Sample Category Title
Yen Weakness Continues, Sterling Ready For More Upside
Yen's weakness is currently a clearer development in the rather indecisive markets. Germany and UK benchmark yields are extending near term rally while US 10-year yield stands firm above 3.7%. On the other hand, 10-year JGB yield is still capped by BoJ imposed ceiling. Dollar is mixed for now after traders refused to commit over yesterday's CPI data. On other hand Sterling looks ready to ride on any upside surprise in today's consumer inflation data. A question is whether the Pound's rally, if happens, could take Euro and Swiss higher, or pressured them.
Technically, GBP/CHF is making some progress in breaking 1.1206 minor resistance. Upside acceleration today would add to the case that whole corrective pattern from 1.1574 has completed. 1.1433 resistance should be the next target. Firm break there will set the stage to resume larger rally from 1.0813 through 1.1574 later in the month. Let's see how it goes.
In Asia, Nikkei closed down -0.42%. Hong Kong HSI is down -1.51%. China Shanghai SSE is down -0.47%. Singapore Strait Times is down -1.06%. Japan 10-year JGB yield is down -0.007 at 0.503. Overnight, DOW dropped -0.46%. S&P 500 dropped -0.03%. NASDAQ rose 0.57%. 10-year yield rose 0.044 to 3.761.
Fed Harker: It's going to be above 5%
Philadelphia Fed President Patrick Harker commented on yesterday's inflation report and said "it was good and it was moving down, but not quickly." He added that FOMC will have to "let the data dictate" tightening, and, "It's going to be above 5% in the Fed funds rate. How much above 5? It's going to depend a lot on what we're seeing."
"In my view, we are not done yet… but we are likely close," he said. "At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work," he noted in a prepared speech".
"Rates are now at a level that allow us to slow down and proceed cautiously and, to my mind, the days of us raising 75 basis points at a time have surely passed," Harker said. "Just at the last meeting, I voted for a hike of 25 basis points — what some would call slow but actually is closer to cruising speed when it comes to tightening."
Fed Williams: We need all the gears turning at the right pace
York Fed President John Williams said yesterday, "We will we stay the course until our job is done... We must restore balance to the economy and bring inflation down to 2 percent on a sustained basis."
"We need all the gears turning at the right pace to restore balance between demand and supply in the entire economy," said Williams. "We still have some way to go to achieve that goal."
He expects core inflation, as measured by core PCE reading at 4.4% in December, to fall to 3% this year and then 2% over the next few years. Growth will likely slow to just 1% this year, with unemployment rate to rise to between 4% and 5%.
RBA Lowe: I don't think we're at the peak of interest rate yet
RBA Governor Philip Lowe said in a Senate hearing, "I don't think we're at the peak (on interest rate) yet, but how far we have to go up I don't know." He noted that inflation, which is currently sitting at 7.8%, was still "wage too high". Unemployment would need to rise before there were any major changes to inflation.
"I understand why some people focus on the risks on the one side, but we've got to be attentive to the risk from higher inflation," Lowe warned. "It's corrosive for the economy. And all the evidence is if inflation stays high for too long, expectations adjust and that leads to higher interest rates and more unemployment.."
"The risks are two sided, and we're trying to navigate our way through a narrow path."
Looking ahead
UK inflation data is the major focus in European session, with CPI and PPI featured. Eurozone will release trade balance and industrial production.
Later in the day, US retail sales will take center stage, and Empire State manufacturing, industrial production, NAHB housing index and business inventories will be featured. Canada will release housing starts, manufacturing sales and wholesale sales.
USD/JPY Daily Outlook
Daily Pivots: (S1) 131.97; (P) 132.65; (R1) 133.77; More...
Intraday bias in USD/JPY stays on the upside at this point. Rebound from 127.20 short term bottom should extend to 38.2% retracement of 151.93 to 127.20 at 136.64, even as a correction to the decline from 151.39. On the downside, break of 131.49 minor support will turn intraday bias neutral again first.
