stability and sufficient data before considering changes.

The summary acknowledged that the sustainable and stable achievement of price stability target, set at 2%, is not yet certain. In considering whether to end the negative interest rate policy and yield curve control framework, the board stressed the importance of confirming a virtuous cycle between wages and prices.

To reach the 2% inflation target sustainably, one member noted that "growth momentum in nominal wages needs to strengthen further". It's also noted that wage growth has not kept pace with inflation. And, even with potentially higher wage hikes in the spring, the risk of inflation significantly surpassing 2% remains "low". Current policy approach does not risk "falling behind the curve" in response to inflation dynamics.

The summary also noted that acknowledged that the need to "rapidly tighten monetary policy is small". At the same time, "the cost incurred if this risk materializes would be significant."

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1020; (P) 1.1032; (R1) 1.1056; More...

EUR/USD's rally continues today and hit as high as 1.0749 so far. Intraday bias remain son the upside for retesting 1.1274 high. Strong resistance should be seen from there to limit upside, at least on first attempt. On the downside, below 1.1027 minor support will turn intraday bias neutral first. But further rally will remain in favor as long as 1.0722 support holds, in case of retreat.

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.

Economic Indicators Update