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Dollar Turns Soft, CPI Awaited
Dollar is trading on the softer side again as focus turns to CPI report from the US today. While the markets are finally buying in that federal fund rates would peak above 5% level, there are already some bets on a higher terminal rate. Meanwhile, the bets on a rate cut this year is receding after Fed officials repeatedly rule that out. Eventually, the path would be heavily dependent on the inflation outlook. Elsewhere, Yen is recovering but remains the weakest one for the weak. Sterling is the strongest, followed by Aussie and then Swiss Franc. Euro is mixed for now.
Technically, selloff in Gold and EUR/USD have slowed, as they are both trying to draw support from 55 day EMAs respectively. For Gold, strong rebound from current level, followed by break of 1890.10 resistance, will indicate that pull back from 1959.47 has completed. More importantly, in such case, even if the corrective pattern might extent, rise from 1614.60 should resume at a later stage. Such development would also affirm EUR/USD's bullishness for another rally through 1.1032.
In Asia, Nikkei closed up 0.64%. Hong Kong HSI is down -0.17%. China Shanghai SSE is up 0.10%. Singapore Strait Times is down -0.25%. Japan 10-year JGB yield is up 0.0020 at 0.506. Overnight, DOW rose 1.11%. S&P 500 rose 1.14%. NASDAQ rose 1.48%. 10-year yield dropped -0.027 to 3.717.
Japan GDP grew 0.2% in Q4 only, missed expectations
Japan GDP grew 0.2% qoq in Q4, below expectation of 0.5% qoq. In annualized term, GDP rose 0.6%, below expectation of 2.0%. GDP deflator rose 1.1% yoy, matched expectations. For the full year of 2022, GDP expanded 1.1%, slowed from 2021's 2.1%.
Economy Minister Shigeyuki Goto said after the release, "Rising inflation and the global slowdown are risks... But corporate spending appetite hasn't cooled ... we're not too pessimistic about the outlook."
Finance Minister Shunichi Suzuki said, "With global monetary tightening continuing, the slowdown in overseas economies could still drag on Japan's economy as well. We also need to pay attention to the impact from inflation, supply constraints, volatility in financial markets and the spread of Covid cases in China."
Separately, it's confirmed that the government nominated Kazuo Ueda as the next BoJ Governor, when Haruhiko Kuroda's term ends on April 8. Ueda is a 71-year-old former BoJ board member and an academic at Kyoritsu Women's University.
Australia consumer sentiment dropped back to 78.5, pressures bearing down on consumer becoming intense
Australia Westpac-Melbourne Institute Consumer Sentiment Index fell -6.9%mom from 84.3 to 78.5 in February. The reading was already below the trough of 79.0 as seen in the global financial crisis, but above the 75.6 low in April 2020 when the pandemic first hit.
Westpac noted: "Cost of living pressures and interest rate rises continue to weigh heavily. Hopes of some easing in both have been dashed by the strong December quarter CPI and the RBA's resumption of its interest rate tightening cycle."
Regarding RBA policy, Westpac expects another 25bps hike to 3.60% on March 7, a pause in April, and then a final 35bps hike in May to 3.85%.
It added, "The consumer sentiment survey continues to give a very clear warning that the pressures bearing down on the consumer are becoming intense. While spending has held up relatively well to date, we expect an abrupt slowdown to show through in coming months."
Australia NAB business confidence rose to 6, conditions rose to 18
Australia NAB Business Confidence rose further from 0 to 6 in January. Business Conditions also improved from 13 to 18. Looking at some details, trading conditions rose from 20 to 28. Profitability conditions rose from 13 to 17. Employment conditions rose from 9 to 10.
NAB Chief Economist Alan Oster: "Business conditions picked back up in January after three months of softening in late 2022. There were strong increases in conditions for 'upstream' sectors such as wholesale, construction and manufacturing, and importantly, conditions in the more consumer-facing industries remained very strong."