In the bigger picture, prior of 55 week EMA (now at 131.47) raises the chance of medium term bearish reversal, but that's not confirmed yet. Strong rebound from current level, followed by sustained break of 38.2% retracement of 151.93 to 127.20 at 136.64 will argue that price actions from 151.93 is merely a corrective pattern. However, rejection by 136.64 will solidify medium term bearishness for 61.8% retracement of 102.58 to 151.93 at 121.43 and 38.2% retracement of 75.56 to 151.93 at 122.75.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 04:30 | JPY | Tertiary Industry Index M/M Dec | -0.40% | 0.00% | -0.20% | 0.10% |
| 07:00 | GBP | CPI M/M Jan | -0.40% | 0.40% | ||
| 07:00 | GBP | CPI Y/Y Jan | 10.30% | 10.50% | ||
| 07:00 | GBP | Core CPI Y/Y Jan | 6.20% | 6.30% | ||
| 07:00 | GBP | RPI M/M Jan | 0.10% | 0.60% | ||
| 07:00 | GBP | RPI Y/Y Jan | 13.20% | 13.40% | ||
| 07:00 | GBP | PPI Input M/M Jan | 0.80% | -1.10% | ||
| 07:00 | GBP | PPI Input Y/Y Jan | 15.40% | 16.50% | ||
| 07:00 | GBP | PPI Output M/M Jan | -0.20% | -0.80% | ||
| 07:00 | GBP | PPI Output Y/Y Jan | 14.40% | 14.70% | ||
| 07:00 | GBP | PPI Core Output M/M Jan | 0.70% | 0.10% | ||
| 07:00 | GBP | PPI Core Output Y/Y Jan | 11.90% | 12.40% | ||
| 10:00 | EUR | Eurozone Trade Balance (EUR) Dec | -16.0B | -15.2B | ||
| 10:00 | EUR | Eurozone Industrial Production M/M Dec | -0.80% | 1.00% | ||
| 13:15 | CAD | Housing Starts Jan | 252K | 249K | ||
| 13:30 | CAD | Manufacturing Sales M/M Dec | 0% | |||
| 13:30 | CAD | Wholesale Sales M/M Dec | 0.50% | |||
| 13:30 | USD | Empire State Manufacturing Index Feb | -15.6 | -32.9 | ||
| 13:30 | USD | Retail Sales M/M Jan | 1.70% | -1.10% | ||
| 13:30 | USD | Retail Sales ex Autos M/M Jan | 0.90% | -1.10% | ||
| 14:15 | USD | Industrial Production M/M Jan | 0.40% | -0.70% | ||
| 14:15 | USD | Capacity Utilization Jan | 79.00% | 78.80% | ||
| 15:00 | USD | NAHB Housing Market Index Feb | 37 | 35 | ||
| 15:00 | USD | Business Inventories Dec | 0.40% | 0.40% | ||
| 15:30 | USD | Crude Oil Inventories | 2.4M |
Technical Outlook and Review
USD/JPY:
Looking at the H4 chart, my overall bias for USDJPY is bullish due to the current price crossing above the Ichimoku cloud, indicating a bullish market. If this bullish momentum continues, expect the price to possibly continue heading towards the 1st resistance at 134.650, where the overlap resistance is. In an alternate scenario, price could possibly head back down to retest the 1st support at 132.904, where the overlap support is.
Areas of consideration:
- H4 time frame, 1st resistance at 134.650
- H4 time frame, 1st support at 132.904
DXY:
Looking at the H4 chart, my overall bias for DXY is bullish due to the current price crossing above the Ichimoku cloud, indicating a bullish market. If this bullish momentum continues, expect the price to possibly continue heading towards the 1st resistance at 103.964, where the previous swing high is. In an alternative scenario, price could head back down to retest the 1st support at 102.439, where the 50% Fibonacci line and overlap support is.
Areas of consideration:
- H4 time frame, 1st resistance at 103.964
- H4 time frame, 1st support at 99.241
EUR/USD:
Looking at the H4 chart, my overall bias for EURUSD is bearish due to the current price crossing below the Ichimoku cloud, indicating a bearish market structure. If this bearish momentum continues, expect the price to possibly continue heading towards the 1st support at 1.06952, where the overlap support is. In an alternate scenario, price could possibly head back up to retest the 1st resistance at 1.07803, where the overlap resistance is.
Areas of consideration :
- H4 1st resistance at 1.07803
- H4 1st support at 1.06952
GBP/USD:
Looking at the H4 chart, my overall bias for GBPUSD is bearish due to the current price crossing below the Ichimoku cloud, indicating a bearish market. If this bearish momentum continues, expect the price to possibly continue to head towards the 1st support at 1.19609, where the recent swing low is. In an alternate scenario, price could head back up to retest the 1st resistance line at 1.21756 where the overlap resistance and 50% Fibonacci line is.
