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Daily Pivots: (S1) 0.6703; (P) 0.6730; (R1) 0.6757; More...

AUD/USD recovered after hitting 0.6693 and intraday bias is turned neutral first. Deeper decline is expected as long as 0.6854 support turned resistance holds. Break of 0.6693 will resume the fall from 0.7156 to 161.8% projection of of 0.6854 to 0.7028 from 0.6854 at 0.6539. Nevertheless, firm break of 0.6854 will argue that such decline is finished, and revive near term bullishness.

In the bigger picture, focus is now on 0.6721 structural support. Sustained break there will argue that whole rise from 0.6169 (2022 low) has completed at 0.7156, after rejection by 55 month EMA (now at 0.7179). Deeper decline would then be see back to 61.8% retracement of 0.6169 to 0.7156 at 0.6546, even as a corrective fall. Nevertheless, strong rebound from current level will retain medium term bullishness for another rise through 0.7156 later.

Asian markets traded on a positive note as sentiment was lifted by better-than-expected economic data from China. The strong performance of Hong Kong stocks was a clear indication of the positive outlook Commodity currencies staged a remarkable rebound, as led by New Zealand Dollar. In contrast, the Yen and the Dollar experienced mild weakness during the session. European majors, we showed a mixed performance with the Swiss Franc lagging behind as the relatively weaker one for the week.

Technically, Dollar's retreat is so far shallow, with EUR/USD holding below 1.0068 support turned resistance, GBP/USD below 1.2146 resistance, and AUD/USD well below 0.6854 support turned resistance. USD/CHF is indeed pressing 0.9428 temporary top while USD/JPY and USD/CAD are trading well above 134.04 and 1.3474 support levels respectively. Similarly, while Gold recovered after hitting 1804.48, upside is limited below 1847.27 resistance. Fall from 1959.47 is still in favor to continue. Nevertheless, break of 1847.27 will indicate short term bottoming in Gold, and possibly short term topping in Dollar too.

In Asia, Nikkei closed up 0.26%. Hong Kong HSI is up 3.79%. China Shanghai SSE is up 0.80%. Singapore Strait Times is up 0.03%. Japan 10-year JGB yield is up 0.0017 at 0.505. Overnight DOW dropped -0.71%. S&P 500 dropped -0.30%. NASDAQ dropped -0.10%. 10-year yield dropped -0.006 to 3.916

China PMI manufacturing rose to 52.6, highest since 2012

China official PMI Manufacturing rose from 50.1 to 52.6, above expectation of 50.7. That's also the highest reading since April 2012. PMI Non-Manufacturing rose from 54.4 to 56.3, highest since March 2021. PMI Composite rose from 52.9 to 56.4.

"In February, the economic stabilisation policy measures further took effect, coupled with the epidemic's impact receding and other favourable factors, the speed of enterprises to resume production accelerated, meaning China's economic prosperity level continued to rebound," said senior NBS statistician Zhao Qinghe.

Also released, Caixin PMI Manufacturing rose from 49.2 to 51.6 in February, slightly above expectation of 51.3. That the first expansion reading in 7 months, and the second-highest since May 2021. Caixin added there were renewed increases in output, new orders and employment. Suppliers' delivery times improved at the quickest rate for eight years. Business confidence also strengthened to near two-year high.

Japan PMI manufacturing finalized at 47.7 in Feb, continually deteriorating activity

Japan PMI Manufacturing was finalized at 47.7 in February, down from January's 48.9. That's also the worst reading since September 2020. S&P Global also noted that backlogs of work decreased at quickest pace for 29 months. Input prices had the slowest rise for a year-and-a-half.

Usamah Bhatti, Economist at S&P Global Market Intelligence, said: "Latest data pointed to continually deteriorating activity in the Japanese manufacturing sector midway through the first quarter of 2023. Both new orders and production levels, which make up 55% of the headline PMI figure, fell at the fastest pace since July 2020 as weak domestic demand and a global economic slowdown hindered sales and output volumes.

"Moreover, the dip is likely to be sustained in the near-term as the absence of new orders amid dampened client confidence lifted capacity pressure on manufacturers further and led to the sharpest reduction in outstanding business in nearly two-and- a-half years."

Australia CPI slowed to 7.4% yoy in Jan, ex-volatile items down to 7.2% yoy

Australia monthly CPI indicator slowed from 8.4% yoy to 7.4% yoy in January, below expectation of 8.1% yoy. CPI excluding volatile items (i.e. excludes Fruit and vegetables and Automotive fuel) slowed from 8.1% yoy to 7.2% yoy.