"Confidence dipped into negative territory late in 2022 but is now back around the average after rebounding over the past two months. The improvement in confidence suggest firms have a more optimistic outlook as concerns about global growth prospects ease, while strong conditions are also providing evidence that the economy is more resilient than previously expected."
RBNZ survey: OCR expected to rise to 5% by year end
According to RBNZ Survey of Expectations (Business), one-year inflation expectations rose slightly from 5.08% to 5.11% in February quarter. The reading was similar to value from the 1990 survey when actual CPI was 7.60%.
On the other hand, two-year inflation expected dropped further from 3.62% to 3.30%. The spread also narrowed, with no respondent answering below 2.00% or above 6.00%.
Official Cash Rate (OCR) expectations increased notably by 74 basis points from 4.25% to 4.89% by the end of this quarter. OCR is expected rise further to 5.00% by the end of the year, up from 4.67%.
Looking ahead
UK employment data is the main focus in European session. Swiss will release PPI and Eurozone will publish GDP revision.
Later in the day, US will release CPI data as one of the main events of the week.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.0677; (P) 1.0704; (R1) 1.0751; More...
EUR/USD recovered after edging lower to 1.0654 and intraday bias is turned neutral again. On the downside, break of 1.0654 will resume the corrective fall from 1.1032 to 38.2% retracement of 0.9534 to 1.1032 at 1.0463. Strong support should be seen around there to bring rebound, at least on first attempt. On the upside, above 1.0790 minor resistance will turn bias back to the upside for retesting 1.1032 high instead.
In the bigger picture, the rally from 0.9534 low (2022 low) is a medium term up trend rather than a correction. Further rise is in favor to 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273 next. This will remain the favored case as long as 1.0482 support holds.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:30 | AUD | Westpac Consumer Confidence Feb | -6.90% | 5.00% | ||
| 23:50 | JPY | GDP Q/Q Q4 P | 0.20% | 0.50% | -0.20% | |
| 23:50 | JPY | GDP Deflator Y/Y Q4 P | 1.10% | 1.10% | -0.30% | |
| 00:30 | AUD | NAB Business Conditions Jan | 18 | 12 | ||
| 00:30 | AUD | NAB Business Confidence Jan | 6 | -1 | ||
| 02:00 | NZD | RBNZ Inflation Expectations Q/Q Q1 | 3.30% | 3.62% | ||
| 04:30 | JPY | Industrial Production M/M Dec F | 0.30% | -0.10% | -0.10% | |
| 07:00 | GBP | Claimant Count Change Jan | 9K | 19.7K | ||
| 07:00 | GBP | ILO Unemployment Rate (3M) Dec | 3.70% | 3.70% | ||
| 07:00 | GBP | Average Earnings Excluding Bonus 3M/Y Dec | 6.50% | 6.40% | ||
| 07:00 | GBP | Average Earnings Including Bonus 3M/Y Dec | 6.20% | 6.40% | ||
| 07:30 | CHF | Producer and Import Prices M/M Jan | 0.20% | -0.70% | ||
| 07:30 | CHF | Producer and Import Prices Y/Y Jan | 2.20% | 3.20% | ||
| 10:00 | EUR | Eurozone GDP Q/Q Q4 P | 0.10% | 0.10% | ||
| 10:00 | EUR | Eurozone Employment Change Q/Q Q4 P | 0.10% | 0.30% | ||
| 11:00 | USD | NFIB Business Optimism Index Jan | 89.8 | |||
| 13:30 | USD | CPI M/M Jan | 0.50% | 0.10% | ||
| 13:30 | USD | CPI Y/Y Jan | 6.20% | 6.50% | ||
| 13:30 | USD | CPI Core M/M Jan | 0.40% | 0.40% | ||
| 13:30 | USD | CPI Core Y/Y Jan | 5.30% | 5.70% |
Elliott Wave Projects Oil Pullback to Find Buyers
Cycle from 12.10.2022 low in Oil is in progress as an impulse Elliott Wave structure. Up from 12.10.2022 low, wave 1 ended at 82.64 on 1.23.2023 high and wave 2 pullback ended at 72.39 as the 1 hour chart below shows. Internal subdivision of wave 2 unfolded as a zigzag Elliott Wave structure. Down from wave 1, wave ((a)) ended at 76.55, rally in wave ((b)) ended at 79.73, and wave ((c)) lower ended at 72.39 which completed wave 2 in higher degree. Oil has turned higher in wave 3 with internal subdivision as an impulse. It still needs to break above wave 1 at 82.64 to confirm this view.