Areas of consideration:
- H4 1st resistance at 1.21756
- H4 1st support at 1.19609
USD/CHF:
Looking at the H4 chart, my overall bias for USDCHF is bullish due to the current price being above the Ichimoku cloud, indicating a bullish market. If the current bullish trend continues, expect the price to possibly break the 1st resistance at 0.92882, where the previous swing high is, before heading towards the 2nd resistance at 0.93609 where the intermediate high is. In an alternative scenario, price could possibly head back down to retest the 1st support at 0.90591, where the recent swing low and 50% Fibonacci line is.
Areas of consideration
- H4 1st support at 0.90591
- H4 1st resistance at 0.92882
- H4 2nd resistance at 0.93609
XAU/USD (GOLD):
Looking at the H4 chart, my overall bias for XAUUSD is bearish due to the current price being below the Ichimoku cloud, indicating a bearish market. If this bearish momentum continues, expect the price to possibly continue heading towards the 1st support at 1824.515 where the overlap support and -61.8% Fibonacci expansion line is. In an alternative scenario, price could possibly head back up to retest the 1st resistance at 1863.530, where the previous swing low and 38.2% Fibonacci line is.
Areas of consideration:
- H4 time frame, 1st resistance at 1863.530
- H4 time frame, 1st support at 1824.515
AUD/USD:
Looking at the H4 chart, my overall bias for AUDUSD is bearish due to the current price being below the Ichimoku cloud, and the ascending trend line has been broken, indicating a change of market structure.
The 1st support is at 0.68711 which is the overlap support and in line with the 50% Fibonacci retracement. The 2nd support is at 0.65831 which is the recent swing low.
In an alternate scenario, the price could possibly go back up towards the 1st resistance level at 0.70132 which is the recent swing high and in line with the 23.6% Fibonacci retracement. There is 2nd resistance at 0.71363 which is the previous swing high.
Areas of consideration
- H4. 2nd resistance at 0.71363
- H4. 1st resistance at 0.70132
- H4, 1st support at 0.68711
- H4, 2nd support at 0.65831
NZD/USD:
Looking at the H4 chart, my overall bias for NZDUSD is bearish, as the current price is below the Ichimoku Cloud, and the ascending trend line has been broken, indicating a change of market structure. Expecting the price to go down towards the 1st support at 0.62762 which is the recent overlap swing low. It is also inline with 23.6% Fibonacci retracement. The 2nd support is at 0.61936.
In an alternate scenario, price could possibly go up towards the 1st resistance level at 0.63649 which is the recent overlap swing high andin line with 50% Fibonacci retracement. . There is a 2nd resistance at 0.65158.
Areas of consideration:
- H4 time frame, 2nd resistance at 0.65158
- H4 time frame, 1st resistance at 0.63649
- H4 time frame, 1st support at 0.62762
- H4 time frame, 2nd support at 0.61936
USD/CAD:
Looking at the H4 chart, my overall bias for USDCAD is bearish , as there is a descending trend line. Expecting the current price is head down towards the 1st support at 1.32332 which is the recent swing low and in line with 61.8% Fibonacci retracement.
In an alternative scenario, the price could possibly head up to the 1st resistance at 1.34730 which is the recent swing high and also in line with the 50% Fibonacci retracement. The 2nd resistance is at 1.36933 which is the previous swing high.
Areas of consideration:
- H4 time frame, 2nd resistance at 1.36933
- H4 time frame, 1st resistance at 1.34730
- H4 time frame, 1st support at 1.32332
OIL:
Looking at the H4 chart, my overall bias for BOC is bullish.as the there is an ascending trend line, Expecting the price head up towards the 1st resistance level at 88.598 which is the recent swing high.
In an alternate scenario, the price could possibly head down towards the 1st support level at 79.222 which is the recent overlap swing low, before the price drops to the 2nd support at 75.827.
Areas of consideration:
- H4 time frame, 1st resistance at 88.598
- H4 time frame,1st support at 79.587
- H4 time frame, 2nd support at 75.827
Dow Jones Industrial Average:
On the H4 chart, the overall bias for DJI is bullish. To add confluence to this, the price is crossing above the Ichimoku cloud which indicates a bullish market. If this bullish momentum continues, expect the price to possibly continue heading towards the 1st resistance line at 34342.32, where the recent swing high is. In an alternative scenario, price could possibly head back down towards the 1st support at 33380.95, where the 50% Fibonacci line is.
Areas of consideration:
- H4 time frame, 1st support at 33380.95
- H4 time frame, 1st Resistance at 34342.32
DAX:
Looking at the H4 chart, my overall bias for DAX is bullish due to the current price crossing above the Ichimoku cloud, indicating a bullish market. If this bullish momentum continues, expect the price to possibly head towards the 1st resistance line at 15705, where the recent high is. In an alternative scenario, price could possibly head down to retest the 1st support at 15290, where the overlap support is.