The most significant contributors to the annual increase in the January monthly CPI indicator were Housing (9.8%), Food and non-alcoholic beverages (8.2%) and recreation and culture (10.2%).

Australia GDP grew 0.5% qoq in Q4, domestic prices grew fastest since 1990

Australia GDP grew 0.5% qoq in Q4, below expectation of 0.8% qoq. Through the year, GDP grew 2.7% yoy. GDP Implicit price deflator (IPD) rose 1.6% qoq and 9.1% yoy. Domestic prices grew 1.4% qoq and 6.6 yoy, highest annual growth since 1990.

Katherine Keenan, ABS head of National Accounts, said, "the 0.4 per cent rise in total consumption and 1.1 per cent rise in exports were the primary contributors to GDP growth in the December quarter...

"Continued growth in household and government spending drove the rise in consumption, while increased exports of travel services and continued overseas demand for coal and mineral ores drove exports."

Looking ahead

Swiss retail sales and manufacturing PMI will be released in European session. Germany will release CPI and unemployment. Eurozone will release PMI manufacturing final. UK will release PMI manufacturing final today too. Later in the day, Canada will release PMI manufacturing. US will release ISM manufacturing and construction spending.

AUD/USD Daily Report

Daily Pivots: (S1) 0.6703; (P) 0.6730; (R1) 0.6757; More...

AUD/USD recovered after hitting 0.6693 and intraday bias is turned neutral first. Deeper decline is expected as long as 0.6854 support turned resistance holds. Break of 0.6693 will resume the fall from 0.7156 to 161.8% projection of of 0.6854 to 0.7028 from 0.6854 at 0.6539. Nevertheless, firm break of 0.6854 will argue that such decline is finished, and revive near term bullishness.

In the bigger picture, focus is now on 0.6721 structural support. Sustained break there will argue that whole rise from 0.6169 (2022 low) has completed at 0.7156, after rejection by 55 month EMA (now at 0.7179). Deeper decline would then be see back to 61.8% retracement of 0.6169 to 0.7156 at 0.6546, even as a corrective fall. Nevertheless, strong rebound from current level will retain medium term bullishness for another rise through 0.7156 later.

Economic Indicators Update

USD/JPY:

We’re seeing price approach our 1st resistance at 139.45. This is in line with the 50% Fibonacci retracement and 61.8% Fibonacci projection. If price breaks this level, the next big resistance is at 145.16 which is an overlap resistance.

In terms of support, there’s a nice overlap at 130.84 which serves as our 1st support. The next key support is the major swing low at 127.08.

DXY:

Price is testing the 1st resistance at 105.56. This is a strong overlap resistance which also coincides what multiple 38% Fibonacci retracements. If price were to break this level, we could see if make a push up to 107.93.

In terms of support, a reversal from here would see prices drop to 101.12 which is a major double swing low support.

EUR/USD:

Price is approaching our 1st support at 1.0578 which is an overlap support that lines up with a 38.2% Fibonacci retracement. It’s worth noting that price is also seeing bullish pressure from the ascending support line.

The 2nd support is down at 1.0333 which is a strong overlap support and a 50% Fibonacci retracement too.

In terms of resistance, the closest resistance is at 1.1001 which is a recent swing high resistance.

GBP/USD:

Price is ranging between the 1st support at 1.1918 which is an overlap support and a strong 23.6% Fibonacci retracement and the 1st resistance at 1.2435 – which coincides with 2 swing high resistance.

If price were to break the 1st support, we’re likely to see a double top reversal pattern and price could drop to 1.1630 which also lines up with the 38% Fibonacci retracement.

However, if price were to break the 1st resistance, we could see a push up to 2nd resistance at 1.2671 which is a strong pullback resistance that lines up with the major 61.8% Fibonacci retracement.

USD/CHF:

Price is now testing the 1st resistance at 0.9414. This is an overlap resistance and along with that, a 38.2% Fibonacci retracement. If price were to break this resistance, the next key resistance it could rise to is 0.9596 which is a small swing high resistance and a 50% Fibonacci retracement.

It’s worth noting that if price were to reverse from ehre, we could see it drop nicely down to 0.9080 which is our 1st support. This 1st support lines up nicely with a couple of recent swing lows.

AUD/USD:

Price has broken our ascending support line and is enroute to our 1st support at 0.6614. This level lines up with the head and shoulders exit potential along with a 50% Fibonacci retracement. If price were to bounce from there, the 1st resistance we should take note of is at 0.6886 which is a strong overlap resistance and the level which formed the head and shoulders reversal.