Up from wave 2, wave ((i)) ended at 78.84 and pullback in wave ((ii)) ended at 76.52. Oil then resumes higher again in wave ((iii)). Up from wave ((ii)), wave (i) ended at 80.62. Expect wave (ii) pullback to find support against 76.52 and more importantly against 72.39 for further upside. Near term, as far as pivot at 72.39 low stays intact, expect dips to find support in 3, 7, or 11 swing for further upside. Potential target higher is 100% – 161.8% Fibonacci extension of wave ((i)). This area comes at 83.08 – 87.13.
Oil 60 Minutes Elliott Wave Chart
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 132.904, where the recent high is. In an alternate scenario, price could possibly head back down to retest the 1st support at 130.812, where the overlap support and 50% Fibonacci line is.
Areas of consideration:
- H4 time frame, 1st resistance at 132.904
- H4 time frame, 1st support at 130.812
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 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 0.70082 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 0.70082
- 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 channel, 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
Japan GDP grew 0.2% in Q4 only, missed expectations
Japan GDP grew 0.2% qoq in Q4, below expectation of 0.5% qoq. In annualized term, GDP rose 0.6%, below expectation of 2.0%. GDP deflator rose 1.1% yoy, matched expectations. For the full year of 2022, GDP expanded 1.1%, slowed from 2021's 2.1%.
Economy Minister Shigeyuki Goto said after the release, "Rising inflation and the global slowdown are risks... But corporate spending appetite hasn't cooled ... we're not too pessimistic about the outlook."
Finance Minister Shunichi Suzuki said, "With global monetary tightening continuing, the slowdown in overseas economies could still drag on Japan's economy as well. We also need to pay attention to the impact from inflation, supply constraints, volatility in financial markets and the spread of Covid cases in China."
Separately, it's confirmed that the government nominated Kazuo Ueda as the next BoJ Governor, when Haruhiko Kuroda's term ends on April 8. Ueda is a 71-year-old former BoJ board member and an academic at Kyoritsu Women's University.
RBNZ survey: OCR expected to rise to 5% by year end
According to RBNZ Survey of Expectations (Business), one-year inflation expectations rose slightly from 5.08% to 5.11% in February quarter. The reading was similar to value from the 1990 survey when actual CPI was 7.60%.
On the other hand, two-year inflation expected dropped further from 3.62% to 3.30%. The spread also narrowed, with no respondent answering below 2.00% or above 6.00%.
Official Cash Rate (OCR) expectations increased notably by 74 basis points from 4.25% to 4.89% by the end of this quarter. OCR is expected rise further to 5.00% by the end of the year, up from 4.67%.
Australia NAB business confidence rose to 6, conditions rose to 18
Australia NAB Business Confidence rose further from 0 to 6 in January. Business Conditions also improved from 13 to 18. Looking at some details, trading conditions rose from 20 to 28. Profitability conditions rose from 13 to 17. Employment conditions rose from 9 to 10.
NAB Chief Economist Alan Oster: "Business conditions picked back up in January after three months of softening in late 2022. There were strong increases in conditions for 'upstream' sectors such as wholesale, construction and manufacturing, and importantly, conditions in the more consumer-facing industries remained very strong."