Areas of consideration:
- H4 time frame, 1st resistance is at 15705
- H4 time frame, 1st support is at 15290
ETHUSD:
Looking at the H4 chart, my overall bias for ETHUSD is bearish, the strong ascending trend line has been broken. Expecting the price to go down to break the 1st support line at 1449.11 which is in line with 38.2% Fibonacci retracement, before it heads towards the 2nd support at 1310.18 which is in line with 61.8% Fibonacci retracement.
In an alternate scenario, the price may go up and break the 1st resistance line at 1685.76 before breaking the 2nd resistance line at 1785.00 which is the previous swing high.
Areas of consideration:
- H4 time frame, 2nd resistance of 1785.00
- H4 time frame, 1st resistance of 1685.76
- H4 time frame, 1st support at 1449.11
- H4 time frame, 2nd support at 1310.18
BTCUSD:
Looking at the H4 chart, my overall bias for BTCUSD is bearish. An ascending channel has broken, a descending channel was created, expecting the price to break the 1st support line at 21121.43 which is in line with 38.2% Fibonacci retracement, before heading down towards the 2nd support at 19231.61 which is in line with 61.8% Fibonacci retracement.
In an alternative scenario, the price could possibly head up to the 1st resistance at 24234.83 which is the recent swing high.
Areas of consideration:
- H4 time frame, 2nd resistance 24942.70
- H4 time frame, 1st resistance 24234.83
- H4 time frame, 1st support at 21121.43
- H4 time frame, 2nd support at 19231.61
S&P 500:
Looking at the H4 chart, my overall bias for S&P500 is bullish due to the current price being above the Ichimoku cloud, indicating a bullish market. If this bullish momentum continues, expect the price to possibly break the 1st resistance at 4208.50, where the recent swing high is., before heading towards the 2nd resistance at 4327.50 where the previous swing high is, In an alternative scenario, price could possibly head back down to retest the 1st support at 4090.00, where the 50% Fibonacci line is.
Areas of consideration:
- H4 time frame, 1st support at 4090.00
- H4 time frame, 1st resistance at 4208.50
- H4 time frame, 2nd resistance at 4327.50
RBA Lowe: I don’t think we’re at the peak of interest rate yet
RBA Governor Philip Lowe said in a Senate hearing, "I don't think we're at the peak (on interest rate) yet, but how far we have to go up I don't know." He noted that inflation, which is currently sitting at 7.8%, was still "wage too high". Unemployment would need to rise before there were any major changes to inflation.
"I understand why some people focus on the risks on the one side, but we've got to be attentive to the risk from higher inflation," Lowe warned. "It's corrosive for the economy. And all the evidence is if inflation stays high for too long, expectations adjust and that leads to higher interest rates and more unemployment.."
"The risks are two sided, and we're trying to navigate our way through a narrow path."
Fed Williams: We need all the gears turning at the right pace
New York Fed President John Williams said yesterday, "We will we stay the course until our job is done... We must restore balance to the economy and bring inflation down to 2 percent on a sustained basis."
"We need all the gears turning at the right pace to restore balance between demand and supply in the entire economy," said Williams. "We still have some way to go to achieve that goal."
He expects core inflation, as measured by core PCE reading at 4.4% in December, to fall to 3% this year and then 2% over the next few years. Growth will likely slow to just 1% this year, with unemployment rate to rise to between 4% and 5%.
Fed Harker: It’s going to be above 5%
Philadelphia Fed President Patrick Harker commented on yesterday's inflation report and said "it was good and it was moving down, but not quickly." He added that FOMC will have to "let the data dictate" tightening, and, "It's going to be above 5% in the Fed funds rate. How much above 5? It's going to depend a lot on what we're seeing."
"In my view, we are not done yet… but we are likely close," he said. "At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work," he noted in a prepared speech".
"Rates are now at a level that allow us to slow down and proceed cautiously and, to my mind, the days of us raising 75 basis points at a time have surely passed," Harker said. "Just at the last meeting, I voted for a hike of 25 basis points — what some would call slow but actually is closer to cruising speed when it comes to tightening."
Gold Price Faces Key Challenges, US CPI Declined To 6.4%
Key Highlights
- Gold price struggled to clear the $1,865 resistance zone.
- A key bearish trend line is forming with resistance near $1,862 on the 4-hours chart.
- EUR/USD and GBP/USD spiked lower after the US CPI release before recovering.
- The US Consumer Price Index increased 6.4% in Jan 2023 (YoY), down from 6.5%.