NZD/USD:

Price has broken the 1st support-turned-resistance at 0.6196 which would lead us to think we could be seeing a double top reversal. However, there is an intermediate support at 0.6146 which is line with the 38.2% Fibonacci retracement. Price needs to break this intermediate support to confirm a double top reversal which might push prices down to 1st support at 0.6024 – which also happents to line up with the 50% Fibonacci retracement.

However, if prices were to rise from here, we could see if rise to the 2nd resistance at 0.6474 which has seen multiple swing highs react off it in the past.

USD/CAD:

We can see an ascending support line push prices up stretching all the way back to June 2022. Along with that, price has also recently broke a descending resistance-turned-support line with our 1st support at 1.3515 which is the breakout level + the overlap support.

The 1st resistance to take note of is at 1.37070 which is a recent swing high. Price needs to break this to trigger a bigger move up to 1.3981.

DJ30:

Price is testing our 1st support at 32490 which is a strong overlap support that also lines up with our 38.2% Fibonacci retracement. Price needs to break this level to trigger a small drop to 2nd support at 1.31776 which is a small swing low support lining up with the 50% Fibonacci retracement.

If price were to bounce from here, we could see a push up to 34370 which is our 1st resistance with multiple swing highs reacting off that level. Breaking that level, the next resistgance would be at 35399 which is also another swing high.

DAX:

We can see prices being squeezed between an ascending support line and a descending resistance line. In terms of key levels, 15677 is our 1st resistance and 15214 is our intermediate support. If price were to break this intermediate support and the ascending support line, the first level price might drop to is at 14877 which is a strong overlap support.

In terms of resistance, if price were to break 15677, we could see a push up towards 16275 which is our 2nd resistance that lines up with multiple swing highs.

S&P500:

Price has broken our of our long term descending resistance-turned-support line and is also seeing a short term support line holding prices up quite nicely. Our 1st support is at 3945 and a bounce from here could see prices rise up to 4145 which is our 1st resistance htat lines up with multiple swing highs.

If prices were to break the ascending support line and our 1st support, we could see prices drop to the 2nd support at 3759 which lines up with a recent swing low.

BTC/USD:

Price is in a bit of a range with the 1st key resistance at 25424 – which is an overlap resistance. If price were to break through this level, we could see it rise quite nicely to our 2nd resistance at 28497 which is a 23.6% Fibonacci retracement.

Our 1st support is at 21532 and a break of this level could see prices drop to 18040 – a strong overlap support.

ETH/USD:

Price is testing a key resistance at 1680 which is a swing high resistance. A reversal from here could see prices first test the 1st support at 1463 which lines up with a 50% Fibonacci retracement and if prices were to break that, the next support would be a pullback support at 1357 that lines up with a 61.8% Fibonacci retracement.

BCO/USD:

We’re seeing price being squeezed from an ascending support and a descending resistance. In terms of key levels, the 1st key resistance is at 89.14 which is an overlap resistance lining up with a 23.6% Fibonacci retracement. Breaking that level could suggest prices might make a push up to 2nd resistance at 100.26 which is the 50% Fibonacci retracement.

In terms of support levels, the key one we’re looking at is at 77.89 which is an overlap support.

XAU/USD (GOLD):

Price is testing a key 1st support at 1786 area which is a 50% Fibonacci retracement lining up with an overlap support. If price were to bounce from here, it could potentially rise to 1st resistance at 1867 which is a 38.2% Fibonacci retracement.

Breaking the 1st support might trigger a move down to 2nd support at 1734 – this is an overlap support that is slightly below the key 61.8% Fibonacci retracement.

China official PMI Manufacturing rose from 50.1 to 52.6, above expectation of 50.7. That's also the highest reading since April 2012. PMI Non-Manufacturing rose from 54.4 to 56.3, highest since March 2021. PMI Composite rose from 52.9 to 56.4.

"In February, the economic stabilisation policy measures further took effect, coupled with the epidemic's impact receding and other favourable factors, the speed of enterprises to resume production accelerated, meaning China's economic prosperity level continued to rebound," said senior NBS statistician Zhao Qinghe.

Also released, Caixin PMI Manufacturing rose from 49.2 to 51.6 in February, slightly above expectation of 51.3. That the first expansion reading in 7 months, and the second-highest since May 2021. Caixin added there were renewed increases in output, new orders and employment. Suppliers' delivery times improved at the quickest rate for eight years. Business confidence also strengthened to near two-year high.

Full Caixin release here.

Japan PMI Manufacturing was finalized at 47.7 in February, down from January's 48.9. That's also the worst reading since September 2020. S&P Global also noted that backlogs of work decreased at quickest pace for 29 months. Input prices had the slowest rise for a year-and-a-half.