"Confidence dipped into negative territory late in 2022 but is now back around the average after rebounding over the past two months. The improvement in confidence suggest firms have a more optimistic outlook as concerns about global growth prospects ease, while strong conditions are also providing evidence that the economy is more resilient than previously expected."
Australia consumer sentiment dropped back to 78.5, pressures bearing down on consumer becoming intense
Australia Westpac-Melbourne Institute Consumer Sentiment Index fell -6.9%mom from 84.3 to 78.5 in February. The reading was already below the trough of 79.0 as seen in the global financial crisis, but above the 75.6 low in April 2020 when the pandemic first hit.
Westpac noted: "Cost of living pressures and interest rate rises continue to weigh heavily. Hopes of some easing in both have been dashed by the strong December quarter CPI and the RBA's resumption of its interest rate tightening cycle."
Regarding RBA policy, Westpac expects another 25bps hike to 3.60% on March 7, a pause in April, and then a final 35bps hike in May to 3.85%.
It added, "The consumer sentiment survey continues to give a very clear warning that the pressures bearing down on the consumer are becoming intense. While spending has held up relatively well to date, we expect an abrupt slowdown to show through in coming months."
GBP/USD Recovery Could Fade Above 1.2150
Key Highlights
- GBP/USD is attempting a recovery wave from the 1.2000 support.
- It is facing resistance near 1.2180 and 1.2220 on the 4-hours chart.
- EUR/USD declined to 1.0655 and remains at a risk of more losses.
- The US Consumer Price Index could decline from 6.5% to 6.2% in Jan 2023 (YoY).
GBP/USD Technical Analysis
The British started a major decline from well above the 1.2350 level against the US Dollar. GBP/USD declined below the 1.2200 support to move into a bearish zone.
Looking at the 4-hours chart, the pair declined below the 1.2160 support zone, the 100 simple moving average (red, 4-hours), and the 200 simple moving average (green, 4-hours).
There was also a close below the 1.2150 support zone. Finally, it tested the 1.1960 support zone. Recently, the pair started an upside correction and traded above 1.2120. It cleared the 38.2% Fib retracement level of the key decline from the 1.2401 swing high to 1.1961 low.
However, the pair struggled to clear 1.2180 and the 200 simple moving average (green, 4-hours). It is near the 50% Fib retracement level of the key decline from the 1.2401 swing high to 1.1961 low.
The next major resistance is near the 1.2220 level. A clear move above the 1.2220 resistance might start a steady increase towards the 1.2300 resistance zone.
Any more gains could open the doors for a move towards the 1.2400 level, above which the bulls may perhaps aim a retest of the 1.2440 resistance.
Looking at EUR/USD, the pair traded to a new monthly low near 1.0655 and remains at a risk of more losses in the near term.
Economic Releases
- UK Claimant Count Change for Jan 2023 – Forecast 3.0K, versus 19.7K previous.
- UK ILO Unemployment Rate for Dec 2022 (3M) – Forecast 3.7%, versus 3.7% previous.
- US Consumer Price Index for Jan 2023 (MoM) – Forecast +0.5%, versus +0.1% previous.
- US Consumer Price Index for Jan 2023 (YoY) – Forecast +6.2%, versus +6.5% previous.
- US Consumer Price Index Ex Food & Energy for Jan 2023 (YoY) – Forecast +5.5%, versus +5.7% previous.
GBPCAD Wave Analysis
- GBPCAD reversed from key support level 1.6110
- Likely to rise to resistance level 1.6325
GBPCAD currency pair recently reversed up from the key support level 1.6110 (previous monthly low from January), standing near the lower daily Bollinger Band and the 50% Fibonacci correction of the upward impulse from November.
The upward reversal from the support level 1.6110 stopped the previous minor impulse wave (iii).
Given the oversold daily Stochastic, GBPCAD can be expected to rise further toward the next resistance level 1.6325 (top of the previous short-term correction (ii)).