Gold Price Technical Analysis
Gold price struggled to start a recovery wave above $1,870 against the US Dollar. The price made a couple of attempts, but the bulls failed to clear $1,865 and $1,870.
The 4-hours chart of XAU/USD indicates that the price declined sharply after the US CPI data was released. The US Bureau of Labor Statistics stated the US CPI declined to 6.4% on a yearly basis in January from 6.5% in December.
There was a strong decline below the $1,865 and $1,860 support levels. The price even spiked below the $1,850 level. However, the bulls were active near the $1,842 zone.
The price recovered and climbed above the $1,850 level. It is still facing a strong resistance near $1,865. There is also a key bearish trend line forming with resistance near $1,862 on the same chart.
The main resistance is near the $1,870 zone and the 100 simple moving average (red, 4-hours), above which the price might rise towards the 200 simple moving average (green, 4-hours).
On the downside, an initial support is near the $1,850 level. The next major support is near the $1,842 level, below which gold price might struggle to stay above the $1,835 zone. In the stated case, gold price could slide towards the $1,820 support.
Looking at EUR/USD, the pair also spiked lower below the 1.0750 level before recovering higher. It is still facing hurdles near 1.0800.
Economic Releases to Watch Today
- UK Consumer Price Index for Jan 2023 (YoY) – Forecast 10.3%, versus +10.5% previous.
- UK Core Consumer Price Index for Jan 2023 (YoY) – Forecast +6.2%, versus +6.3% previous.
- US Retail Sales for Jan 2023 (MoM) – Forecast -0.2%, versus +0.6% previous.
Fed Logan: We shouldn’t lock in on a peak interest rate or a precise path of rates
Dallas Fed President Lorie Logan said, "we must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions."
"And even after we have enough evidence that we don't need to raise rates at some future meeting, we'll need to remain flexible and tighten further if changes in the economic outlook or financial conditions call for it," she added.
"The most important risk I see is that if we tighten too little, the economy will remain overheated and we will fail to keep inflation in check," Logan said. "That could trigger a self-fulfilling spiral of unanchored inflation expectations that would be very costly to stop."
"My own view is that, given the risks, we shouldn't lock in on a peak interest rate or a precise path of rates," she said.
Fed Barkin: Gonna be a lot more inertia, persistence to inflation
Richmond Fed President Thomas Barkin told BloombergTV that today's US CPI data is "about as expected".
"Inflation is normalizing but it's coming down slowly. I just think there's gonna be a lot more inertia, a lot more persistence to inflation than maybe we'd all want," he added.
Japanese Yen Swings on US Inflation
The Japanese yen has shown some strong movement on Tuesday. In the North American session, USD/JPY is trading at 132.85, up 0.32%.
US inflation slows, but less than expected
US inflation in January ticked lower to 6.4%, down from 6.5% but higher than the forecast of 6.2%. It was a similar story for the core rate, which dropped from 5.7% to 5.6%, above the forecast of 5.5%. The markets seemed uncertain how to react and USD/JPY showed sharp swings in both directions before steadying.
The numbers appear to support the Fed’s position that more rate hikes are needed for a longer period than previously expected, which could mean a higher terminal rate than the Fed had previously projected. The markets had continuously questioned this ‘higher and longer’ stance and had priced in rate hikes late in the year. We won’t be hearing much talk of rate cuts until inflation falls at a faster pace. Disinflation, which had pushed the dollar lower in recent months, appears to have lost some steam.
BoJ names Ueda as next governor
After plenty of speculation about the next BoJ governor, it’s official. The BoJ has nominated Kazuo Ueda, which was a surprise choice. When reports surfaced that Ueda was the likely pick, the yen moved briefly moved higher, as the markets viewed the choice as a signal for fresh thinking and a change in policy. Ueda said last week that current policy settings were appropriate and the yen gave back those gains. It’s possible that Ueda was being diplomatic and did not wish to make any waves before he was even nominated.
We may have to wait until he takes over the helm of the BoJ in April before we know his stance on monetary policy. He could decide to abolish the yield control curve (YCC), as he has criticized YCC in the past. This would mean the end of the cap on 10-year bond yields, which the BoJ recently increased from 0.25% to 0.50%, resulting in the yen rising sharply. Will Ueda raise interest rates? That would be a massive shift in policy, and Ueda may prefer to get his feet wet first in his new position as governor before making any dramatic moves.
USD/JPY Technical
- USD/JPY has support at 131.38 and 130.71
- There is resistance at 132.96 and 134.18