Usamah Bhatti, Economist at S&P Global Market Intelligence, said: "Latest data pointed to continually deteriorating activity in the Japanese manufacturing sector midway through the first quarter of 2023. Both new orders and production levels, which make up 55% of the headline PMI figure, fell at the fastest pace since July 2020 as weak domestic demand and a global economic slowdown hindered sales and output volumes.

"Moreover, the dip is likely to be sustained in the near-term as the absence of new orders amid dampened client confidence lifted capacity pressure on manufacturers further and led to the sharpest reduction in outstanding business in nearly two-and- a-half years."

Full release here.

Key Highlights

• Gold price started an upside correction from the $1,805 zone.
• It broke a major bearish trend line with resistance near $1,815 on the 4-hours chart.
• EUR/USD and GBP/USD started a decent recovery wave.
• The US ISM Manufacturing Index could increase from 47.4 to 48.0 in Feb 2023.

Gold Price Technical Analysis

Gold price gained bearish momentum after it broke the $1,840 support against the US Dollar. The price traded close to the $1,800 level before the bulls appeared.

The 4-hours chart of XAU/USD indicates that the price traded as low as $1,804. It settled below the 100 simple moving average (red, 4-hours) and the 200 simple moving average (green, 4-hours).

Recently, there was an upside correction above the $1,815 level. The price broke a major bearish trend line with resistance near $1,815 on the 4-hours chart. There was a test of the 50% Fib retracement level of the downward move from the $1,845 swing high to $1,804 low.

The price is now facing resistance near the $1,830 level and the 200 simple moving average (green, 4-hours). The main resistance is near the $1,845 zone and the, above which the price might gain bullish momentum.

On the downside, an initial support is near the $1,815 level. The next major support is near the $1,805 level, below which gold price might struggle to stay above the $1,800 zone. In the stated case, gold price could slide towards the $1,780 support.

Looking at EUR/USD, the pair started a recovery wave from the 1.0535 zone and might rise further towards the 1.0680 resistance.

Economic Releases to Watch Today

• Germany’s Manufacturing PMI for Feb 2023 - Forecast 46.5, versus 46.5 previous.
• Euro Zone Manufacturing PMI for Feb 2023 – Forecast 48.5, versus 48.5 previous.
• UK Manufacturing PMI for Feb 2023 – Forecast 49.2, versus 49.2 previous.
• US ISM Manufacturing Index for Feb 2023 – Forecast 48.0, versus 47.4 previous.

Australia monthly CPI indicator slowed from 8.4% yoy to 7.4% yoy in January, below expectation of 8.1% yoy. CPI excluding volatile items (i.e. excludes Fruit and vegetables and Automotive fuel) slowed from 8.1% yoy to 7.2% yoy.

The most significant contributors to the annual increase in the January monthly CPI indicator were Housing (9.8%), Food and non-alcoholic beverages (8.2%) and recreation and culture (10.2%).

Full release here.

Australia GDP grew 0.5% qoq in Q4, below expectation of 0.8% qoq. Through the year, GDP grew 2.7% yoy. GDP Implicit price deflator (IPD) rose 1.6% qoq and 9.1% yoy. Domestic prices grew 1.4% qoq and 6.6 yoy, highest annual growth since 1990.

Katherine Keenan, ABS head of National Accounts, said, "the 0.4 per cent rise in total consumption and 1.1 per cent rise in exports were the primary contributors to GDP growth in the December quarter...

"Continued growth in household and government spending drove the rise in consumption, while increased exports of travel services and continued overseas demand for coal and mineral ores drove exports."

Full release here.

January surprised to the downside with some sign the inflationary pulse may be starting to ease.

The Monthly CPI Indicator rose 7.4% in the year to January compared to Westpac’s 7.9%yr forecast and the market’s 8.0%yr.

Diving into the detail this was the index fell 0.4% in January compared to 0.1% rise forecast by Westpac; we assume the market median would have been around 0.2% given the 8.0%yr forecast. This is a moderation from the 3.0% rise in December, 2.4% increase in November and a 6.3% decline in October. The Monthly CPI Indicator can be very volatile month to month as it is not a true monthly price index but rather the released of data for the quarterly CPI as it becomes available hence it can be very volatile month to month depending on the timing of the price surveys. This may be way the ABS only reference the annual pace of growth.

The most significant contributions to the annual rise in January were: housing (+9.8%yr), food & non-alcoholic beverages (+8.2%yr) and recreation a& culture (+10.2%yr).

The ABS noted that the annual increase for the housing group in January was lower than December (+10.1%yr) due to a moderation in new dwellings and rents. In monthly terms, both dwelling (+0.5%) and rents (+0.7%) rose in January. However, rents are now growing more strongly than they were a year ago while the increases in dwelling prices are moderating.

Food & non-alcoholic beverages rose 8.2%yr in January, a moderation from the 9.5%yr increase in December. The ABE noted that in the month most food & non-alcoholic beverages prices rose. The main exception was fruit & vegetables which fell 2.3%.

As we expected there was a moderation in price inflation for recreation & cultural with holiday travel & accommodation rising 17.8%yr to January, a moderation from the 29.3%yr pace to December. In January holiday travel & accommodation prices fell 7.2% following a 29.3% increase in December.

Outside of the above contributions to the monthly increase in January worth noting is the 3.6% fall in clothing & footwear on the back of a 5% fall in garments; a 1.1% rise in auto fuel prices and a very modest 0.2% rise in tobacco. Please refer to the included table for a further breakdown on the Monthly CPI indicator and its comparison to our current CPI forecast for Q1.

The ABE no longer publishes an estimation of a Trimmed Mean CPI Indicator as the variation in the timing of price surveys resulted in a meaningful different result from Monthly Trimmed Mean compared to the quarterly Trimmed Mean.

We are processing the Monthly CPI Indicator data to incorporate it into a complete Q1 CPI preview. Our current published inflation forecast for Q1 are 1.5%qtr/7.2%yr for the CPI and 1.3%qtr/6.6%yr for the Trimmed Mean.

Australia’s economy expanded by a modest 0.5%, which was softer than anticipated. Conditions were soft in late 2022, with the adverse impacts of high inflation and sharply higher interest rates becoming apparent. Consumer spending grew by only 0.3%, while total domestic demand stalled. .

The Australian economy expanded by a modest 0.5% in the December quarter.

That was softer than anticipated, Westpac 0.8% and market median 0.8%, range (0.4% to 1.0%).

Annual growth is 2.7%. The level of activity is 7.2% above levels prior to the pandemic, at the end of 2019. Note, that Q3 GDP growth was revised up a fraction, to a gain of 0.7% from 0.6%.

Key surprise: The consumer was the key surprise, with only a tepid 0.3% rise in overall spending. Services were the key disappointment, with only a modest rise. Also, income growth was weaker than anticipated and the decline in the household saving ratio was more pronounced.

While nominal gross household income grew by 1.6%, real household disposable income contracted by a hefty -2.2%.

Hours worked: The National Accounts estimate that hours worked expanded by 2%, eclipsing the Labour Force survey estimate of 1.4%, after a rise of 0.5% in Q3 (a result held back by covid related elevated absenteeism). Over the year, hours worked grew by 6.5%.

Consumer spending grew by only 0.3% in the quarter, well short of our expectation, a plus 0.8%.

The ABS report that growth in discretionary spending (+0.4%) slowed to be more in line with essential spending (+0.3%).

The ABS add, discretionary spending was led by hotels, cafes and restaurants (+1.6%) and transport services (+5.7%), reflecting residual post-lockdown demand. Spending in these categories slowed following four consecutive quarters of strong demand.

Other discretionary spending on recreation and culture (-1.4%), clothing and footwear (-2.7%), and furnishings and household equipment (-1.2%) fell as cost-of-living pressures began to weigh on household budgets.

The household saving ratio moved lower still, down from 7.1% to 4.5%, a reading below the “equilibrium”, judged to be around 6%. This ends a period of excess savings, which has been a feature during the pandemic.

Expenditure detail:

Domestic demand stalled in the December quarter, the weakest result outside of a lockdown period since June 2014. This indicates that the economy hit a soft spot at the end of 2022.

Net exports added a hefty 1.1ppts, on a lift in services led 1.1% rise in exports and a pull-back in imports, (-4.3%), albeit they still rose strongly over the year (+12.1%).

Total inventories subtracted -0.5ppts from activity on a correction of non-farm business inventories after a Q3 run-up centred on some one-offs.

Home building activity declined, down by -0.9%,, with a further pull-back in renovations work, -4.2%, more than offsetting a lift in new home building work, +1.4%.

The real estate sector – in the form of Ownership Transfer Costs (turnover in the property sector) - fell a further -6.2% after the -11.2% plunge in Q3 as rapid interest rate rises bite.

Business investment contracted, declining by -0.8%, led lower by a fall in construction work, as well a dip in equipment spending, -0.2%.

Public demand is cresting at a high level, up only 0.2% in both Q3 and Q4, following a -0.5% for Q2. This follows rapid growth up to the March quarter 2022, boosted by the response to the pandemic.